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Nestle’s H1 profit down 2.5% as Maggi recall in India hurts

Swiss FMCG major Nestle on Thursday reported 2.5 <g data-gr-id="35">per cent</g> decline in its consolidated net profit at 4.51 billion Swiss Franc for the first half of 2015 as Maggi noodles ban in India impacted its <g data-gr-id="34">bottomline</g>.

The negative impact of the Maggi withdrawal will continue in the second half of the year in the Indian market, the company said, adding its sales in Asia, Oceania and sub-Saharan Africa (AOA) markets were “overshadowed” by the issue in India. Nestle said its consolidated sales were also down marginally at 42.84 billion Swiss Franc in the first half of the year as against 42.98 billion Swiss Franc in the year-ago period.

Commenting on the results, Nestle CEO Paul Bulcke said: “The first half results were in line with our expectations, broad-based across categories and geographies, solid even in difficult circumstances, and consistent with our strong performance over time.”

“In India, our withdrawal of Maggi noodles resulted in a negative organic growth, which will continue into the second half. We are engaging fully with the authorities as we work to relaunch the product,” the company said in a statement. The company further said: “The trading operating profit margin of zone AOA was affected by the withdrawal and destruction costs of the returned products in India, which have already had a material impact in the first half of the year”. 

Nestle said in 2015, it is aiming “to achieve organic growth of around 5 <g data-gr-id="39">per cent</g> with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency”. “The trading operating profit margin of zone AOA was affected by the withdrawal and destruction costs of the returned products in India which have already had a material impact in the first half of the year,” said Nestle.

In June, India’s central food safety regulator FSSAI had banned the Maggi instant noodles, saying it was “unsafe and hazardous” for consumption after finding lead levels beyond permissible limits. The regulator had also said the company violated labeling regulations on taste enhancer MSG and ordered the company to submit a compliance report on its orders. The ban was, however, overturned by the Bombay High Court.

This week, the government filed a class action suit against Nestle India seeking about Rs 640 crore in damages for alleged unfair trade practices, false <g data-gr-id="36">labeling</g> and misleading advertisements. 

Following orders from <g data-gr-id="31">India’a</g> food safety regulator FSSAI, Nestle India had to recall its entire stock of instant noodles sold under Maggi brand. 

Impact of Maggi recall in India to continue in H2, says Nestle
Nestle on Thursday said the negative impact of <g data-gr-id="83">withdrawal</g> of Maggi in Indian market will continue in <g data-gr-id="84">second</g> half of the year. The company, which posted a 4.5 <g data-gr-id="81">per cent</g> increase in sales at 42.8 billion Swiss Franc (about 43.8 billion$) in the first half of the year, said its sales in Asia, Oceania and sub-Saharan Africa (AOA) markets were "overshadowed" by the issue in India. 

"In India, our withdrawal of Maggi noodles resulted in a negative organic growth, which will continue into the second half,” the company said in a statement. 

Shares end high at nearly 3%
Shares of Nestle India ended nearly 3 per cent higher on Thursday as the Bombay High Court quashed food regulators’ ban on Maggi noodles. The stock ended the day with a gain of 2.78 per cent at Rs 6,356.70 on the BSE. During the day, it surged 5.82 per cent to Rs 6,545. At the NSE, shares of the company settled at Rs 6,317.25, up 1.33 <g data-gr-id="103">per cent</g> from its previous close. Following the gain in the stock, the company’s market valuation rose by Rs 1,658.35 crore to Rs 61,288.58 crore.
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