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Nestle India reports 52.5% Net Income decline and 1.2 pp EBITDA Margin decline from 20.9% to 19.7%

12-02-2016 • About Nestle India ($NESTLEIND) • By InTwits

Nestle India reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Nestle India is a company in decline: FY2015 revenue growth was -17.2%, 5 years revenue CAGR was -3.1%
  • Nestle India has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.0%. At the same time it's a lot of higher than industry average of 3.2%.
  • CAPEX is quite volatile: 1,508 in FY2015, 1,894 in FY2014, 3,449 in FY2013, 9,768 in FY2012, 15,571 in FY2011
  • The company has highly profitable business model: ROIC is at 40.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Nestle India ($NESTLEIND) key annual financial indicators

mln. INR201120122013201420152015/2014
P&L
Revenue74,90883,02390,61998,06381,233-17.2%
EBITDA15,36918,25519,65520,50215,976-22.1%
Net Income9,61610,67911,17111,8475,633-52.5%
Balance Sheet
Cash2,2722,3707,4944,4584,99612.1%
Short Term Debt2,45920419-77.1%
Long Term Debt7,25010,50011,8951551688.6%
Cash flow
Capex15,5719,7683,4491,8941,508-20.4%
Ratios
Revenue growth-21.2%10.8%9.1%8.2%-17.2%
EBITDA growth22.8%18.8%7.7%4.3%-22.1%
EBITDA Margin20.5%22.0%21.7%20.9%19.7%-1.2%
Net Income Margin12.8%12.9%12.3%12.1%6.9%-5.1%
CAPEX, % of revenue20.8%11.8%3.8%1.9%1.9%-0.1%
ROIC85.4%57.7%47.9%49.6%40.2%-9.3%
ROE90.3%69.5%53.6%45.5%19.9%-25.6%
Net Debt/EBITDA0.5x0.4x0.2x-0.2x-0.3x-0.1x

Revenue and profitability


The company's Revenue dropped on 17.2% in FY2015. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased slightly on 1.2 pp from 20.9% to 19.7% in FY2015.

Net Income marign decreased on 5.1 pp from 12.1% to 6.9% in FY2015.

Capital expenditures (CAPEX) and working capital investments


In FY2015 Nestle India had CAPEX/Revenue of 1.9%. CAPEX/Revenue decreased on 9.9 pp from 11.8% in FY2012 to 1.9% in FY2015. Average CAPEX/Revenue for the last three years was 2.5%.

Return on investment


The company operates at high and attractive ROIC (40.25%) while ROE is a bit lower (19.92%). ROIC decreased on 9.3 pp from 49.6% to 40.2% in FY2015. ROE dropped on 25.6 pp from 45.5% to 19.9% in FY2015.

Leverage (Debt)


Company's Net Debt / EBITDA is -0.3x and Debt / EBITDA is 0.0x. Net Debt / EBITDA decreased on 0.1x from -0.2x to -0.3x in FY2015. Debt decreased on 9.4% in FY2015 while cash surged on 12.1% in FY2015.

Appendix 1: Peers in Packaged Foods


Below we provide Nestle India benchmarking against other companies in Packaged Foods industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Simran Farms ($SIMRAN)38.4%23.8%27.5%23.4%
Heritage Foods ($HERITGFOOD)27.1%15.0%7.5%20.4%
Rcl Foods ($RCLFOODS)-56.8%-34.2%18.2%17.8%
Umang Dairies ($UMANGDAIR)46.8%15.7%24.5%16.1%
Britannia Industries ($BRITANNIA)19.0%12.4%11.3%13.8%
 
Median (15 companies)18.0%15.0%16.0%9.6%
Nestle India ($NESTLEIND)10.8%9.1%8.2%-17.2%


Top companies by EBITDA margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Glaxosmithkline Consumer Healthcare ($GSKCONS)18.8%18.6%17.8%22.5%17.2%
Sampre Nutritions ($SAMPRE)16.8%
Krbl ($KRBL)14.7%14.1%14.2%15.1%15.4%
Adf Foods ($ADFFOODS)16.2%13.5%11.2%8.6%14.5%
Britannia Industries ($BRITANNIA)5.2%5.7%6.9%9.2%11.1%
 
Median (17 companies)5.8%7.2%7.1%7.1%6.7%
Nestle India ($NESTLEIND)20.5%22.0%21.7%20.9%19.7%


Top companies by CAPEX/Revenue, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Venky'S (India) ($VENKYS)6.4%8.9%6.6%10.4%7.7%
Krbl ($KRBL)5.8%4.1%4.0%6.1%7.3%
Umang Dairies ($UMANGDAIR)1.2%2.0%4.4%2.7%3.2%
Glaxosmithkline Consumer Healthcare ($GSKCONS)3.6%2.7%4.3%2.5%
Heritage Foods ($HERITGFOOD)2.8%2.1%1.9%3.7%2.5%
 
Median (8 companies)3.1%3.7%4.2%4.3%2.5%
Nestle India ($NESTLEIND)20.8%11.8%3.8%1.9%1.9%


Top companies by ROIC, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Kse ($KSE)14.7%27.7%14.1%36.9%69.0%
Britannia Industries ($BRITANNIA)17.8%24.6%33.7%54.0%59.4%
Glaxosmithkline Consumer Healthcare ($GSKCONS)45.0%44.6%36.2%
Umang Dairies ($UMANGDAIR)54.8%93.5%55.6%22.3%28.4%
Bambino Agro Industries ($BAMBINO)13.5%16.3%18.1%
 
Median (19 companies)11.3%12.1%10.9%20.3%18.1%
Nestle India ($NESTLEIND)85.4%57.7%47.9%49.6%40.2%


Top companies by Net Debt / EBITDA

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Vadilal Industries ($VADILALIND)5.8x2.6x4.5x3.9x4.0x
Venky'S (India) ($VENKYS)0.9x2.6x2.8x6.7x3.9x
Bambino Agro Industries ($BAMBINO)3.1x3.2x3.2x2.9x
Krbl ($KRBL)3.7x4.1x2.9x3.0x2.7x
Heritage Foods ($HERITGFOOD)3.5x2.2x0.9x1.0x1.4x
 
Median (16 companies)2.3x1.9x1.3x1.1x0.0x
Nestle India ($NESTLEIND)0.5x0.4x0.2x-0.2x-0.3x