Nestle India net profit rises 38% on higher volumes

Nestle India, the local arm of the Swiss consumer packaged goods company, reported a 38% increase in its net profit on Thursday to Rs 424 crore for the quarter ended March 31, 2018. The profitability of the FMCG major, known for its products such as Maggi noodles and KitKat chocolates, improved on account of higher revenues and lower deferred taxes.

The company's operating revenues for the January-March quarter came in at Rs 2,757 crore, up 6.3% over the year earlier. The growth in topline appeared muted due to the introduction of Goods and Services Tax (GST) from July 1, 2017, and the subsequent change in the way in which taxes are accounted for.

“Consequent to the introduction of GST with effect from July 1, 2017, VAT/sales tax, excise duty, etc., have been subsumed under GST, and accordingly the same is not recognised as part of sales as per the requirements of Ind AS 18,” Nestle India said in a post-earnings statement. “This has resulted in lower reported sales in the current quarter in comparison to the sales reported under the pre-GST structure of indirect taxes.”

Nestle India also indicated in its earnings statement that comparable growth in turnover for the quarter (Nestle India follows a January-December financial year) was estimated at 13.4%.

“I am happy that during the quarter we have sustained our growth momentum, which is backed by broad volume based growth across categories. This is in line with our strategy of broad-based growth through increased penetration,” said Suresh Narayanan, chairman and managing director, Nestle India.

To embark on a path of volume-led growth, after the controversy around Maggi dented the company’s earnings in 2015, Nestle India launched over 40 products in the last one year. The company has also announced its entry into the breakfast cereals market in a joint venture with General Mills.