 "Nestle's Q2 net profit rises 6%")
Nestle India, which follows a January-December financial year, reported net sales at Rs 2,418.91 crore in April-June, up 9.29 per cent as against Rs 2,213.21 crore in the same period of the previous year.
"The results are broadly as expected and in line with our vision and strategy for nutrition, health and wellness," said Nestle's Managing Director Etienne Benet. The company will continue to focus in these areas even in the coming quarters. The company is now a debt-free company after paying final instalment of $35 million (total borrowing of $192 million) of external commercial borrowing in July, Benet added.
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During the half year ended June 30, Nestle India's net profit marginally dropped to Rs 547.02 crore as against Rs 550.47 crore in the same period last year. Net sales during the half-year period stood at Rs 4,732.37 crore as compared to Rs 4,461.29 crore in the same period of the previous financial year, the company said in a statement.
The operating margins of the company were adversely impacted by high cost of milk and its derivatives in India which was higher than international markets, Nestle said in a statement.
Nestle India shares were up 2.22 per cent to Rs 5,406.60 apiece on BSE on Thursday.
Share buyback announced
Nestle announced an 8 billion Swiss franc ($8.8 billion) share buyback on Thursday and revealed stronger sales growth in emerging markets in contrast to other big consumer products companies.
The share buyback follows Nestle's sale of an eight per cent stake in French cosmetics company L'Oreal earlier this year and the repurchase plan was bigger than originally expected by the market.
The world's biggest food group by sales is still grappling with weak demand in China, but achieved growth in many smaller markets in Asia and Africa and Latin America.
Nestle's rivals, including Unilever, Beiersdorf, Mondelez International and Diageo, have all blamed emerging market weakness for disappointing results this year.
"The environment in emerging markets remains a mixed picture," Nestle Chief Financial Officer Wan Ling Martello said. "We continue to see very good growth in many of the smaller markets, a recovery in South Asia, while China remains tough in some categories."
She said Nestle had increased prices in some emerging markets to offset weaker local currencies.
Emerging market sales growth accelerated to 9.7 per cent in the first half, from 8.2 per cent a year ago and 8.5 per cent in the first quarter.
That included double-digit growth in Latin America and robust growth in Turkey, Pakistan, Africa and the Philippines.
Martello said conditions remained challenging in China but should improve in the second half.
The company also stood by its forecast for overall organic sales growth of around five per cent this year.
"Nestle is one of the very few players in the consumer goods sector not to disappoint the market in the first half, and not giving a profit warning for the full year," Vontobel analyst Jean-Philippe Bertschy said in a research note.
Bertschy, who has a "buy" rating on Nestle, said the share buyback was more than the roughly 5 billion franc repurchase expected by the market.