The firm said revenues rose 13.9 percent to 7.32 billion rupees, expenses kept pace, rising 13.95 percent to 4.87 billion rupees and gross profits rose 14 percent to 2.45 billion rupees.
But the firm had to spend another 250 million rupees on foreign exchange purchases. It also lost 50 million rupees on foreign currency borrowings.
Energy prices were also hiked in the first quarter.
"2012 is turning out to be a testing year," Alois Hofbauer, managing director of Nestlé Lanka Plc, said in a statement.
"We are operating in an even more difficult environment than the year before and are facing multiple challenges."Sri Lanka's rupee fell from 110 to around 130 in the first quarter after credit taken by state utilities to manipulate energy prices put pressure on Sri Lanka's dollar peg.
Currency depreciation in addition to pushing up costs, will also lower purchasing power of consumer leading to a reduction in living standards.
Sri Lanka dairy imports to keep costs high, effectively making milk more expensive to less affluent citizens, in a bid to reach 'self sufficiency'.
Recently dairy farmers threw away some milk saying there were no buyers to collect them.
The firm said it had bought more milk from local suppliers.
"We still continue with our investment commitments to Sri Lanka and have even increased our local milk procurement to support our local dairy farmers as best we can," Hofbauer said.
The firm said it had increased collections from local dairy farmers by 48 percent in the first quarter of 2012 from a year earlier.