Nestle India Q2 Results: Profit Rises On Lower Taxes Despite Covid-19 Disruptions
Packets of Maggi 2-Minute Noodles, manufactured by Nestle India Ltd., sit alongside other food products suspended from the ceiling in a basket inside a general store in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Nestle India Q2 Results: Profit Rises On Lower Taxes Despite Covid-19 Disruptions

Nestle India Ltd.'s revenue rose marginally even as lower tax aided profit in the quarter ended June, a period when the Covid-19 lockdown disrupted everything from sourcing and production to supply.

The maker of Maggi instant noodles and Kit Kat chocolate saw its revenue rise 1.7% year-on-year to Rs 3,050 crore in the April-June period, according to an exchange filing. Analyst estimates compiled by BloombergQuint had pegged the top line at Rs 3,205 crore.

“The past three months have witnessed volatility, uncertainty and stresses that we had never imagined before nor experienced,” Suresh Narayanan, chairman and managing director at Nestle India, said in a statement accompanying the results. "This led to disruptions across the value chain of the company that has impacted our results, though we have built back momentum strongly as we ended the quarter."

Net profit of Nestle India—that follows January-December fiscal—rose 11.2% over the year ago to Rs 487 crore in the three months ended June, against the Rs 525-crore forecast.

The tax expense for the quarter has been computed at the rates introduced by the Taxation Laws (Amendment) Ordinance 2019, dated Sept. 20, 2019, the statement said. The net profit after tax and earnings per share have been positively impacted by the lower tax rates.

The company's operating profit also rose 4.9% year-on-year to Rs 747 crore. That's lower than the Rs 790-crore estimate. Its margins, too, expanded to 24.5% from 23.7% a year ago, in line with the 24.6% forecast.

India’s consumer goods makers were battling the worst consumption slowdown in more than a decade even before the pandemic struck. The lockdown completely stalled businesses, barring essential services, in April and most of May before the government started easing restrictions. Still, that pushed the economy toward its first full-year contraction in more than four decades.

During the lockdown, Nestle India saw demand sustain for products such as Maggi noodles, dairy whiteners, packaged milk and coffee, Suresh Narayanan, managing director at Nestle India Ltd., had told BloombergQuint in an interview last month. The consumption of other categories also rose. The company, according to its statement, has launched new range of Maggi noddles in Delhi-National Capital Region, Mumbai and Pune.

Nestle India's domestic sales were up 2.6% over year ago at Rs 2,908 crore, while its exports were down 8.8% at Rs 134 crore.

"We accelerated our digital engagements across key parts of our portfolio, put out innovative campaigns to engage the consumers in many, while ensuring judicious application of marketing spends in line with the current business scenario," Narayanan said. “The e-commerce channel grew 122% this quarter, and now contributes 3.6% to domestic sales."

The demand in all ‘out of home’ consumption channels, according to him, experienced a sharp decline due to the lockdown. But the company witnessed growth in "in-home-consumption", which boosted sales of its Everyday Dairy Whitener, Nestlé a+ Milk, and other milk-based portfolio such as Nescafe Classic and Nescafe Sunrise, the company said in the statement. Maggi also witnessed solid growth towards the end of the quarter after initial supply constraints.

Shares of Nestle India closed 1.4% lower before the results were announced. That compares with a 1.5% gain in the benchmark Nifty 50 Index.

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