Nestle India slips 5% after Q1 profit margin contracts YoY

In Q1CY20, the gross margins declined more-than-expected by 220 bps YoY to 56.3 per cent due to higher commodity costs, particularly milk and its derivatives.

Shares of Nestle India declined 5 per cent to Rs 16,634 on the BSE on Wednesday after the company reported 140 basis points contraction in Ebitda (earnings before interest, taxes, depreciation and amortization) margin at 24.1 per cent in March quarter (Q1CY20) over the previous year quarter.

The gross margins, meanwhile, declined more-than-expected by 220 bps year on year (YoY) to 56.3 per cent due to higher commodity costs, particularly milk and its derivatives. Higher raw material price led to fifth consecutive quarter of gross margin compression.

On the upside, the FMCG major’s total sales increased 10.8 per cent YoY at Rs