Nestle India flags food, commodity inflation after profit surges 36%

Nestle India posted a 36% rise in second-quarter profit, with net profit reaching 10.27 billion rupees ($108.03 million), according to Business Recorder. Robust sales of Nescafe coffee and Maggi noodles helped push revenue up 20% to 67.88 billion rupees. Even so, management flagged food inflation and rising commodity prices as key challenges, while Chairman and Managing Director Manish Tiwary described the environment as difficult.

Sales at Indian consumer goods makers have received a lift from tax reductions on consumption and targeted price rises, though input costs for packaging, edible oils and farm produce are climbing. Retail inflation rose to 5.54% in September, close to the ceiling of the central bank's acceptable range, as Middle East conflict and a sluggish monsoon lifted prices. The company plans to offset these pressures through product innovation, brand spending and tighter cost control.

Profit landed close to expectations, disappointing investors who had hoped for a bigger beat, according to Systematix Group analyst Chetan Mahadik. He also suggested that investors could be weighing slower revenue growth in later quarters. Sales volume still climbed at a double-digit pace, which the company attributed to deeper rural penetration for Maggi. Shares dropped roughly 9% following the release.