Nestle India Q1 Results: Profit Rises 7%, But Misses Estimates

• Revenue rose 3.3% to Rs 4,814 crore, as compared with the Rs 5,135-crore forecast—the slowest pace in eight years.

• Operating profit rose 5.6% to Rs 1,115 crore, as against the projected Rs 1,239 crore.

• Margin came in at 23.2% versus 22.7%. Analysts had pegged the metric at 24.1%.

Nestle India’s domestic sales rose 4.25% over a year ago to Rs 4,608.5 crore driven by volume and product mix, while exports fell 7% to Rs 184.5 crore.

The packaged consumer goods maker encountered several headwinds during the quarter, including lower consumption growth, persistent food inflation concerns and fluctuating commodity prices.

Cocoa and coffee prices are at an all-time high. Cereals are going through a structural cost increase backed by minimum support price. However, there is relative stability in prices of milk, edible oil and packaging.

Despite these challenges, five out of 12 brands grew in double digits, said Suresh Narayanan, chairman and managing director at Nestle India.

"Almost a fourth of our growth has been mix and volume-led, and we hope to strengthen this trend in the coming months," he said.

Categorywise Highlights

• Despite a scorching summer across many parts of the country, the beverage portfolio stood out with "strong double-digit" sales growth.

• New launches within the prepared dishes and cooking aid portfolio contributed 30% to growth.

• Maggi and Kitkat delivered double-digit growth.

• Milk products and nutrition portfolio maintained growth.

• Nestle's pet care division has placed a strong emphasis on e-commerce and quick commerce, which has been crucial in expanding its reach to more pet families.

E-commerce contributed to 7.5% of domestic sales, clocking double-digit growth, the company said in a statement. Additionally, the company has been building its distribution infrastructure. During the April-June quarter, it expanded its distribution network by adding 800 new touchpoints.

Nestle has also enhanced its rural distribution, reaching an additional 5,000 villages. This brings the total number of villages served to 2,05,000.

Peer Hindustan Unilever Ltd., meanwhile, posted a higher-than-estimated volume growth aided by price cuts. Others including Marico Ltd. and Dabur India Ltd. have guided for a pick-up in their revenue in the April-June quarter as well, suggesting demand was improving albeit gradually.

Shares of Nestle were trading 2.73% lower at Rs 2,472 apiece on the NSE after the results were announced, as compared with a 0.24% decline in the benchmark Nifty.