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NEW DELHI : Packaged foods and beverages company Nestlé India on Wednesday reported a 10.6% year-on-year (y-o-y) jump in June-quarter profit at 538.5 crore, missing Street estimates.

Estimates by nine brokerages had pegged Nestlé India’s sales at 3,528.90 crore for the quarter; while eight analysts had projected the company to report net income of 576.50 crore.

The maker of Maggi noodles and Kit Kat chocolates reported a 13.8% y-o-y jump in sales for the three months ended 30 June, benefiting from a low base. Sales for the quarter stood at 3,462.35 crore, up from 3,041.45 crore in the year-ago period. Sequentially, the firm reported a 10.5% drop in profit, while sales were down 3.8%.

The company flagged inflationary pressures in commodities, especially in oils and packaging materials. Other expenses jumped 30% y-o-y largely because of rising fuel prices and compared to a base quarter impacted by restrictions in operations because of the lockdown imposed to contain the covid pandemic, it said. Other income decreased because of lower yields. E-commerce channels grew by 105% and contributed 6.4% of domestic sales during the quarter.

Demand during the quarter was led by Maggi noodles, Kit Kat, Munch, Maggi sauces and Maggi masala-ae-magic brands, which posted strong double-digit growth. Domestic sales for this period increased 13.7%, though the lockdown disrupted production across factories.

Domestic sales growth was driven by volume and mix, the company said.

The company has invested 1,000 crore as part of the 2,600 crore capacity expansion promised for the Indian market over the next three to four years. Nestlé India had announced the investment in October to expand existing manufacturing capacities, apart from setting up a new plant in Gujarat.

“Last year, our commitment to India made us articulate an ambition to invest 2,600 crore over three-four years. I’m pleased to announce that out of this, we have already invested about 1,000 crore. This is a vindication of our confidence and trust in the Nestlé journey in India," said Suresh Narayanan, chairman and managing director.

Analysts tracking the company said that sales were broadly in line with estimates, but earnings before interest, taxes, depreciation and amortization, or Ebitda, was lower than estimates.

“On the sales front, good to see domestic and exports grow in double digits, while the strong performance in e-commerce has continued," said Abneesh Roy, executive director, institutional equities, Edelweiss Securities.

However, the Ebitda margin compression of 88 basis points (bps) y-o-y and 177bps quarter-on-quarter was a key negative, he said.

Prices of milk and other commodities have increased sharply in the past four months, but the company was able to improve gross margins by 67bps mainly because of a favourable product mix and higher realization, said analysts at ICICI Securities. However, overhead spends increased sharply by 265bps mainly because of increasing fuel prices.

In the first half of the year, the contribution of innovations to domestic sales stood at 4.9%. Nestlé hired over 1,000 people through regular hiring, apprenticeship and internship in the period.

On Wednesday, Nestlé India’s board of directors approved the disinvestment of the company’s entire minority stake of 19.98% in Sahyadri Agro and Dairy Pvt. Ltd (formerly lndocon Agro and Allied Activities Pvt. Ltd), a company engaged in milk collection in western India, because of changes in the business scenario.

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