Nestle India Q3 profit inches up 5% as rising input costs hurt

Nestle India said Tuesday its profit after tax for the third quarter ended September 2021 rose 5% to Rs 617.4 crore from Rs 587 crore a year earlier, helped by volume growth and price hikes as demand recovers.

The company, which follows the January-December financial year, said profit was up 14.6% sequentially from Rs 538.6 crore in the April-June period. 

Revenue for the third period rose 9.6% to Rs 3,882.5 crore from a year earlier and 11.7% sequentially. Growth was driven by increased volumes, improved demand for ready-to-eat food and milk-based products, and price hike. 

The company said its domestic sales rose 10.1% during the third quarter, a shade lower than the 10.2% sales growth recorded in the same period last year. On a quarter-on-quarter basis, sales were up an impressive 13.7%. 

Nestle India, which markets marquee brands like Maggi noodles, Nescafe coffee and Kitkat chocolates, said that the April-June quarter had been hit hard by the second wave of the coronavirus pandemic.

However, the July-September quarter saw the resurgence of organised trade and that sales via e-commerce channels accelerated as consumer behaviour shifted toward online purchases. 

Nestle India Q3 other key details

1) The company reported a 1.3% rise in exports to Rs 177.6 crore during Q3.

2) Rising commodity prices and packaging costs suppressed margins to 24.4% from 24.9%. 

3) Total input costs rose almost 16% due to higher commodity prices, particularly edible oil and packaging materials.

4) Brands like Milky bar, Kitkat and Munch saw double-digit percentage growth during the second quarter.

5) Nestle India declared second interim dividend for 2021 of Rs 110 per share, amounting to Rs 1,060.57 crore.

6) The company had in May paid the first interim dividend of Rs 25 per share.

Nestle India management commentary:

The company said there are indications that business is set to return to pre-pandemic levels in some markets. 

It also said that the out-of-home channel is on a path of recovery as the hospitality sector, offices and malls reopen and demand picks up. The e‐commerce channel showed strong acceleration on the back of convenience and pandemic-driven consumer behaviour.

“This quarter has once again seen the company deliver ‘double‐digit broad‐based value growth’ in domestic sales across categories,” said Suresh Narayanan, chairman and managing director.

“Organized trade witnessed a resurgence in the third quarter with strong revenue growth in mid‐twenties after a muted second quarter which was impacted by the pandemic second wave,” he said.

The company, however, noted that the price outlook for wheat, coffee and edible oils remains firm to bullish while costs of packaging materials continue to increase amid supply constraints, rising fuel and transportation costs.

It expects input prices to be on a bullish trend both globally and, to some extent, locally. Milk prices are expected to remain firm while the recent decision to scrap import duties on edible oils, if continued beyond March 2022, can have a positive impact in muting food inflation pressures, the company said.