Nestle Q4 net rises 68%

With commodity prices easing by the end of last year, fast moving consumer goods major Nestle India posted a 68.4 per cent rise in net profit to Rs 76.5 crore in the fourth quarter ended December 31, 2004.

The steep rise was also due to the fact that the company incurred certain non-recurring exceptional operating expenses in the last quarter of 2003.

Nestle's net sales in the quarter increased by 7.8 per cent to Rs 576 crore with both its domestic and export sales looking up.

But poor consumer demand and high commodity prices persisting for most part of 2004, Nestle witnessed a four per cent dip in its net profit to Rs 252 crore in 2004 compared with the previous year.

The company's sales too grew marginally by 4.1 per cent to Rs 2,227.5 crore in 2004.

Martial Rolland, Nestle's newly appointed chairman and managing director in India, attributed the slow growth to changing consumer spending patterns.

"There has been a shift in consumer spending towards asset building and non-food related lifestyle changes, driven by low cost credit available widely to consumers, and diverting some consumer demand from FMCG products," he said in a release.

Rolland's predecessor Carlo Donati too had cited the changing consumer behaviour to explain Nestle's topline slowdown during the first three quarters of 2004.

In 2003 the company posted a sales growth of 11 per cent and its net profit increased by 30 per cent.

Nestle's domestic sales growth of 5.3 per cent to Rs 1,984 was offset by an identical decline in its exports during 2004. The company's exports declined to Rs 243.5 crore.

"These decreases are mainly due to the rise in commodity prices, particularly in milk solids, which have not been entirely passed on to consumers. Hence, we focused on maintaining market shares, improving organisational structure, improving penetration into newer territories and controlling costs. The fourth quarter of 2004 witnessed a more favourable growth," Rolland said.