Nestle India Q2 Profit Marginally Down to Rs 899.49 Crore, Hit by Softer Demand And High Commodity Prices

FMCG major Nestle India Ltd on Thursday reported a marginal decline of 0.94 per cent in its net profit at Rs 899.49 crore for the second quarter that ended September 2024 as some of its key brands faced softer consumer demand and high commodity prices.

The company had posted a net profit of Rs 908.08 crore in the July-September period a year ago, according to a regulatory filing from Nestle India.

However, Nestle India's revenue from the sale of products was up 1.3 per cent to Rs 5,074.76 crore in the September quarter. It was at Rs 5,009.52 crore in the corresponding period of last fiscal.

Commenting on the results Chairman and Managing Director Suresh Narayanan said, "Despite a challenging external environment with muted consumer demand and high commodity prices, especially for coffee and cocoa, we remained resilient in our pursuit to deliver growth."

"This quarter, 5 of our top 12 brands grew at double-digit. However, some key brands witnessed pressure due to softer consumer demand and we focus on them and have in place robust action plans," he said.

Nestle India's domestic sales were up 1.23 per cent to Rs 4,883.14 crore, as against Rs 4,823.72 crore in the corresponding July-September period.

In the domestic market, Nestle India delivered growth in organised trade, which includes retail chains, hypermarkets etc "spurred by noodles, beverages and overall premiumisation," according to an earning statement by the company, which owns brands like Maggi, Nescafe, KitKat and Milkmaid etc.

Similarly in the Out of Home (OOH) segment, Nestle India has a "robust growth" helped by portfolio transformation, premiumisation, new customer acquisition and driving reach beyond metros.

"Our Out-of-Home business continues to be one of our fastest growing businesses with strong double-digit growth," said Nestle India adding that while in e-commerce, Nestle India has accelerated growth by almost 38 per cent. This was "primarily driven by Quick Commerce and fueled by brands such as Kitkat, Nescafe, Maggi and Milkmaid."

"E-commerce delivered high double-digit growth, which was the highest in the last seven quarters contributing to 8.3 per cent of domestic sales," it said.

Growth on this new age channel was also supported by premiumisation, new user acquisition, festive participation and targeted digital communications.

Its petcare business Purina also witnessed a strong e-commerce momentum, it added.

"Felix and Friskies cat food continued to receive positive feedback from trade and cat parents. Building on the superpremium pillar, Pro Plan dog food witnessed strong growth," said Nestle India.

Its revenue from exports was also up 3.13 per cent to Rs 191.62 crore in the September quarter.

Its export business "continued to expand its footprint by introducing new SKUs across categories to Canada, Middle East, Maldives and Papua New Guinea," it said.

Nestle India's revenue from operations, which includes other operating revenue, was at Rs 5,104 crore, up 1.33 per cent. It was at 5,036.82 crore in the previous September quarter.

Total income Nestle India, which owns popular brands such as Maggi, Nescafe and Kit Kat was flat to Rs 5,110.86 crore as its revenue from other income sources was down.

Moreover, during the quarter Nestle's advertising and marketing investments behind its core brands increased.

"There was a strong focus on efficiencies in media buying, strengthening digital capabilities and reinforcing brand equity," it said.

Nestle India's total expenses in the September quarter were up 3.42 per cent to Rs 4,090.09 crore.

Besides Nestle India is also investing on innovations, which according to the company is "an engine for growth".

"Over the past eight years, we have recalibrated and rejuvenated our product portfolio by launching over 145 new products contributing to approximately 7 per cent of sales. Eight new projects are now in the pipeline," said Narayanan, Nestle's outgoing Chairman.

Nestle has stepped up innovations and started launching new SKUs after the Maggi crisis, which the company faced in 2015.

Over the outlook, Nestle India said "Commodity prices remain elevated especially for coffee and cocoa, with prices of cereals and edible oils also being accentuated with recent developments."

However, it added there is relative stability in milk prices and packaging so far.

Shares of Nestle India were trading at Rs 2,398 apiece in afternoon trade on BSE, down 2.61 per cent from its previous close.