Nestlé India posts strong Q1, flags commodity cost risks
Nestlé India reported a sharp rise in profit and revenue in the June quarter (Q27), driven by broad-based growth across product categories and channels, and warned that commodity costs and El Niño-related supply risks remain key monitoring points.
Shares of the Maggi noodle and KitKat chocolate maker rose 3.94% to a 52-week high. ₹It was at 1,509 on the National Stock Exchange on Wednesday after the company reported a sharp increase in earnings.
Standalone net profit increased by 47.9% year-on-year ₹975 crore in the June quarter, while revenue from operations increased by 25.1% ₹6,378 crore, the company said in its stock market filing on Wednesday.
Nestlé said sales growth was driven by strong volumes, but did not quantify the volume increase.
“All four product lines delivered strong double-digit growth supported by high double-digit growth across channels,” Manish Tiwary, chairman and managing director of Nestlé India, said in the filing.
Analysts at Nuvama Institutional Equities expect FY27 volumes to rise 20% year-on-year.
Rapid trade growth
The company noted that overall business saw strong double-digit growth among urban classes, with rural markets leading the momentum. It strengthened its direct reach by expanding its rural distribution touchpoints in the quarter.
Fast commerce has also emerged as a key growth driver, supported by improved product availability and a more customized, platform-specific package portfolio across relevant categories.
At the category level, powdered and liquid beverages recorded double-digit growth for the 20th consecutive quarter, led by volume increases in Nescafe Classic and Sunrise, as well as strong growth in the premium portfolio led by Nescafe Gold. The company stated that its ready-to-drink beverage business also grew rapidly in the quarter.
The confectionery business, which includes KitKat and Munch, achieved another quarter of volume-led double-digit growth, boosted by premiumization and e-commerce.
The Ready Meals and Cooking Aids business, which includes Maggi, reported an increase in market share and penetration during the quarter. The pet food business also recorded strong double-digit growth and new products were launched in the cat food segment.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 39.8% ₹1,538 crore, while the EBITDA margin increased from 21.6% to 24.2% compared to the previous year.
Cost pressures continue
Even if demand remains strong, Nestlé flagged raw material costs and weather as key risks to watch.
The company said that difficulties in supplying raw materials due to El Niño continue to be a significant problem that can be monitored. The company noted that cocoa prices were affected by erratic rainfall in key producing regions, while sugar prices strengthened due to lower-than-expected crop forecasts and “irregular monsoon conditions associated with El Niño pose a risk to the next crop.”
Nestlé added that edible oil prices remain stable at high levels. While wheat and milk are expected to remain in range, the protein complex, including milk-based proteins, continues to face inflationary pressure as demand from nutrition and protein fortification trends outpaces supply growth.
“We are not expecting a price increase but a reduction in quantity (grams) in products – a reduction in inflation,” said analysts Aniket Salunke, Yash Mitkar and Foram Thosani of Sunrise Gilts & Securities.
“Recently, Maggi has reduced the quantity by 7-9% on almost all its packs. We expect margins to come down as palm oil is imported due to rising inflation and the company has not increased the price,” they added.
Analysts at Nuvama said they expect most core product companies to report very strong numbers in both the first and second quarters and, at this stage, do not see any significant risk from El Niño in the second half of FY27.
