“The distribution will be out of the current treasury position after adequately providing for future requirements. This cash payout will reduce the future generation of 'other income' and will improve the overall capital efficiency,” Nestle India
said in a press release.
On Friday, Nestle India
reported a 11 per cent year-on-year (YoY) rise in net profit to Rs 438 crore for the second quarter ended June 2019, led by sales and volume growth. Total sales increased by 11 per cent at Rs 2,983 crore on YoY basis.
Domestic sales rose by 13 per cent at Rs 2,835 crore largely driven by volume and mix and positively influenced by sales to CSD and sale of surplus fat. The export sales dropped by 14 per cent due to lower coffee exports to Turkey, the company said.
However, EBITDA (earnings before interest, tax, depreciation and amortization) margin declined by 107 bps to 23.6 per cent YoY.
"The company has a strong product portfolio with strong pricing power. The management, however, is currently concentrating more on driving volume with deeper penetration with distribution expansion. Current sales numbers where domestic business grew by 13 per cent signifies the same considering weaker demand scenario," analysts at Narnolia Financial Advisors said in result update.
Going forward, the company’s continued focus on innovating and renovating its brands, new launches in nutrition segment, emphasis on expanding penetration in categories where penetration is relatively low, is expected to drive revenue growth. Change in product mix and judicious pricing is likely to cushion declining margin in the wake of higher input prices, the brokerage firm said, with ‘buy’ rating on the stock and target price of Rs 13,472 per share.
At 11:51 am, Nestle India was up 2 per cent at Rs 11,690 on the BSE, as compared to 1.5 per cent decline in the S&P BSE Sensex. A combined 61,412 equity shares have changed hands on the counter on the BSE and NSE so far.