Margin headwinds loom for Nestlé India after unappetizing June quarter
MUMBAI : Nestlé India Ltd’s shares have dropped by about 3% since its June quarter (Q1FY25) results were announced on Thursday. The numbers mark a substantial slowdown in growth of the packaged foods company with revenue increasing by a mere 3.3% year-on-year. This is the lowest print since the Maggi crisis in 2015 (excluding the June 2020 Covid quarter), said analysts from Kotak Institutional Equities.
Nestlé maintains that the external operating environment had challenges such as lower consumption growth, concerns on continued food inflation and volatile commodity prices. In Q1FY25, volume and sales mix increased by 1%—a multi-quarter low. In comparison, Hindustan Unilever Ltd, which too announced June quarter results this week, clocked an underlying volume growth of 4% in Q1, much better than the 2% growth seen in each of the previous three quarters.
“Trends are unlike peers who are seeing a sequential uptick in Q1 led by rural, although this may not be strictly comparable given Nestlé's higher urban salience and unique portfolio split," said a report by Jefferies India on 25 July. Nestlé said five out of its top 12 brands saw double-digit growth. Encouragingly, its beverage business reported strong double-digit growth, despite a scorching summer across many parts of the country.
Prepared dishes and cooking aids too maintained its growth momentum, with innovations contributing to about 30% of the growth in the quarter, said the company. Further, e-commerce is growing at double-digit and has 7.5% of the domestic sales. The company continued its RUrban strategy of expanding its distribution footprint (adding over 800 new distribution touchpoints in Q1) and had increased its village coverage by 5,000 to about 205,000
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