Nestlé India shares fell nearly 9% in intraday trade on Thursday, despite the packaged foods maker reporting a 36.3% year-on-year jump in second-quarter net profit, as management flagged rising food inflation and commodity costs as challenges for the business.
The stock dropped as much as 8.87% to ₹1,260.50 on the NSE, against its previous close of ₹1,383.20, before recovering some losses. At 2:10 pm, Nestlé India shares were trading at ₹1,302.90, down 5.81%.
The decline came despite strong growth in revenue, profitability and volumes during the July-September quarter, with management's commentary on inflation emerging as a key concern for investors.
Management flags food inflation, commodity costs
“Rising inflation, particularly food inflation, is a reality,” Nestlé India chairman and managing director Manish Tiwary said while commenting on the results.
Tiwary said the company would navigate the challenging environment through innovation, investments behind its brands and a sharper focus on operational efficiencies.
“We remain focused on navigating these external challenges through continuous innovation and renovation, sustained investments behind our brands, and an intensified focus on productivity and operational efficiencies to mitigate commodity cost pressures,” he said.
Nestlé India said it continued to focus on efficiencies across operations while increasing investments behind its brands. Advertising and marketing expenditure rose 46% during the quarter as the company continued to invest in its portfolio amid the challenging cost environment.
Revenue rises 20.5%, EBITDA margin improves
Nestlé India's total sales rose 20.5% year-on-year to ₹6,782.2 crore in the September quarter, driven by robust double-digit volume growth. Revenue from operations increased 20.3% to ₹6,788.3 crore.
Net profit rose to ₹1,026.8 crore from ₹753.2 crore in the year-ago quarter. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased to ₹1,615.5 crore from ₹1,232.7 crore, while the EBITDA margin expanded to 23.8% from 21.9%.
“EBITDA margin remained healthy at 23.8%,” Tiwary said, adding that profit after tax grew 36.3% over the corresponding quarter.
Nestlé India also reported double-digit, volume-led growth in its confectionery business, supported by market-share gains for KitKat and sustained momentum across Munch and Milkybar.
While the quarterly numbers reflected stronger sales, volumes and margins, the sharp intraday fall in the stock highlighted investor concerns over the outlook for input costs and the impact of inflation on the company's business.