Nestle said that the FMCG sector will take another six months to overcome the impact of demonetization.
FMCG major Nestle on Monday said it has taken Rs 100 crore hit on sales due to demonetization and the sector will take another six months to overcome the impact of the government's move to scarp old high value notes.
"We took an impact in November. If you look on overall impact, it would be difficult to put it but roughly the last quarter I met a loss of about of a billion on sales (Rs 100 crore) because of demonetization," said Nestle India Chairman and Managing Director Suresh Narayanan. "As far as we are concerned, in November we took a hit and December was much better. January has been even better and February is also running fairly good," he said at a roundtable discussion in New Delhi.
Last November, the government had scrapped Rs 500 and Rs 1,000 notes, leading to a severe cash crunch in the system. On February 15, Nestle, which follows January-December financial year, had reported a decline of 8.66% in its standalone net profit to Rs 167.31 crore for the fourth quarter, while its net sales was up 16.17% to Rs 2,261.28 crore. According to Narayanan, the FMCG segment would take at least two more quarters as the lag in demand in not on just the industry only but also on the downstream demands as well.
"For the FMCG industry, I would probably give it another two quarters. I think quarter four is when we should be all of this undone, hopefully coming back into," he said, adding, "We have not only to watch out FMCG sector but what has been the collateral impact of demonetization on the demand generating centers".
In FMCG segment, many companies now get a good chunk of their sales from the rural segment and they would have to wait "But if you look overall the FMCG industry then others have a very strong rural play and for them it is still going to be a wait," Narayanan added. Things are shaping up well for Nestle India, Narayanan said, pointing to a decent monsoon, 7th Pay Commission and income tax relief provided in Budget for the next fiscal.
"All that has happened but the net balancing of this I really do not know what the net equation is going to be with all progressive monetization happened, I would have probably another two quarters in terms of watch and wait and but as far as we are concerned things are coming up quite well," he said.
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