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Thursday, September 29, 2022

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Analysts Expect Growth To Pick Up Despite Inflationary Headwinds

Analysts expect Nestle India Ltd. to report healthy growth in the future even as the maker of Maggi noodles missed April-June earnings estimates amid rising costs.

Nestle India’s profit fell in the second quarter but it beat sales forecast as volume growth improved on the back of uptick in rural markets and “double-digit” growth in mega, metro and smaller cities.

The company, however, flagged significant cost pressures with inflation in 2022 seen at five times the 3% annualised rate seen over 2018-2020.

“In such a situation, the engine of growth continues to be penetration-led volume growth,” Suresh Narayanan, chairman and managing director at Nestle India, said while addressing investors in a post-earnings call.

The company, he said, is focusing on protecting growth instead of raising prices to maintain its profits margins. It increased prices hikes in the range of 8.5% to offset the impact of 15% inflation in 2022.

Narayanan said while there have been early signs of softening in edible oil prices and packaging, commodities including green coffee, wheat, fuel, and fresh milk are are at an all-time high. That suggests Nestle India’s profit from operations may remain under pressure in short term.

The company said it logged “strong” growth across the categories in the June quarter led by confectionary, beverages, prepared dish and cooking aids and milk products and nutrition category.

Here’s what analysts made of Nestle India’s Q2 CY22 results:

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