Hike in raw material cost, fuel price hit margins: Nestle

NEW DELHI:  Costly crude oil has sent ripples across businesses, and Nestle is no exception. On Wednesday, the packaged consumer goods major said it has seen the cost of raw materials jump 24% to Rs 1,479 crore in the quarter ended June. Total expenses grew 14% as other operating expenses surged too, hurting its margins. Its other expenditure rose as much as 30.3% during the quarter largely owing to rising fuel prices. It compares to a base quarter impacted by restricted operations due to lockdown.

At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 10% year-on-year to Rs 840 crore, but margin fell 88 basis points YoY and 177 basis points over the previous quarter. Rising input costs forced the company to raise prices across categories. However, its sales registered a 13.7% growth year-on-year suggesting that the company was not badly affected by the second Covid-19 wave during the quarter even as one metric— crude oil—is still causing discomfort.

During the quarter, domestic and export sales achieved double-digit growth largely driven by volume and product mix. “Our efforts to ensure last mile access were aided by e-commerce and in particular hyperlocal (quick commerce) channels, which grew by 147% in the first half of this year,” said Chairman and Managing Director Suresh Narayanan. E-commerce channels contributed 6.4% of domestic sales as against 3.8% in the January-March quarter. Its export revenues jumped 17.7%. Key products Maggi Noodles, Kitkat, Nestle Munch and Maggi sauces posted strong double-digit growth, said Nestle India. 

The company, which follows January-December as its financial year, said revenue from operations grew by 14% to Rs 3,477 crore compared to corresponding quarter last fiscal. Net profit rose 11% to Rs 538 crore.