ADVERTISEMENT

Q3 Results: Nestle India Beats Slowdown As Profit Surges In September Quarter

Net profit rose 33.5 percent over last year to Rs 595.4 crore.

Packets of Maggi 2-Minute Noodles, manufactured by Nestle India Ltd.(Photographer: Kuni Takahashi/Bloomberg)
Packets of Maggi 2-Minute Noodles, manufactured by Nestle India Ltd.(Photographer: Kuni Takahashi/Bloomberg)

Nestle India Ltd.’s quarterly profit rose on expected lines as the maker of Maggi instant noodles and Kitkat chocolate was able to skirt India’s consumption slowdown with double-digit sales growth.

Net profit rose 33.5 percent over last year to Rs 595.4 crore in the quarter ended September, the company said in an exchange filing. That’s higher than the Rs 568 crore estimated by analysts tracked by Bloomberg.

  • Revenue rose 9.4 percent to Rs 3,215.8 crore—slightly higher than the estimated Rs 2,939.4 crore.
  • Operating profit increased 3.6 percent to Rs 751.4 crore.
  • Margin narrowed 130 basis points to 23.4 percent.

India is in the midst of a consumption slowdown as demand softens for everything from soaps to snacks. Sales failed to pick up even in the July-September quarter despite the onset of the festive season.

Still, Nestle was able to buck the trend by selling higher volumes at the expense of its margin. “Led by the unrelenting efforts of our employees and business partners we have sustained momentum of volume and mix led growth,” Suresh Narayanan, chairman and managing director of Nestle India, was quoted as saying in a media statement.

Sales Snapshot

  • Total sales grew 9.5 percent.
  • Domestic sales growth stood at 10.5 percent.
  • Exports fell 7.1 percent due to lower coffee shipments to Turkey.

Lower tax expenses and a tax reversal, from the corporate tax rate cut, also helped aid profitability. Tax expense was lower by Rs 72.5 crore due to a credit from the previous quarter. The company also enjoyed a deferred tax reversal of Rs 19.4 crore.

Another aspect working in favour of Nestle India was its focus on urban markets. Rural India, where the slowdown is much deeper, contributes only 20-25 percent of sales for Nestle, Narayanan had said in August. He had noted that there will be “period of low growths” for the FMCG industry but with “decent single-digit” growth.

Shares of Nestle India closed 1.7 percent lower ahead of the announcements, while the benchmark BSE Sensex closed 0.8 percent down.

Opinion
Marcellus’ Focus Remains On FMCG Stocks Despite Current Market Cycle