Maggi ban pushes Nestle first time into loss in more than two decades

The FMCG company Nestle India (NESTLEIND) announced its unaudited results on July 29 2015, for the second quarter as the half year ended on June 30 2015. The company reported a net loss of Rs 64.4 crore for the Q2CY15, as compared to a net profit of Rs 320.28 crore in Q1CY15. The company has been faced with a very unusual situation after the ban on its flagship product Maggi noodles during the quarter.

NESTLEIND's total revenue decreased by 22.23 per cent quarter on quarter basis to reach Rs 1957.01 crore in Q2CY15 against Rs 2516.48 crore in Q1CY15. The main reason of decrease in revenue is 20.6 per cent decline in Net Domestic Sales largely due to the impact of the Maggi Noodle issue and export sales also declined by 12.7 per cent due to lower coffee exports to Russia partially offset by export of milk & nutrition products to Bangladesh. While, its other operating income increased by 139.11 per cent compared to last quarter and it is increased mainly due to higher realisation of export incentives.

NESTLEIND's total operating expenses decreased by 20.16 per cent on sequential basis, which stood at Rs 1562.38 crore in Q2CY15 from Rs 1956.97 crore in Q1CY15. Its EBITDA decreased by 29.47 per cent to reach Rs 394.63 crore in Q2CY15 on quarterly basis and its EBITDA margin contracted by 207 basis points to 20.16 per cent in Q2CY15 for the same period.

The company during the quarter reversed net sales worth Rs 288.38 crore in relation to Maggi Noodles stock being withdrawn from trade partners and market. The company’s exceptional item includes Rs 451.66 crore, which relates to estimates of loss on account of stocks withdrawn including incidental and other related costs of the company. However, other income of the company increased by 18.30 per cent on sequential basis to reach Rs 30.13 crore, due to repayment of External Commercial Borrowings (ECB) in last quarter.

Commenting on the results Suresh Narayanan, Managing Director of NESTLE said, “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.”