Nestle struggles to get out of the woods

Net profit and sales in March quarter both continue sequential improvement since Maggi ban lifted but well down on annual basis; CMD promises more progress

Nestlé India net profit improved in the March quarter to Rs 259 crore but this was 19.1 per cent less than in the same quarter a year before. Net sales dropped 8.4 per cent over a year before, to Rs 2,295.7 crore.

Sales and profit have improved since the Maggi Noodles controversy hit the Swiss-based fast moving consumer goods (FMCG) company last May (see chart). During the past four quarters, net profit has risen in each and is now at par with its March quarter profit in 2014.

Suresh Narayanan, chairman and managing director, said: “Our results show further improvement in sequential performance, both in sales and margins. This is extremely satisfying as we move ahead and rebuild our business, particularly Maggi Noodles, after a tough year.  Maggi has already regained leadership with over 50 per cent of market share within five months of relaunch. I am delighted that in a survey of India’s brands by TRA in October/November 2015, it  emerged as the most trusted in the FMCG category.”

The controversy on alleged health hazards in the instant noodle brand had broken out in May last year, followed by a country-wide ban on the product till November. The company relaunched one variant on November 10. Maggi now has more than 50 per cent of the domestic instant noodles market; before the ban, it had 78 per cent. Since 2013-14, the company's dependence on Maggi had increased; pre-ban, it got 30 per cent of its revenue from the brand.

To raise the revenue contribution from other categories, the FMCG major has launched several products under its chocolate & confectionaries and beverages categories.

The chairman says they're working on how to bring new and innovative products, apart from expanding reach.   

“We are working on increasing penetration for all our businesses," he said on some recent launches, which he described as "precursors to products in different stages of readiness for launch".

During the quarter, export sales decreased 4.8 per cent to Rs 166 crore. Domestic sales fell more, by 8.7 per cent to Rs 2,130 crore.

Net profit declined more than its sales due to higher employee benefit expenses and an increase in net provisioning for contingencies. Net sales dropped 8.4 per cent and tax expenses remained flat at Rs 161.4 crore, bringing profit further down. The stock closed at Rs 5,703.85 or 1.9 per cent higher at the BSE exchange on Thursday.

In anticipation of further improvement in profitability and sales. The exchange's 30-index benchmark rose 0.75 per cent.