Higher costs hinder Nestlé Lanka 3Q

Nestlé Lanka PLC saw its earnings falling 4.3 percent year-on-year (YOY) to Rs.900.4 million for the quarter ended September 30, 2019 (3Q19) as the local unit of the world’s largest food company saw its top line getting impacted by higher cost of sales.

The earnings per share for the quarter weakened to Rs.16.76 from Rs.17.52 a year ago.

The firm reported 2.6 percent YOY growth in revenue to Rs.9.5 billion for the quarter but cost of sales rose at a faster pace of 5 percent YOY to Rs.6 billion, resulting in a gross profit of Rs.3.5 billion, down 1.2 percent YOY.

The operating profit for the quarter under review also fell 2.5 percent YOY to Rs.1.3 billion amid a 12.9 percent YOY increase in administrative expenses.

Nestlé Lanka is the producer and the marketer of Nespray full cream milk powder and the importer of many other infant milk powders.

The company substantially increased the prices of its popular infant milk powder NAN recently after almost a five-year hiatus amid significant depreciation of the rupee against the US dollar.

Nestlé Lanka also recently ventured into the crowded UHT milk market. Nestlé Lanka says majority of its dairy production happens from the milk procured from local dairy farmers.

The company also has invested heavily in making coconut milk powder under its popular Maggi brand.

For the nine months ended, September 30, 2019, Nestlé Lanka’s earnings fell 29.4 percent YOY to Rs.1.85 billion with sales revenue falling 3.9 percent YOY to Rs.26.8 billion.

Switzerland based Nestlé S.A. holds 90.82 percent stake in Nestlé Lanka while the Norway’s Central Bank, Norges Bank has 0.92 percent stake in the company being the second largest shareholder.