Nestle Q1 results: Revenue meets estimates, profit drops due to higher inflation

Net Profit decline - Nestle India reported a net profit of Rs 594.71 crore, down 1.25% YoY. In the year-ago period, the company reported a net profit of Rs 602.25 crore. The net profit is below the street estimate of Rs 610 crore. Sequentially, the net profit increased from Rs 386.66 crore. The cost of key raw and packaging materials are witnessing 10-year highs, and costs continued to surge this quarter which has impacted profit from operations. Continued inflation is likely to be a key factor in the short to medium term

Revenue increase - The company reported a revenue of Rs 3,980.70 crore in Q1'22, up 10.24% YoY. In Q1'21, the company reported revenue of Rs 3,610.82 crore and in the previous quarter the revenue reported was Rs 3,706.20 crore. The revenue is in line with the street estimate of Rs 3784 crore.

Other Updates - The total expenses in the Jan-Mar quarter, were up 13% to Rs 3,195.90 crore, as against Rs 2,828.61 crore in the year-ago period. The company's exports were marginally down to Rs 156.64 crore, as against Rs 158.17 crore in the corresponding quarter. 

Nestle India quarterly results: Summary in brief

Nestle earnings: Updates from business segments

• E-commerce: The segment showed strong acceleration with growth fuelled by new emerging formats like 'Click & Mortar' and 'Quick Commerce'. The robust performance in e-commerce continued as the channel grew by 71% and now contributes 6.3% of domestic sales. 
• Organized Trade: The channel witnessed strong broad-based revenue growth as footfall normalized.
• Out of Home (OOH): Despite the third wave, impacting January sales, the OOH Business posted better than expected Q1 results mainly resulting from faster channel opening & due to continuation of the business-led revenue acceleration measure as per the agreed strategy.

Commodity outlook - The company said that the cost outlook for key commodities like edible oils, coffee, wheat, and fuel remains firm to bullish. The costs of packaging materials continue to increase amid supply constraints, and rising fuel and transportation costs. Input costs are expected to be on a bullish trend both globally and locally. 

Management commentary - Suresh Narayanan, Chairman and Managing Director, said, “I am pleased to share that in this quarter we have delivered double-digit domestic sales driven by volume and mix, which once again demonstrates the strength of our brands, consumer resonance and the resilience of the Nestlé India team and our partners. Our key brands continue to perform well with Maggi Noodles, KitKat, Nestlé Munch, Nescafé Classic and Sunrise posting creditable double-digit growth in this quarter."

Dividend - The Board of Directors has declared an interim dividend for 2022 of Rs 25 per equity share amounting to Rs 241 crore. The dividend will be paid on and from 6 May 2022 along with the final dividend for 2021 of Rs 65 approved in the Annual General Meeting on April 12, 2022.

The Nestle share was trading flat on Thursday afternoon at Rs 18,340 per share.

Nestle India results: review

While Nestle was able to meet estimates on topline, its bottomline has come in below estimates, impacted by higher raw material prices. Nestle’s domestic sales growth was broad-based and largely driven by volume and mix. This helped to meet estimates on the topline. Performance in e-commerce continued as the channel grew by 71% and now contributes 6.3% of domestic sales. Going forward, inflation will continue to be a key thing to monitor. Nestle shares closed flat at Rs 18,311 on BSE.