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Nestle India: Sales Traction From New Products - Views on News from Equitymaster
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Nestle India: Sales Traction From New Products
Nov 30, 2016

Nestle India declared results for the quarter ended September 2016. The company reported a revenue growth of 36% YoY during the quarter.

Performance Summary
  • The company's revenues grew by 36% during the quarter as compared to a year ago on a lower base. Food Safety and Standard Authority of India (FSSAI) ban on Maggi noodles had impacted its sales in 3QCY15. The growth was broad based across categories aided by new product launches in the past couple of quarters. Maggi noodles too has consolidated its market leadership position with 57% market share after its reintroduction in November 2015.
  • Further, the company is aggressively pushing to introduce new products in the market to boost growth. The company has introduced four new variants to Maggi noodles named as Maggi Hotheads. To add to this the company has introduced a variety of new products in it's confectionary, milk products and beverages segment. In all the company has introduced 25 new products. This will drive the growth in the topline going ahead.
  • Nestle's operating profits increased by 65% YoY led by an increase in sales and soft commodity prices. Operating margins too expanded by 3.6% to 20.1%. However, operating margins may take a hit going forward as the company intends to spend aggressively on advertisement and promotions to rebuilt the brand equity of Maggi noodles.
  • Net profit grew by 116% to Rs 2.6 bn during the quarter. Profits were lower during the same quarter in the preceding year on account of the Maggi ban.

    Standalone financial performance
    (Rs m) 3QCY15 3QCY16 Change 9MCY15 9MCY16 Change
    Net sales (Net of Excise Duty) 17,424 23,635 35.6% 62,159 69,376 11.6%
    Expenditure 14,544 18,883 29.8% 49,226 54,585 10.9%
    Operating profit (EBDITA) 2,880 4,751 65.0% 12,933 14,792 14.4%
    EBDITA margin (%) 16.5% 20.1% 20.8% 21.3%
    Depreciation 906 882 -2.6% 2,576 2,663 3.4%
    EBIT 1,975 3,869 95.9% 10,357 12,129 17.1%
    EBIT Margins 11.33% 16.37% 16.66% 17.48%
    Interest 0 1 200.0% 35 40 13.5%
    Other income 272 374 37.4% 828 1,089 31.4%
    Empoyee benefit expense due to passage of time 189.0 219.1 15.9% 570.5 659.2 15.5%
    Provisions for contingiencies - - 301.50 456.40
    Corporate social responsibility expense 16.20 56.70 41.50 128.50
    Exceptional items 245.20 0.00 4,761.80 318.20
    Profit before tax 1,796.20 3,966.70 120.8% 5,475 11,615 112.1%
    Tax 553 1,273 130.0% 1,675 4,023 140.2%
    Effective tax rate 31% 32% 31% 35%
    Profit after tax/(loss) 1,243 2,694 116.8% 3,801 7,592 99.8%
    Net profit margin (%) 7.1% 11.4% 6.1% 10.9%
    No. of shares (m) 96.4
    Diluted earnings per share (Rs)* 105.3
    Price to earnings ratio (x) 58.4

    (*On a trailing 12-month basis & excluding exceptional Items)

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