Sri Lanka Nestlé unit March net down 32-pct, drought hits demand, nut prices

ECONOMYNEXT – The Sri Lankan unit of the Nestlé food multinational said March 2017 quarter net profit fell 32% to Rs862 million from a year ago with the prevailing severe drought affecting consumer demand and raising raw material prices.

 “Severe drought leading to depressed consumer demand, and a significant increase in raw material costs, has made the start of this year particularly challenging,” Nestlé Lanka Managing Director Shivani Hegde said in a statement.

“We . . . were encouraged by our stronger market positions and the many recognitions won by our much loved brands. With an increasingly challenging business environment, we have put the necessary measures in place to enhance efficiency and offer more value to our consumers.”

The drought has significantly affected fresh coconut crop, leading to an unprecedented increase in coconut prices, it said.

Sales fell 3.8% to Rs9.4 billion during the period while expenses had risen with marketing, selling and distributing expenses up 4.8% to Rs1.7 billion and other operating expenses up 67% to Rs18 million, interim accounts filed with the stock exchange showed.

The Nestlé statement described market conditions as tough and that results were impacted by an increase in Value Added Tax.

But the company said it had started capacity expansion in its Kurunegala factory with an investment of over Rs 4.5 billion, reinforcing commitment to the dairy and coconut industries.

Nestlé said it intends to expand production capacity for its popular dairy and coconut based products.

(COLOMBO, May 08, 2017)





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