Nestle gets 'slurped' up!

about 15 days ago
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While the market seems to be under a full-fledged bear attack, a few stocks are bright sparks and Nestle is one of them. Despite negative reports of the company coming under the scanner for allegedly sponsoring research in five Indian hospitals in violation of a law that protects and promotes breastfeeding, six months after it was scrutinised for a similar transgression, the market has decided to concentrate only on the good news here.

There were actually two good news here. Firstly, its earnings for Q2CY19 were good - Total Sales increased by 11% (YoY) at Rs.3000 crore. Domestic sales increased 13%, largely driven by volume & mix and positively influenced by sales to CSD and sale of surplus fat. Export Sales dropped by 14% due to lower coffee exports to Turkey.  The company ended the quarter with a net profit of Rs.438 crore, rising 11%.

The second good news is that it is planning to soon begin construction of its newest, and ninth factory in India, at Sanand, Gujarat. This state of the art, environmentally sustainable factory for MAGGI Noodles will involve an initial investment of nearly Rs.700 crore over the next two years, generate employment for about 400 people.

This apart, the company has declared interim dividend comprising of Rs.23 per equity share (Face value Rs. 10/- per equity share) for 2019 amounting to Rs.222 crore out of current year profits, and a special interim dividend of Rs.180 per equity share out of the accumulated profits of previous years (surplus in the profit and loss account). The total amount of Rs.203 per equity share will be paid on and from 23 August 2019. The distribution will be out of the current treasury position after adequately providing for future requirements. This cash payout will reduce the future generation of 'other income' and will improve the overall capital efficiency.

Naturally, the stock is among the top three gainers on the BSE today, a very small lot of gainers as such. The stock price rose to an intraday high at Rs.11,912, rising almost 4.5%. Its 52-week high is not too far away at Rs.12,025.65.

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