Nestle Q3 Results: Profit Beats Estimates, Revenue Up 9.45%

Nestle India Ltd.’s third-quarter profit rose, beating estimates, on a one-time gain, while sales grew, aided by strong demand for its chocolates to coffee.

Net profit of the maker of Maggi instant noodles and KitKat chocolates—that follows calendar-year financial reporting—rose 37.28% over a year earlier to Rs 908.1 crore in the three months ended September 2023, according to its exchange filing. That compares with the Rs 792.2 crore consensus estimate of analysts tracked by Bloomberg.

The net profit for the quarter includes a one-time gain of Rs 106.4 crore.

It is the first company in the FMCG pack to declare its quarterly results.

Analysts peg the underlying volume growth at 5%, in line with estimates.

Q3 CY23 Key Highlights (YoY)

• Revenue jumped 9.45% to Rs 5,036.8 crore. (Bloomberg estimate: Rs 5,125.9 crore).

• Operating profit rose 21.98% to Rs 1224.9 crore (Bloomberg estimate: Rs 1,212.1 crore).

• Margin came in at 24.3% versus 21.8%. (Bloomberg estimate: 23.6%).

• Cost of materials consumed dropped 1.8% to Rs 1917.3 crore. As a percentage to sales, it has decreased due to higher net realisations.

• Total expenses, however, stood at Rs 3,954.5 crore, up 6%.

"We crossed Rs 5,000 crore turnover, which has been our first in any quarter in the history of the company and a landmark for us," said Suresh Narayanan, chairman and managing director, Nestle India.

During the quarter, Nestle India’s domestic sales increased 10.3% over a year ago to Rs 4,823.7 crore, while exports rose 10.6% to Rs 205.5 crore.

"Domestic sales grew double digit, on account of mix, volume and price," the company said. Key brands continued to perform well, led by Kitkat and Nescafe. Milk products and nutrition also delivered double-digit growth.

Sharing outlook on commodity, the company said it expects uneven rain and rain deficit to impact production of maize, sugar, oilseeds and spices, that may have an adverse impact on pricing.

Coffee continues to be volatile because of global supply deficit. The weather during the harvest of Indian Robusta crop may impact production.

The upcoming winter weather may impact wheat production.

Healthy milk flush is likely in winter, which is expected to keep prices stable.

The out-of-home business continued to deliver double-digit growth, led by volumes. E-commerce contributed to 6.1% of the quarterly sales, with continued growth across channels driven by quick commerce, Nestle said.

Nestle India has been expanding its reach in small towns and villages, a strategy it terms "Rurban", which is helping the Maggi noodle maker secure a better reach into newer markets, it said. "We continue to widen and customise our Rurban portfolio by introducing products that cater to specific local requirements. As an example, a step in this direction was the recent launch of Maggi Teekha Masala and Maggi Chatpata Masala variants of Maggi noodles in Rurban markets across 15 states of India." With this, Nestle India also made a comeback in the Rs 10 price point.

The company's board also approved a stock split in the ratio of 1:10 for the first time ever. This means that each share that an investor holds will be subdivided into 10 shares.

The Board also declared a second interim dividend of Rs 140 per equity share with a face value of Rs 10 per equity share, amounting to Rs 1,349.8 crore for 2023, which will be paid on November 16. This is in addition to the interim dividend of Rs 27 per equity share paid on May 8.

Shares of Nestle India rose 1.06% after the results were declared, as compared with a 0.16% decline in the benchmark Nifty 50.