Nestle Q1 Results: Slight Dip in Profit; Revenue Rises 10% to Rs 3,981 Crore

Nestle India’s January-March profit has gone down by 1 pre cent at Rs 594.7 crore, which was below Street’s expectations of Rs 625 crore. The fast-moving consumer goods company reported a 10.2 per cent on-year rise in revenues from operations to Rs 3,980.7 crore for the reporting quarter.

Net sales jumped 9.7 per cent to Rs 3950 crore in quarter ended March 2022 from Rs 3600 crore posted in quarter ended March 2021. The FMCG major’s profit before exceptional items and tax fell 0.69 per cent to Rs 806.2 crore in Q1 CY22 over Q1 CY21.

Total sales and domestic sales for the quarter ended March 2022 increased by 9.7 per cent and 10.2 per cent respectively. Domestic sales growth was broad based and largely driven by volume & mix. Export sales were lower by 1 per cent largely due to change in product mix.

Nestle said profitability was impacted as the cost of materials consumed increased due to higher commodity prices, particularly edible oil, milk and its derivatives and packaging materials. Nestle’s total expenses rose nearly 13 per cent year-on-year to Rs 3,195.9 crore in Q1 CY22 over Q1 CY21. Cost of raw material consumed increased by nearly 22 per cent to Rs 1845.9 crore.

The impact of higher raw material prices was telling as the company’s operating margins shrank 260 basis points on-year to Rs 23.2 per cent. The margin and operating profit performance were both below Street’s expectations.

Suresh Narayanan, chairman and managing director, Nestle India said, “In this quarter we have delivered double-digit domestic sales driven by volume and mix, which once again demonstrates the strength of our brands, consumer resonance and the resilience of the Nestlé India team and our partners,” Narayanan said adding that cost of key raw and packaging materials are witnessing 10-year high levels.

Narayanan further said that the cost continued to surge this quarter which impacted profit from operations. “Continued inflation is likely to be a key factor in the short to medium term. We are confident of facing this turbulence with strategies of scale, efficiencies, mix, and pricing all of which we will deploy judiciously,” he said.

Nestle’s earnings before interest, taxes, depreciation, and amortisation or EBITDA stood at Rs 924.4 crore, missing Street estimates. EBITDA margin stood at 23.2 per cent.

The FMCG firm said performance in e-commerce continued as the channel grew by 71 per cent and now contributes 6.3 per cent of domestic sales. “We will continue to leverage e-commerce further through meaningful shopper insights, data analytics, speed, sharp communication and customization,” it said in a filing.

Commenting on future outlook, Nestle said cost outlook for key commodities like edible oils, coffee, wheat, fuel remains firm to bullish while costs of packaging materials continue to increase amid supply constraints, rising fuel and transportation costs. Input costs are expected to be on bullish trend both globally and locally. The FMCG major further said that fresh milk costs are expected to remain firm with continued increase in demand and rise in feed costs to farmers.

Nestle India shares fell as much as 3 per cent to Rs 17,772.9 on the BSE, extending losses after the January-March earnings announcement.