Commenting on the results, Suresh Narayanan, chairman and managing director, Nestle India, said, “The market momentum continued to be favourable, and I am pleased that we have sustained our broad-based volume growth across categories. There is an improvement in margins due to favourable cost of commodities and cost efficiency programmes. However, we are now witnessing headwinds in commodity prices.”
“Kitkat, Nescafe and Maggi continue to grow strongly in the market. We have also recently introduced breakfast cereals with Nesplus and canned beverages with Nescafe ready-to-drink (RTD). This is in line with our focus on consumer-led innovations, centred around nutrition, health and wellness,” he added.
“We are committed to a healthier future and are continuing to enhance the nutrition profile of our products by adding ingredients like whole grains, vegetables and micronutrients and have been reducing public health-sensitive nutrients. We have also taken a pledge and announced our roadmap for reduction of sodium, sugar and fat in relevant categories. We seek to make our portfolio tasty and yet more nutritious for our consumers,” Narayanan said.
Highlights for QE June 30
In accordance with Ind AS 18 on revenue and Schedule III to the Companies Act, 2013, sales for the period between January 1 and June 30, 2017 were reported gross of excise duty and net of value-added tax (VAT)/sales tax. Excise duty was reported as a separate expense line item. Consequent to the introduction of Goods and Services Tax (GST) with effect from July 1, 2017, VAT/sales tax, excise duty, etc. have been subsumed into GST, and accordingly the same is not recognised as part of a sales as per the requirements of Ind AS 18. 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. With the change in the structure of indirect taxes, expenses are also being reported net of taxes. Accordingly, financial results for the quarter and six months ended June 30, 2018, and in particular, sales, absolute expenses, elements of working capital (inventories, trade payable, other current assets/current liabilities, etc.) and ratios in percentage of sales are not comparable with the figures of corresponding periods. Profit from operations in percentage of sales (21.4 per cent) and net profit (Rs 395 crore) in percentage of sales are positively impacted as the percentages have been calculated on lower reported sales.
Total sales and domestic sales for the quarter increased by 8.5 per cent and eight per cent, respectively. The growth rates are adversely impacted due to lower reported sales by the change in structure of indirect taxes and reduction in realisations to pass on the GST benefits. On a comparable basis, domestic sales growth is estimated 14.5 per cent, supported by the increase in volumes on a base impacted by softer trading ahead of the rollout of GST.
Profit from operations as percentage of sales and net profit as percentage of sales are positively impacted by 110 basis points (bps) and 70 bps, respectively, as the percentages have been calculated on lower reported sales.
Dividend
The board of directors have declared second interim dividend for 2018 of Rs 20 per equity share (face value of Rs 10 per equity share) amounting to Rs 1,928.3 million, which will be paid on and from August 24, 2018. This is in addition to the first interim dividend of Rs 20 per equity share paid on June 1, 2018.
