(Reuters) -Nestle India reported a quarterly profit below market expectations on Friday, as a slowdown in consumer spending in major cities and higher product prices dampened its sales.
Consumer goods makers are struggling to sustain profits due to inflation in palm oil, coffee and cocoa, while slow wage growth and higher prices of essentials like vegetables and pulses have forced city dwellers to tighten their belts.
“It was a quarter that was marked with food inflation, moderation in urban consumption, with gradual recovery in rural consumption,” Nestle India Chairman and Managing Director Suresh Narayanan said in a statement.
The Indian arm of Swiss food giant Nestle reported a profit of 6.96 billion rupees ($80.34 million) for the third quarter, up 6.2% from a year earlier, but below market estimates of 7.31 billion rupees, according to data from LSEG.
Revenue for Nestle India, home to brands such as Nescafe instant coffee and KitKat chocolate, rose 3.9% to 47.8 billion rupees for the three-month period ended Dec. 31, primarily driven by price hikes.
Revenue jumped 8.1% in the comparable quarter last year.
Shares in Nestle India, which also declared a dividend of 14.25 rupees apiece, climbed as much as 7.7% following the results. At its current levels, up 5.5%, the stock is on course for its best day in more than four years.
The “worst is behind” for consumer goods, with the fourth quarter set to improve sequentially on past price hikes, Nuvama analyst Abneesh Roy said, citing stock gains in Tata Consumer and Colgate-Palmolive India after “weak results”.
($1 = 86.6370 Indian rupees)
(Reporting by Praveen Paramasivam in Chennai and Kashish Tandon in Bengaluru; Editing by Sherry Jacob-Phillips)
