Nestle's June qtr net up 10% to Rs 263 cr; firm claims GST hit top line

Net sales grew 7.3%, negatively impacted by GST roll out; profit up 9.7%

Food and beverages major Nestle India’s net profit grew 9.7 per cent on a year-on-year (YoY) basis to Rs 263.4 crore, from Rs 240.2 crore. Profit growth, however, got impacted during the quarter due to a higher cost of materials.

Sales growth got impacted due to the roll out of the goods and services tax (GST) during June, the company told the Bombay Stock Exchange (BSE) in its regulatory filing on Wednesday. 

While announcing its quarterly financial results, Suresh Narayanan, chairman and managing director of the firm said: “Revenue growth was negatively impacted by softer trading in June ahead of the rollout of GST.”

In the June quarter, Nestle’s net sales increased by 7.3 per cent YoY to Rs 2,469 crore, from Rs 2,301 crore.

“I am pleased with the momentum on volume-led growth during the quarter,” said Narayanan in a statement while adding that the company’s business faced softer trading conditions in June, prior to the introduction of GST with trade destocking and postponing purchases. 

The transition into the new tax regime has, however, been “smooth” so far, he said.

The negative impact of GST just ahead of its implementation from July 1, has been faced by various consumer goods companies as destocking and new placement of new orders by trade partners were not in line with the trend. While the consumer durable makers have anticipated an uptick in sales due to huge discounting in June, primary sales of FMCG majors have been hit as the wholesale segment is yet to align with the new tax structure.

Nestle’s domestic sales outpaced import sales– 8.8 per cent compared to 12 per cent negative growth in import sales. Growth in domestic sales was backed by new product launches, better sales of Maggi noodles and improved realisations.

Profits were hit by an increase in the prices of milk and milk derivatives that had to be partially absorbed, which in turn led to an increase in the ratio of cost of materials consumed versus net sales, the firm said. The ratio increased by 41 basis points YoY, from 39.59 per cent last year to 40 per cent in 2017. 
 

One basis point is one hundredth of a percentage point. Excise duty paid during the quarter jumped 21.5 per cent to Rs 82.5 crore, from Rs 67.9 crore, further impacting profit growth, as tax holiday at its Pantnagar plant in Uttarakhand ended.

KEY TAKEAWAYS

* In the June quarter, Nestlé’s net sales increased by 7.3 per cent year-on-year to Rs 2,469 crore from Rs 2,301 crore a year ago
 

* Nestlé’s domestic sales outpaced import sales at 8.8 per cent, compared to 12 per cent negative growth in import sales

* Growth in domestic sales was backed by new product launches, better sales of Maggi noodles and realisations

Financial performance of Nestle India in June quarter

	Apr-Jun, 2016	Apr-Jun, 2017	Change
Net sales	2,301	2,469	7.3%
Net Profit	240.2	263.4	9.7%