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Business News/ Companies / Company Results/  Nestlé beats profit estimates, launches JV with Dr Reddy’s
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Nestlé beats profit estimates, launches JV with Dr Reddy’s

The company reported a 26.8% jump in January-March profit, beating street estimates, helped by softer milk prices.

Quarterly revenue from operations grew 9% to ₹5,267.59 crore.Premium
Quarterly revenue from operations grew 9% to 5,267.59 crore.

Nestlé India Ltd on Thursday reported a 26.8% jump in January-March profit, beating street estimates, helped by softer milk prices.

Quarterly revenue from operations grew 9% to 5,267.59 crore. Profit for the period stood at 934 crore, up from 736.6 crore reported in the year-ago period, the company said in a filing to the exchanges. Nestlé India’s Ebitda margin expanded by 2.41 percentage points to 25.4% in the final quarter of FY24.

Ebitda, or earnings before interest, taxes, depreciation and amortization, is a measure of operating profitability.

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“I am pleased to share that we have delivered double-digit growth, despite challenges posed by rising food inflation and volatile commodity prices. We have witnessed a strong growth momentum across our product portfolio led by a combination of pricing and mix," Suresh Narayanan, chairman and managing director, Nestlé India, said.

However, the company warned of “unprecedented headwinds" in prices of key commodities such as coffee and cocoa, with all-time-high prices and an ongoing price rally. “Cereals and grains are going through a structural cost increase backed by MSP. Milk prices are expected to rise on account of expected harsh summer," it said.

JV with Dr Reddy's

On Thursday, the company also announced a definitive agreement to form a joint venture with Dr Reddy’s Laboratories Ltd to bring nutraceutical brands to consumers in India and other agreed territories. Dr Reddy’s will hold 51% and Nestlé India’s 49% in the joint venture (JV) firm. Nestlé India will have a call option to increase shareholding to up to 60% after six years at a fair market value. Dr Reddy’s will continue to hold at least 40% of the shareholding after Nestlé India exercises its call option.

Also Read: Nestlé Controversies: From sugar in baby food to Maggi ban, we look at top 8 concerns in India and abroad

"The partnership will bring together a global range of nutritional health solutions as well as vitamins, minerals, herbals and supplements of Nestlé Health Science (NHSc) with the strong and established commercial strengths of Dr. Reddy’s in India," Nestle India said in a statement.

Headquartered in Hyderabad, the new company will leverage the capabilities as well as services of the Nestlé Group and Dr Reddy’s. Select brands will be licensed by the two companies to the JV company. Nestlé will license brands including Nature’s Bounty, Osteo Bi-Flex and Ester-C, while Dr Reddy’s will license brands such as Rebalanz, Celevida, Antoxid, Kidrich-D3, Becozinc in the nutrition, and over-the-counter segments. The company is expected to become operational in the second quarter of FY25.

Launch of premium coffee brand

Additionally, Nestlé India announced the launch of its premium coffee brand Nespresso that will be rolled out in the country by the end of 2024. The first Nespresso boutique will open in Delhi, before expanding to other key cities. This launch will bolster Nestlé India’s premium coffee offerings, it said.

Nestle beat estimates led by strong sales and raw material benefits, said Amnish Aggarwal, head of institutional research, Prabhudas Lilladher Pvt. Ltd. “Nestle has sustained strong growth in a tough environment due to lower product penetration in key categories and higher growth in rurban (small markets)," he said. However, Aggarwal said news of India’s food regulator probing infant nutrition brands, including Nestle India, over claims of added sugar may cloud returns in near term.

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ABOUT THE AUTHOR
Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 25 Apr 2024, 12:39 PM IST
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