Nestle India - What Q2FY20 results say for the Maggi Maker

About the company

NESTLé India is a subsidiary of NESTLé S.A. of Switzerland. Nestle is the world’s largest food and beverage company. It has more than 2000 brands and is present in 190 countries worldwide. Currently, Nestle has eight factories in India.

Popular Brands:

• Beverages: Nescafe Coffee, Nestea
• Breakfast Cereals: NesPlus
• Chocolates: BarOne, Milkibar, Munch, Kitkat, Polo, Alpino
• Milk Products & Nutrition: Nestle A+, Milkmaid, Nestle ActiPlus
• Prepared Dishes & Cooking Aids: Maggi Noodles, Pazzta (Pasta), Ketchup, Maggi masala, Maggi Oats

Observations:

• 9.5% higher sales on the back of squeezed EBIDTA margins (183 bps fall vis-à-vis last year)
• Domestic sales (~95% of operating revenue) increased by 10.5% largely driven by volume and mix. Export Sales (~5% of operating revenue) dropped by 7.1% due to lower coffee exports to Turkey.
• Cost of materials consumed has increased by 16.2% YoY and 1.4% as a percentage of the total income. This is due to higher commodity prices particularly milk, the impact of which has not been fully passed on to consumers.
• Tax Expense computed at lower tax rates (as per the Tax Ordinance 2019). Accordingly, tax expense for the current quarter is lower due to credit of INR 725 mn pertaining to the previous quarter.
• Company's business activity falls within a single operating segment namely food. Accordingly, the disclosure requirements of Ind AS 108 are not applicable.
• Provision for Contingencies is mainly for matters related to litigations and other uncertainties requiring management judgement. Legal proceedings in the MAGGI noodles issue are currently on before the Hon'ble Supreme Court.
• The company said that key brands such as Maggi, Kitkat, Nestle Munch and Nescafe RTD delivered strong performances in the third quarter.

Source: Company filings, Image