Nestle beats note ban blues in March quarter

Net profit would likely grow 15.6% on the back of double-digit topline growth

Nestlé India has beaten the blues of demonetisation and recovered, led mostly by its popular instant noodles Maggi, the company said in an earnings conference call (con-call).

Prime Minister Narendra Modi had announced the demonetisation of old Rs 500 and Rs 1,000 notes on November 8 last year. This had led to a severe cash crunch in the economy, hitting demand for consumer goods.

For the December 2016 quarter, Nestlé India had reported a nearly 9 per cent decline in standalone net profit. It had fallen to Rs 167.3 crore for the quarter, compared to Rs 183.2 crore for the same period the previous year.

In the con-call on Thursday, Nestlé Chief Financial Officer François-Xavier Roger said the India business was recovering. “Nestlé India continued with a good performance, driven by Maggi. We see progressive normalisation after demonetisation. South Asia (of which India is a constituent) continued to make sustained progress with high single-digit organic growth.”

Nestlé is the second company, after Anglo-Dutch major Unilever, to indicate that the note ban effect was wearing off in the March quarter. On Thursday, Unilever, which reported a surprise 2.9 per cent underlying sales growth for the quarter, said growth in India had recovered.

Based on the numbers reported as well as Unilever’s commentary for the period, Naveen Trivedi, senior analyst, HDFC Securities, said he saw its Indian subsidiary Hindustan Unilever showing better sales performance in the March quarter. Volume growth, he said, would be over 3 per cent sequentially higher than the decline of 4 per cent reported in the December quarter.

Nestlé India, on the other hand, said Abneesh Roy, senior vice-president, institutional equities, Edelweiss, would see a 12 per cent revenue growth for the March quarter, led by a mix of price and volume growth.

Net profit would likely grow 15.6 per cent for the March quarter, Roy said, on the back of prudent cost management as well as double-digit topline growth.

Nestlé India is also slated to enter new categories such as pet care, skin care and hair care, according to its chairman and managing director Suresh Narayanan. He also said, in the firm’s recently released annual report for the calendar year 2016, that the firm was looking to introduce more global brands in the country to reduce its dependence on Maggi.