Nestle products become further price competitive in international markets

 

Amidst weakening of rupee two ‘constructive gains’ for Nestle

by Sanath Nanayakkare- December 25, 2020

Amidst the weakening of the rupee, there exists two constructive gains for Nestle, a corporate update issued by First Capital on Nestle Lanka Plc. states.

# 1. Nestle products become further price competitive in international markets.

# 2. The inflow of foreign exchange,

Coconut Milk Powder is the salient product boosting export revenue contribution to 20% supported by Nestomalt and Milo, it notes.

The update further says:

Key products: Nestomalt and Milo is expected to drive domestic revenue to reach new highs on

the back of revival in volumes supported by Maggi noodles and Maggi Coconut Milk Powder.

The negativity attached in the recent past regarding the sugar content in Milo and excessive lead as well as mislabeling over flavour enhanced MSG in Maggi noodles have been handled by the company by taking necessary measures of reducing sugar content and better product awareness, First Capital Research notes.

NESTLE sources their milk 100% locally with the utilization of milk collection points and chilling centers across the island. However, Nestle has 14,000 dairy farmers who already price their milk at

a competitive price point. The recent price cap on coconuts has an indirect impact on Nestle’s cost of

sales as they collect the coconuts from farmers. Notably, the coconut procured is a

result of “NESTLE coconut plan” where Nestle enables coconut cultivation by aiding farmers and indirectly purchasing nearly 90 million coconuts a year. Further, the Maximum Retail Price

(MRP) set at a maximum of Rs. 70 per coconut may benefit Nestle, the report says.

“We upgrade Nestle’s fair value to Rs.1,500 for 2021 (estimated), First Capital notes.