Nestle profit up 8%; higher tax, interest pull down margin

Nestle India reported net profit of Rs 257 crore, up 7.8 percent from Rs 256 crore in the first quarter of last year. The company which follows a January to December financial year, reported its first quarter (January to March) numbers today.

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Its net sales came at Rs 2,047 crore, up 13 percent over the same period last year.

The operating margin for the company has marginally gone up from 19.3 percent to 19.5 percent, a rise of 20 bps (1 percent= 100 bps). But net profit margin has come down from 14.1 percent to 13.4 percent (down 70 bps).

The drop has primarily come due to rise in tax expense from Rs 103 to Rs 127 crore over the same period of time due to the end of a tax holiday the company used to enjoy for last five years on 100 percent of profit on its Pantnagar factory. Now it would have to pay taxes on 30 percent of the profits.

Its finance costs also went up from Rs 7 lakh in the first quarter last year to Rs 2.27 crore this quarter due to a foreign currency denominated loan the company has taken from its parent, Nestle SA.

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Antonio Halio Waszyk, the chairman and managing director of Nestle India said, 2012 is already showing itself as a challenging year. Low consumer confidence and economic environment is creating pressure across sectors. Nestle is maintaining a cautious tone and will focus more on innovation and strengthening of product portfolio.