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NEW DELHI : Packaged food and beverage company Nestlé India Ltd on Tuesday reported a 5.1% increase from the year earlier in quarterly net profit thanks to higher domestic sales and exports.

Profit in the three months ended 30 September rose to 617 crore. The figure trailed the 634.7 crore consensus estimate of 11 analysts polled by Bloomberg. Eight brokerages had pegged sales at 3,890.80 crore.

The maker of Maggi noodles and Kit Kat chocolates, which follows the January to December financial year cycle, posted a 9.6% increase in sales at 3,865 crore in the quarter, from 3,525.4 crore a year earlier.

Growth during the September quarter was broad-based and largely driven by volume and mix. Export sales grew 1.3%, while domestic sales increased 10.1%, the company said.

Improvement in mobility following the easing of covid-related curbs helped Nestle record growth in sales from organized retail.

The company reported double-digit growth in smaller cities as well.

Meanwhile, the out-of-home channel is on a recovery path with gradual opening of hotels, restaurants, offices and malls, the company said.

“There are signs of a return to pre-pandemic levels of business traction in some geographies, categories and channels," the company said in its earnings statement.

Nestlé’s prepared dishes and cooking aids portfolio comprising Maggi noodles and ketchups grew despite the high base effect of the year-ago quarter.

“Maggi noodles and Maggi Masala-ae-Magic posted healthy growth, while Maggi sauces had somewhat muted growth due to decreased in-home consumption, high base and increased competitive intensity," the company said.

Confectionery brands such as Kit Kat and Munch registered high double-digit growth aided by media campaigns, attractive consumer promotions and distribution drives.

The beverages portfolio too saw “strong double-digit growth", primarily in brands such as Nescafe classic.

“This quarter has once again seen the company deliver ‘double-digit broad-based value growth’ in domestic sales across categories. Organized trade witnessed a resurgence in the third quarter with strong revenue growth in mid-20s after a muted second quarter which was impacted by the pandemic second wave," said Suresh Narayanan, chairman and managing director, Nestlé India.

Narayanan said the company sustained double-digit growth in smaller cities too.

“We are firmly and resolutely on a journey to accelerate it further by using a healthy mix of a customized portfolio, enhanced distribution infrastructure and deployment of resources, localized communication, enhanced visibility and building consumer connect," he said.

Meanwhile, following the commentary by Hindustan Unilever Ltd, which too announced its September quarter earnings on Tuesday, Nestlé flagged raw material inflation in some categories.

On input costs, Nestlé said the outlook for key categories such as wheat, coffee and edible oils remain “firm to bullish", while costs of packaging materials continue to increase amid supply constraints, and rising fuel and transportation costs.

Fresh milk prices are expected to remain firm with continued increase in demand and rise in feed costs to farmers.

In an environment of raw and packaging material inflation, Nestlé said it will look at opportunities for cost optimization and efficiencies.

Nestlé India’s third-quarter earnings were in line with estimates, said Abneesh Roy, executive director, institutional equities, Edelweiss Securities.

Meanwhile, the company’s gross margins contracted by 240 basis points (bps) mainly due to elevated prices of edible oil and packaging material.

“Firm milk prices also have started impacting margins adversely. Employee and overhead spend were down by 44 basis points and 111 basis points, respectively, given the company continued to remain in cost rationalizing mode even after normalization from covid-19 related disruption," analysts at ICICI Securities said in a note.

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