Nestle`s India unit profit jumps 25% on price hikes, demand
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Nestle India reported a near-25% increase in first-quarter profit on Tuesday, as the packaged foods maker benefited from higher prices and steady demand for its Kit-Kat and Munch chocolates as well as instant coffee.
Consumer packaged goods makers globally jacked up product prices to offset the cost inflation and protect their earnings margins even as crude and palm oil rates eased recently.
Profit at the Indian unit of Swiss food giant Nestle rose to 7.37 billion rupees ($90 million) in the quarter ended March 31, from 5.91 billion rupees a year earlier.
Revenue from operations climbed to 48.31 billion rupees from 39.93 billion rupees.
Meanwhile, the rising demand for small packs of its Nescafe coffee and Maggi noodles and a move to expand its distribution network lifted rural sales over the last few quarters, shrugging off a broader slowdown in the packaged foods space.
"Rural growth was also strong, secular and robust, being volume led," Managing Director Suresh Narayanan said in a statement.
The company is seeing early signs of softening of prices of commodities, including edible oils, wheat and packaging materials, it said.
Still, Nestle India continues to wrestle with high milk prices, which hurt the margins in its chocolates and confectionery division as well as the dairy business that makes Milkmaid condensed milk and Everyday dairy whitener.
"Cost of fresh milk, fuels, and green coffee are expected to remain firm because of continued increase in demand and volatility," Nestle India said.
Shares in Nestle India were down 1.2% at 20,445.5 rupees on Tuesday morning, trimming its gains so far this year to under 5%.
Meanwhile, its parent, the world's biggest packaged food company, separately reported slightly better-than-expected first-quarter sales, with hiked prices offsetting a tepid sales volume.
