Nestle posts first loss in 17 years after Maggi banhttps://indianexpress.com/article/business/business-others/the-maggi-effect-nestle-posts-first-loss-in-17-years/

Nestle posts first loss in 17 years after Maggi ban

Loss comes on the back of a net profit of Rs 287.8 cr in the corresponding quarter last year

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Suresh Narayanan, MD, Nestle India, said that the company is doing everything to get Maggi back on the shelves.

Struck by exceptional item charge of Rs 451.6 crore on account of withdrawal of stocks of Maggi noodles, Nestle India on Wednesday reported a net loss of Rs 64.40 crore for the second quarter ended June 30, 2015, — its first quarterly loss in at least 17 years. This comes on the back of a net profit of Rs 287.8 crore in the corresponding quarter last year and a profit of Rs 320 crore in the previous quarter ended March 2015.

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While Maggi accounts for close to 20 per cent of Nestle India’s revenue, Suresh Narayanan, MD, Nestle India, said that the company is doing everything to get Maggi back on the shelves. “Nestle India is making all efforts and will continue to engage with authorities to bring Maggi noodles back on the shelves,” said Narayanan.

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Maggi row has not only impacted the profits but also the revenue of the firm. Nestle India reported 20.1 per cent decline in net overall sales during the quarter. Stating the reason, the company said, “It is largely due to the impact of the Maggi noodles issue. Net domestic sales decreased by 20.6 per cent.”

This comes as a setback to the firm that registered record profits in the last few quarters. While the company’s net profit crossed Rs 300 crore mark for the first time in September 2014, it hit an all-time high of Rs 326 crore in December.

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Quantifying the loss Nestle said, “In addition to loss of sales from the business disruption, ‘net sales’ worth Rs 288.4 crore has been reversed during the quarter in relation to Maggi noodle stocks already sold and withdrawn from the market.” It also said that the exceptional item relates to loss on account of stocks withdrawn. Earlier, in June this year the Food Safety and Standards Authority of India (FSSAI) banned the sale of Maggi noodles saying it was “unsafe and hazardous” for human consumption after finding lead beyond permissible limit and presence of taste enhancer monosodium glutamate (MSG). It is also important to note that the ‘prepared dishes and cooking aids (PDCA)’ segment (that mostly comprise Maggi) that contributes close to 30 per cent of the revenue for Nestle India has been the only volume driver for the company.

For the year ended December 2014, while the gross sales quantity (in metric tonne) for Nestle in India contracted 0.6 per cent over that in 2013, the PDCA segment witnessed sales quantity rise 3.7 per cent.

‘Milk products and nutrition’ segment, which is the largest segment for Nestle India as it accounts for almost 45 per cent of the gross sales revenue of the company saw it contract by 2.3 per cent in 2014 and fell to 135,591 MT. The segment also witnessed a contraction in volumes in 2013 over the year 2012. The volume within this segment has been on a decline over several years now and is now down to 1,35,591 MT from 1,44,397 MT in 2010.