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Nestle India on Thursday reported a 1.3 percent year-on-year decline in its net profit to Rs 594.7 crore for the quarter ended March. The fast-moving consumer goods company reported a 10.2 percent year-on-year rise in revenues from operations at Rs 3,980.7 crore for the reporting quarter.

Nestle's earnings before interest, taxes, depreciation, and amortisation or EBITDA stood at Rs 924.4 crore, missing Street estimates. EBITDA margin stood at 23.2 percent.

Nestle India shares fell as much as three percent to Rs 17,772.9 on the BSE, extending losses after the company reported Q1 results.

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Analysts in a CNBC-TV18 poll had estimated the company's quarterly profit at Rs 625 crore and revenue at Rs 3,950 crore.

The impact of higher raw material prices was telling as the company's operating margins shrank 260 basis points on-year to Rs 23.2 percent. The margin and operating profit performance were both below Street's expectations.

Also Read:Nestle revenue likely to grow 9.5% on hikes in Maggi and milk-based product prices

Sanjay Manyal, Research Analyst, ICICI Direct, “As far as revenue growth is concerned, largely what we were expecting and what we believe that the growth is - came from the pricing part; volume would have been a smaller part of the growth and that too from the Maggi portfolio. I think it is expected that all the raw material prices, whether it is milk or for that matter crude based packaging material, all have gone up sharply in the last 6-8 months and that would be reflected across FMCG companies."

"And though Nestle’s overall raw material basket is more skewed towards the agri side of the commodities rather than the crude and the palm which probably is a bit of solace, I believe still Nestle would also see the margin pressure probably one more quarter,” Manyal told CNBC-TV18.

Abneesh Roy, Edelweiss Securities said the resumption of office might be a positive for Nestle since for the last two years office supplies were restricted.

“The good part in this result is almost 20-21 percent kind of growth on a two-year basis on the revenue front and double-digit growth even in terms of YoY is a good thing. So, from the next one-two quarters perspective, food companies will be lower in terms of the pecking order because of more gross margin pressure, but this could be a good recovery play given urban consumption and the mobility coming back. So Nestle should be bought from a one-year perspective, but from a near term perspective, we will prefer Tata Consumer, ITC and HUL.”

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First Published:Apr 21, 2022 10:51 AM IST