Nestle India: Q2FY14 Result Analysis

Nestle India reported net sales of Rs 2419 crore in the quarter ended June 2014 as compared to Rs 2213 crore in June 2013, registering a growth of 9.29%. The company’s export sales grew by 4.1% to Rs 181 crore, while third party exports grew by 35.8% and export to affiliates declined by 7.1% (mainly to Russia). The other operating income of the company came in at Rs 13 crore in the current quarter as against Rs 9.5 crore in the same quarter last year. This increase is mainly due to higher realization of export incentives.

The cost of raw materials consumed by the company went up by 23% in the current quarter to Rs 1123 crore from Rs 913 crore in June 2013. This is mainly due to record high cost of milk and its derivatives in India which was even higher than international markets. The cost of raw materials as a percentage of net sales stood at 46.44% in the current quarter. The finance costs of the company came down substantially to Rs 3.77 crore in the current quarter from Rs 8.51 crore last year. The finance cost reduced mainly due to lower average outstanding of External Commercial Borrowing (ECB). All in all the net profit of the company came in at Rs 288 crore in June 2014 as compared to Rs 271 crore in June 2013, reporting a growth of mere 6%.

The company has recently launched Nestle Butter Milk, Nestle Sweet Lassi and has also come out with Maggi Oats Noodles. Commenting on the results, Etienne Benet, Managing Director, Nestle, said “The results are broadly as expected and in line with our vision and strategy for Nutrition, Health, and Wellness that we shared in our earlier communications. Supporting this vision further we have recently launched low fat NESTLE Sweet Lassi, NESTLE Butter Milk with Ayurvedic Herbs and Spices and Maggi Oats Noodles that are excellent innovations and good additions to our portfolio. Maggi Masala-ae-Magic, fortified with iron, lodine and Vitamin A is growing rapidly and is helping in addressing the serious concerns about micronutrient deficiencies in India. I am also happy that with the final installment of USD 35 million paid in July, the company has repaid the entire external commercial borrowing of USD 192 million and is now debt free.”