One of the largest players in India’s FMCG segment, Nestle announced its financial results for their second quarter of 2022 (following the calendar year as the accounting period) on 28th July 2022. For the six months ended 30th June 2022, the company reported a profit after tax (PAT) of Rs. 1,110.05 crore in Q2 of 2022, which declined marginally by 2.7% YoY (year on year) from Rs. 1,140.83 crore in Q2 of 2021. However, there was a greater decline of 48.25% in the PAT from the end of the previous financial year (on 31st December 2021) from Rs. 2,144.86 crore.
This decline for Nestle can be attributed to an increase in impairment loss on property, plant, and equipment, as well as a rising net provision for contingencies. Cost of materials consumed as a percentage of sales also increased due to higher commodity prices, particularly that of edible oil, milk and its derivatives, as well as packaging materials. Other income too saw a decline due to lower average liquidities that were partly offset by higher yields.
On the other hand, the revenue from operations of the company saw a 13.12% YoY increase, rising to Rs. 8,017.27 crore in Q2 2022, from Rs. 7,087.52 crore in Q2 2021.
The total sales for the quarter stood at Rs. 4,007 crore, increasing 15.7% YoY in Q2 2022. The domestic sales for the quarter increased by 16.4% YoY. As stated by the company, the growth in domestic sales growth was broad based with a healthy balance of pricing and volume mix. Export sales also saw a growth of 0.7% YoY from Q2 2021.
In relation to total cash flows, the net cash generated from operating activities in the half year was robust and was partially offset by capital expenditure and payment of dividend. The multinational FMCG giant distributed a total of Rs. 867.74 crore as dividend in the six months ended 30th June 2022. The Earnings Per Share (EPS) stood at Rs. 53.4. As the result was announced during the market hours, Nestle’s share reacted positively to the announcement, jumping by 0.80% to Rs. 18,690 at around 11:14 am.
Misses of Nestle 2022 Results
Commenting on the results, Mr. Suresh Narayanan, Chairman and Managing Director, Nestlé India said, “I am pleased to share that we have continued to deliver robust sales growth this quarter and breached the INR 40 billion (4000 crore) mark. This is attributable to the resilience of my team and the tenacity of our partners. Our endeavour this quarter was to secure our ‘engines of growth’ in this inflationary context and to enable sharp overall business recovery when the pressures abate. The growth is broad based and while being primarily driven by pricing, has a healthy underlying volume and mix evolution. I am also happy to share that the ‘out of home’ space got back to accelerated growth in channels like hotels, education centres and workplaces. As far as channels are concerned, ‘organised trade’ saw broad based growth across consumers and categories.”
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Research Analyst: Bavadharini KS