Nestle India Net Plunges 60%, Missing Estimates, After Maggi Ban

  • Noodle sales may restart soon after ban overturned in court
  • Maggi noodles haven't been sold in India since early June

Nestle SA’s Indian unit reported a 60 percent drop in third-quarter profit, much worse than analysts expected, as a government ban on sales of Maggi noodles weighed on the company.

Net income was 1.24 billion rupees ($19 million) in the three months through September, according to an exchange filing Thursday, compared with the 2.3 billion-rupee estimate of 18 analysts compiled by Bloomberg. Sales fell 32 percent to 17.4 billion rupees. In July, Nestle India Ltd. reported its first quarterly loss in more than 15 years because of the ban, which an Indian court overruled in August.

India’s supermarkets, mom-and-pop shops and other retail outlets didn’t sell Maggi instant noodles for five months after the nation’s food regulator ordered the ban in June following some tests that found the noodles contained too much lead. Nestle challenged the order in a Mumbai court and won, with judges allowing the company to resume sales as long as additional tests found the noodles were safe.

Those tests are in progress, and the company has restarted manufacturing at three of its plants, Nestle India said in the filing, which was released after market hours.

The noodles crisis has led to an about 10 percent drop in the company’s market value since May 20, when the food regulator started ordering batch recalls of Maggi, its biggest product.

The company’s sole focus is to reduce its dependence on Maggi noodles and recover from the “traumatic and debilitating” experience of the ban, Nestle India Managing Director Suresh Narayanan said in an interview last month. After bringing Maggi back, the company will also look to expand its offerings in chocolates and beverages including coffee and milk products, he said.

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