Nestle India Q1 Results: Profit Misses Estimates, Margin Contracts On Cost Pressures

Nestle India Ltd. reported lower-than-expected profit for the first quarter, due to rising commodity prices and higher operating expenses. The company’s earnings missed analyst estimates despite revenue growth, with margins narrowing due to increased input and finance costs.

Standalone net profit for the quarter ending June fell 11.7% to Rs 659.2 crore from Rs 746.6 crore a year earlier, according to its notification to the exchanges on Thursday. That fell short of the Rs 751 crore estimate. Revenue rose 5.9% year-on-year to Rs 5,096 crore, slightly below Bloomberg’s estimate of Rs 5,103 crore.

• Revenue up 5.9% to 5,096 crore versus 4,814 crore (Bloomberg Estimate: Rs 5,103 crore)

• Ebitda down 1.3% to Rs 1,100.2 crore versus Rs 1,114.3 crore (Estimate: Rs 1,181 crore)

• Margin at 21.6% versus 23.1% (Estimate: 23.1%)

• Profit down 11.7% to Rs 659.2 crore versus 746.6 crore. (Estimate: Rs 751 crore)

The company attributed the margin contraction to elevated input costs and higher operational expenses. Nestle India is expanding its manufacturing footprint, leading to a temporary rise in costs. In addition, finance costs increased due to temporary cash-flow borrowing.

Despite the margin pressure, the company reported strong performance in several categories. The confectionery segment delivered high double-digit growth, led by a sharp rise in volumes. Seven of its twelve top brands recorded double-digit growth during the quarter. Urban consumption showed strong momentum, with significant demand driving growth in city markets.

E-commerce remained a key growth channel, contributing 12.5% to domestic sales. Quick commerce platforms and new product launches played a critical role in sustaining e-commerce momentum.

Nestle India’s management said it remains focused on investing in capacity expansion and innovation to drive long-term growth, despite short-term cost headwinds.

Nestle India share price declined 5.59% to Rs 2,315.4 apiece, the lowest level since June 19. It has declined 8% in 12 months, while it has risen 7.66% on year-to-date basis. Total traded volume so far in the day stood at 4.2 times its 30-day average. The relative strength index was at 38.14.

Out of 30 analysts tracking the company, 10 maintain a 'buy' rating, 18 recommend a 'hold' and 12 suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 3.9%.