Nestle India Q2 PAT up 11% to Rs 539 cr, sales up 14%

Steep commodity inflation impacted margins; while staff benefit expenses remained stable, total expenses grew 14% as other operating expenses surged too

Packaged food and beverages major Nestle India reported 10.7 per cent year-on-year growth in its profit after tax (PAT) for the April-June quarter. Its net profit for the quarter stood at Rs 538.6 crore, up from Rs 486.6 crore in the corresponding quarter previous year.

Its net sales for the quarter surged by 13.8 per cent YoY to Rs 3,462.4 crore from Rs 3,042 crore. However, steep rise in its raw material costs impacted its margins. In the June quarter, Nestle’s cost of raw materials consumed jumped 24 per cent to Rs 1,479 crore from Rs 1,194 crore. While its employee benefit expenses remained stable, total expenses grew 14 per cent as other operating expenses surged too.

Its earnings before interest, tax, depreciation and amortization (EBITDA), grew 10 per cent y-o-y to Rs 840 crore but EBITDA margin shrank 88 basis points YoY and 177 basis points over the previous quarter.

According to the company, its other expenditure that increased by as much as 30 per cent was largely due to rising fuel prices and compares to a base quarter impacted by restricted operations due to Covid lockdown. It felt the impact of steady rise in prices of commodities like oils and packaging materials.

Rising input costs forced the company to raise prices across categories that played a key role in its healthy topline growth. Popular products like Maggi noodles, sauces and masalas, Kitkat, and Nestlé Munch posted strong double-digit growth.

“Despite the enormous challenges during the devastating second wave of the pandemic in this quarter, I am immensely proud of the resolve of my team and our partners”, said Suresh Narayanan, chairman and managing director, Nestle India.

As a part of its previously announced Rs 2,600 crore investment plan, Nestle India has already invested Rs 1,000 crore in the past few quarters in expanding its manufacturing capacity.

According to Narayanan, Nestle’s focus on growing hyperlocal channels helped it grow by 147 per cent YoY. While, contribution from e-commerce channels grew by 105 per cent over last year to 6.4 per cent of its domestic sales.