Nestlé India shares crash over 8% as as commodity costs loom

Nestlé India's September-quarter profit rose 36.3% year-on-year, but its shares fell as much as 8.3% on Thursday after the company flagged persistent food inflation and volatile commodity costs.

The maker of Maggi noodles and KitKat chocolates reported broad-based growth across product categories, but investor sentiment was dampened after it said, "rising inflation, particularly food inflation, is a reality".

The shares recovered marginally later in the day. At 1.38 pm, they were down 5.4% from the previous close at ₹1,308.60 apiece on the National Stock Exchange.

"Coffee and wheat are expected to remain range-bound, while sugar and edible oils have stabilized at elevated levels," the company said in an exchange filing. Cocoa prices remain volatile due to weather-driven crop concerns in key producing regions. The company expects milk prices to soften as the flush season arrives.

Standalone net profit climbed 36.3% year-on-year to ₹1,026.8 crore in the September quarter, while revenue from operations rose 20.3% to ₹6,788 crore, the company said in a stock exchange filing on Thursday. Nestle India had reported a 25.4% sales growth in the June quarter.

The company remains focused on navigating external challenges through "continuous innovation and renovation, sustained investments behind our brands, and an intensified focus on productivity and operational efficiencies to mitigate commodity cost pressures," said Manish Tiwary, chairman and managing director.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) grew 31% to ₹1,615 crore, compared to ₹1,232 crore in the corresponding quarter of the last fiscal year. Nestle reported an Ebitda margin of 23.8% in the September quarter, down from 24.2% in the June quarter.

"We view Nestlé India's 2QFY27 performance as strong and largely in line with expectations," said Ronak Shah, consumer sector analyst at Equirus Securities. "Topline growth was supported by double-digit volume growth, while improved mix and pricing more than offset higher operating expenses, resulting in EBITDA margin expansion," he said.

The company said marquee products continued to gain market share. "Confectionery product group recorded another strong quarter of volume led double-digit growth."

The company also highlighted strong rural and e-commerce growth. "General Trade delivered robust, double-digit growth across town classes, led by strong momentum in rural markets," the company said. E-commerce was driven by sustained shopper engagement, portfolio breadth, and focused channel-specific execution.

Growth in the powdered and liquid beverages product group remained broad-based and volume-led across the portfolio in the domestic market.

"This performance was driven by sustained household reach, enhanced affordability and continued premiumization across the coffee portfolio," the company said.

Coffee brewing system Nespresso continued its strong growth momentum in e-commerce and retail channels, fuelled by continuing premiumization and building seasonal relevance in summer through iced coffee, the company said.

Milk products and nutrition product group saw strong, broad-based growth with investments in brand building and portfolio optimisation.

Marketing and advertising spending increased 46% in Q2, compared with over 40% in Q1.

The company also strengthened its presence in the cat food segment through brands like Felix and Friskies.