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Packaged foods company Nestle India on Tuesday reported a 14.65% jump in March quarter net profit at Rs602 crore slightly ahead of street estimates as the company reported double digit growth in domestic sales and key brands reported strong growth helped by in-home consumption.

Revenue from operations for the quarter ended March 31 was up 8.5% at Rs3610.82 crore from the Rs3,325.27 crore it reported in the year ago period.

The maker of Maggi noodles and Nescafe coffee reported a 10.2% jump in domestic sales that stood at Rs3,442 crore for the quarter as key brands within its portfolio, benefitting from at-home consumption, posted double-digit growth.

The growth was broad based and largely driven by volumes and mix, it said.

The company, however, said that recent "sharp escalations" in key raw material prices is posing a challenge. It specially pointed out to headwinds in commodity and packaging materials.

Total expenses for the quarter stood at 2,828.61 crore up 6.1% from the same quarter last year. Nestle India follows a January-December financial year.

“While the Nestlé India family has learnt to cope with the operating volatility in the pandemic, recent sharp escalations in key raw material prices poses challenges that we will resolutely respond to, while maintaining the integrity of our business model," Suresh Narayanan, chairman and managing director, Nestlé India said.

Key brands like Maggi Noodles, Kitkat, Nescafe Classic, Maggi sauces, Milkmaid, Maggi Masala-Ae-Magic delivered robust performance and achieved double digit growth, he said. Demand in out-of-home consumption channel further improved during the quarter but continues to be impacted by covid, the company said.

Large FMCG companies were expected to perform well in the March quarter, helped by a lower base in the year-ago quarter when sales were partially impacted as India moved to a lockdown towards the end of March. Nestle India, however, reported a jump in sales on a higher base quarter.

"Nestle India reported strong first quarter results with overall numbers marginally ahead of our expectations, said Abneesh Roy, Executive Vice President, Edelweiss Securities. “Overall sales increased by 9% y-o-y on a relatively high base compared to other peers at around 11%. The good part was both gross margins and EBITDA or earnings before interest, taxes, depreciation, and amortization margins expanded strongly. This is a very rare feat in March quarter for consumer companies, most companies will see a gross margin compression," he said.

During the quarter—e-commerce continued to deliver strong performance and grew by 66%. By the end of the first quarter—contribution of e-commerce to domestic business stood at 3.8%.

Export sales were lower by 12.9% due to lower exports to affiliates, the company said.

EBITDA margin expanded 168bps y-o-y and gross margins expanded by 223bps y-o-y, during the quarter. “We believe the company was holding low cost skimmed milk powder inventory, which helped it maintaining high gross margin during the quarter," analysts at ICICI Securities said in a post earnings note.. The company also controlled employee costs during the quarter. "Employee spend was lower by 58 bps (as percentage to sales) whereas overhead spends were higher by 131 bps (as % to sales)," ICICI Securities said.

The company, in collaboration with authorities, is looking at setting up vaccination camps across its manufacturing locations, Narayanan said. "This will provide with ease, much needed vaccination of our factory employees in the eligible age group. We are pleased to be in the process of extending our pioneering industry commitment of Nestlé Suraksha medical insurance protection, to our distributor salesforce against COVID-19 for an additional year," he added.

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