Nestle India’s March 2013 Quarter Results: Not Too Sweet

Nestle India has posted muted results for the quarter ended March 2013. During Q1CY13 (the company follows the calendar year as its fiscal year), the net sales have witnessed a growth of 9.7% on a YoY basis to touch Rs 2248 crore.

The net sales from domestic operations, which contributes 93% of its total sales, have grown by 9.7% over the same period last year to stand at Rs 2095 crore for Q1CY13. There has also been a significant increase in the exports, which grew by 50.85% in the quarter.

The growth in the domestic sales can be attributed to better realisations and the product mix. The rise in export sales, according to a press release by the company, was mainly due to the 97.8% growth contributed by export affiliates and exports to third parties went up by 8.8% on a YoY basis.

The net profit remained almost flat at Rs 279.09 crore as against Rs 275.73 crore for Q1CY12, a growth of 1.22% on a yearly basis. The company has said that the YoY figures are not comparable, as its bottomline has been hit by changes in regulatory procedures.

During the quarter, raw material consumption as a percentage of sales has declined by 459 basis points on a YoY basis to stand at 46.21%, mainly due to higher sales realisations. The finance cost has increased substantially to Rs 7.93 crore for Q1CY13 from Rs 2.27 crore in the same period last year. This can be attributed to higher average outstanding loan during the quarter and also the completion of major capital projects for expansion capacity. According to the media release, the finance cost being charged to the income statement as against being treated as a capital expenditure, as was the case in the corresponding period in 2012.

The stock is currently trading at a PE of 43.68x. It has reacted negatively after the results were announced, closing the day down by 1.13% at Rs 4853. We may see some selling pressure in the counter ahead in this week.