Nestle Posted Flat Volume Growth for Q1CY15

Nestle India, one of the biggest players in FMCG segment, has a presence in milk & milk products, beverages, prepared dishes, instant food, and chocolate & confectionery segments. The company was founded in 1866 in Veveyand, Switzerland, where its headquarters is situated. Employee strengh is around 2,80,000 people and have factories or operations in almost every country in the world.

Nestle India recently declared its first quarter results for FY15. The company follows calendar year as its financial year. The company’s March 2015 quarter results showed minute variation compared to its December 2014 quarter results. However, compared Q1FY14 on yearly basis, the net sales grew by 8.36 per cent which is the lowest sales growth over the past four quarters. The total income from operations for Q1CY15 stood at Rs 2517 crore against Rs 2322 crore in the same period last year. The net domestic sales rose 7.6 per cent mainly on account of hike in its product prices. Export sales grew 19.2 per cent contributed largely by export of milk & milk products to Bangladesh and Middle East.

On expense front, Nestlé’s total expenses incresed by 7.76 per cent, to Rs 2052 crore in Q1CY15 against Rs 1904 crore in Q1CY14. The increase in total expenses was due to predominantly a 20 per cent increase in employee expense and a 13 per cent increase in depreciation cost during the same period. The employee cost increased due to certain "one-offs" in the comparative period. The company’s EBITDA incresed by 21.85 per cent on yearly basis and EBITDA margin is increased by 268 basis points to 24.27 per cent in Q1CY15.

The other income is decresed by 18 per cent due to lower average liquidities as well as lower yeilds. Finance cost reduced by 66 per cent due to repayment of external commercial borrowings.  The tax expense increased by 21 per cent because of higher profits and revaluations of net deffered tax liabilities. The net profit of the period incresed by 23.58 per cent to Rs 320 crore in Q1CY15 against, mainly due to decreased in interest and no exceptional items during Q1CY15.

The company posted flattish volume growth in the quarter, same as 0 to 2 per cent volume growth witnessed in the past few quarters. Weak consumption demand along with intensifying competition in chocolates and noodles business from Hindustan Unilever, ITC and Kraft are key pressure points resulting in the weak top line growth in the quarter.

The FII holdings decresed by 131 basis points to 12.48 per cent and the DII holdings decreased by 21 basis points to 4.51 per cent during Q1CY15.