Nestle India on Thursday flagged concerns around global inflationary pressures with many key commodities touching ten-year highs. The FMCG major added that it has been focusing its efforts towards cost optimisation and systematic efficiencies, besides selective price hikes to mitigate the impact.
Speaking at an analyst call, Suresh Narayanan, Chairman and Managing Director, Nestle India, said, “Food and commodity inflation is here to stay for a while and remains a cause of concern. We are focusing on three or four key levers to manage inflation, including cost efficiencies, strategic buying, portfolio and capacity optimisation, and leveraging the economies of scale. Price increase or change is the last option for us. We have taken some selective price hikes of 1-2 per cent. This could also be a lever that we may need to press in the future, if indeed the level of inflation is unrelenting.”
The FMCG major posted a net profit of ₹386.66 crore in the quarter ended December 31, 2021, down 20 per cent from ₹483.31 crore in the corresponding quarter of the previous fiscal. This was due to an exceptional expense of ₹236.50 crore due to past service and settlement costs with the defined benefit pension scheme for certain category of employees being amended. Revenue from operations for the quarter was up 8.93 per cent to ₹3,739.32 crore.
The company — which follows January-December as its fiscal period — reported a net profit of ₹2,144.86 crore for the full year of 2021, up 3 per cent from 2020. Revenue from operations grew 10.18 per cent to ₹14,709.41 crore for the full year.
Nestle India’s board declared a final dividend of ₹65.00 per share amounting to ₹626.70 crore.
Terming 2021 as a challenging year, Narayanan said that the company witnessed broad-based double-digit volume and mix-led growth despite a highly volatile economic environment. Total sales and domestic sales for 2021 increased by 10.1 per cent and 10.7 per cent, respectively.
The company witnessed strong organic growth of 9 per cent in rural markets in the quarter.
Talking about rural growth outlook, he said, “There is pain in the rural markets that has been reflected by many players. The urban-to-rural migration which was seen couple of quarters ago …led to seeding of our brands in semi-urban and rural markets which is benefitting the company. As of now, we have not seen a dramatic shift or change as far as progress of our brands are concerned in rural markets. But, of course, this will depend on the how the enormity and acuity of the economic pain... (pans out). So I think I would really not like to to make any doomsday scenario as far as rural markets are concerned; we have had fairly encouraging growth in rural markets.”