BackNestle reports first quarterly loss in 15 years on Maggi ban
The local unit of the Swiss food maker reported a `64.4 crore loss in the three months ended 30 June
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New Delhi: Nestle India Ltd reported its first quarterly loss in more than 15 years after the country’s food regulator ordered the recall of its Maggi noodles for containing lead in excess of the prescribed limit.
The local unit of the Swiss food maker reported a ₹ 64.4 crore loss in the three months ended 30 June compared with a ₹ 287.86 crore profit in the year earlier, it said on Wednesday. The company incurred a one-time cost of ₹ 451.6 crore related to the removal of Maggi noodles from the Indian market.
Net sales fell 20.1% to ₹ 1,933.8 crore. The firm withdrew about 30,000 tonnes of Maggi from the market, reversing sales worth ₹ 288.4 crore in the June quarter.
The company did this following the 5 June order of the Food Safety and Standards Authority of India (FSSAI) terming the popular snack “unsafe and hazardous for human consumption" because of alleged presence of monosodium glutamate and high levels of lead. Maggi noodles, which accounted for more than one-quarter of the company’s sales in India, have been off store shelves since then as the company has not got regulatory clearance to restart sales. The impact of the recall will affect Nestle India’s earnings in the current quarter as well, analysts said.
“Nestle India’s result for the second quarter does not reflect the real picture, as adjustments are based on mainly assumptions, and other expenses seem to be inflated," said Sunita Sachdev, an analyst with UBS Securities India Pvt. Ltd. “The Maggi issue will have a recurring impact, and the next quarter is expected to give a better picture of where Nestle is heading. Also, there is no clarity on when Nestle will be able to bring back Maggi that accounted for about 30% of its sales."
In a 15 June statement to the BSE, Nestle India had said that the recall and destruction of Maggi noodles will cost the company about ₹ 320 crore.
“The Maggi issue disrupted business. In addition to loss of sales from the business disruption, net sales worth ₹ 288.4 crore have been reversed during the quarter in relation to Maggi noodle stocks already sold and withdrawn from the market," Nestle India said in a statement.
On 12 June, Nestle India challenged the orders passed by FSSAI and the Food and Drug Administration of Maharashtra banning the sale, production and distribution of Maggi noodles. Nestle also claimed that Maggi is safe for human consumption based on tests conducted in its own laboratory and an independent third-party laboratory, contrary to the tests reports of the authorities. The case is yet to be resolved.
“This quarter has been extremely challenging for the company. Nestle India would like to reassure consumers that our products are safe. Consumer trust is and will always remain the cornerstone of Nestle. Nestle India is making all efforts and will continue to engage with authorities to bring Maggi noodles back on the shelves,"Suresh Narayanan, managing director (designate) of Nestle India, said in a statement.
Following the controversy surrounding the Maggi noodles recall, Nestle India replaced Etienne Benet, and named Narayanan, chairman of Nestle Philippines, to take over as Nestle India managing director starting 1 August.
On 2 July, UK’s Food Standards Agency declared Maggi safe for human consumption. Nestle also received clearances from regulators in other countries including Australia, New Zealand and Singapore.
On Wednesday, Nestle India’s shares fell 0.62% to ₹ 6,147.30 on the BSE, while the exchange’s benchmark Sensex gained 0.38% to 27,563.43 points.
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