>NESTLE INDIA LIMITED (KR CHOKSEY)

Nestle India Ltd. (Nestle), a 61.8% subsidiary of Nestle S.A. has been able to deliver strong turnover and profitability in CY09 – a period of uncertainties and challenges. During CY09, net sales grew by 18.6% supported by strong 20.4% growth in domestic market backed by increase in volumes as well as better realizations. Exports witnessed a de-growth of 2.9% on account of lower exports to Russia & Bangladesh, which was partially offset by improved realizations due to depreciation of INR in the first nine months of the year. Exports of culinary products continued to grow steadily; sale of sauces & noodles was satisfactory. Poor sale of infant nutrition products to Sri Lanka and Bangladesh impacted export turnover.

With changing lifestyle, Nestle continues to focus on understanding the evolving needs of the consumers through:
■ Constant innovation & renovation to develop products that are convenient
■ Enhance taste
■ Improve nutrition and wellness and
■ Affordability

The benefits of this are clearly reflected is its increasing growth across the segments.
■ Significant Event
■ Acquisition of Healthcare Nutrition business: Nestle acquired the Healthcare

Nutrition business from Speciality Foods India Pvt. Ltd. w.e.f. Jan 01’ 2010 for ~Rs. 6.7 crore. The product portfolio is meant to satisfy the needs of consumers with special malnutrition requirements. In India the products are sold under the brands like RESOURCE, OPTIFAST and SPERT.

Brand Focus
RESOURCE Management of malnutrition and diabetic people OPTIFAST Nutrition supplement for overweight people SPERT Protein supplement

We believe the new products will further strengthen Nestle’s leadership position in providing nutrition & Health and Wellness.

■ Financial Scan
■ During CY09 Nestle’s top line grew by 18.6% to Rs. 5,129.4 crore, EBITDA grew by 19.8% to Rs. 1,034.5 crore and net profit grew by 22.6% to Rs. 655.0 crore.
■ Domestic sales constituted 94% of total sales and balance was exports.
■ Excise duty as % to sales declined significantly to 1.8% in CY09 as against 3.3% in CY08. With government increasing excise duty rate by 200bps in Budget 2010, we expect excise duty for Nestle would be higher going ahead.
■ Despite challenging times, Nestle was able to maintain operating margins, in fact OPM marginally improved by 20bps to 20.2%. Decline in RM consumed and purchase of goods as % to sales (from 49.5% in CY08 to 47.9% in CY09) lead to improvement in margins. As a consequence, NPM improved from 12.4% in CY08 to 12.8% in CY09 on the back of better operating leverage, decline in effective tax rate. The effective tax rate declined to 28.6% in CY09 compared to 30.9% in CY08.
■ ASP expenses increased as % to sales from 4.5% in CY08 to 5.2% in CY09 as competitive landscape became more sensitive.
■ All the segments showed good growth except for beverages. Milk products & Nutrition grew by 19.2%, prepared dishes & cooking aids grew by 26.9%, Chocolates & confectionery grew by 13.5%. Beverages grew marginally by 0.4% on the back of realization (volume declined by 3%).
■ Nestle paid a total dividend of Rs. 48.5 per share during CY09. At CMP of Rs. 2,715 it gives a dividend yield of 1.8%.

To read the full report: NESTLE INDIA