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Nestle beats slowdown blues, logs sales growth of 11.4% in June quarter

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ET Intelligence Group: Amid a broader slowdown in consumption, Nestle India remains an exception.

The maker of Maggi noodles delivered 10.5 per cent volume growth in the second quarter (9.6 per cent in first half of CY19), the highest among FMCG companies.

The brand has finally crossed the volume of first half CY15, a period prior to the Maggi crisis. Those attending the company’s annual investor meet were positive on the local unit of the Swiss foods major. “We remain positive on the growth prospects as the company is aggressively launching new products and variants in existing brands, which would boost growth.

We expect earnings growth at a CAGR of 19.7 per cent in CY18-20E led by strong sales growth,” said Sanjay Manyal, consumer analyst with ICICI Direct. From 2.08 lakh tonnes of domestic sales in the first half of 2015, it dropped to 1.72 lakh tonnes in the first half of the following year.

In first half of 2019, it crossed the 2015 volume for the first time – of 2.26 lakh tonnes. Nestle is setting up a new Rs 700-crore Maggi plant in Gujarat.

“The decision to set up a green-field unit of Maggi shows management confidence in the future growth potential of Maggi noodles,” said Amnish Agarwal of Prabhudas Lilladher. While Maggi is doing well, the company is present in several other categories and has leadership in 85 per cent of its portfolio.

It enjoys leadership position in instant noodles, pasta, infant cereals, infant formula, tea creamer, white and wafers chocolates and instant coffee categories.

It is in the second position in ketchup and sauces categories.

In the June quarter, Nestle had sales of Rs 2,983 crore, 11.4 per cent higher on year and a net profit of Rs 438 crore, 11 per cent higher.

EBIDTA margins were at 23.3 per cent, down 70 basis points, because of higher raw material price.

The company increased ad spends despite margin pressure. Nestle India’s stock is trading at an all-time high at Rs 11,893.

The stock is valued at 67.5 times its trailing earnings.

As the only company withstanding a slowdown, the stock may see higher demand in the coming days.




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