ZURICH: Swiss food giant Nestle yesterday announced slightly lower first half profits compared to last year, with the strong Swiss franc and Maggi instant noodles recall in India undercutting better-than-expected sales. The maker of Nespresso and KitKat reported profits of 4.1 billion Swiss francs (4.1 billion euros, $4.5 billion) for the first six months of the year, 2.5 percent lower than during the same period in 2014. “The first half results were in line with our expectations, broad-based across categories and geographies, solid even in difficult circumstances,” Nestle’s CEO Paul Bulcke said in a statement. He sought to highlight the company’s burgeoning health and wellness strategy, in which Nestle has been heavily investing over the last several years. The Nestle Nutrition line saw 3.9 percent organic growth over the first half of the year, a figure that Bulcke said underscored the “relevance and strength” of the company’s pivot towards health products.
Nestle’s first half revenues of 42.8 billion Swiss francs were also slightly lower than last year’s 42.9 billion, due mainly to the soaring Swiss franc. The Swiss National Bank had been holding down the value of the franc for more than three years, but in January suddenly announced that it was abandoning the minimum rate of 1.20 francs to a euro. The strong franc has been a headache for companies that report income in the Swiss currency.
Noodle row An Indian court earlier yesterday overturned a government ban on Nestle’s hugely popular Maggi noodles, which the company had always insisted were safe. While tests in some Indian states found lead in the products exceeding approved levels, the court in Mumbai called the ban arbitrary, and said the noodles could go back on sale once a further round of tests was completed. Maggi had held 80 percent of the noodle market in the world’s second most populous nation before the ban, with some experts valuing the brand at $2.4 billion.
The company said the impact of the fracas with Indian food regulators would continue to affect the company’s income in the second half of the year. “In India, our withdrawal of Maggi noodles resulted in negative organic growth which will continue into the second half,” the company statement said. “We are engaging fully with the authorities as we work to relaunch the product,” it added, without making specific comment on the latest legal developments. Although profits were slightly below analysts expectations, organic growth which ignores currency fluctuation and is considered a benchmark of the company’s performance-came in slightly higher than expected. Nestle shares were up 3.3 percent in late-morning trading yesterday at 74.6 francs, with the rise likely helped by the Indian court victory.
The main Swiss SMI index was up 1.9 percent. Bulcke said that despite the turmoil in India and strong franc, Nestle was prepared to confirm the full year outlook of five percent growth. A relaunched line of frozen meals in the US was showing “promising” early signs, the company said. The hugely successful Nespresso brand also continued to grow, including through 20 new boutiques launched around the world and a new dedicated Nespresso cafe in the Austrian capital Vienna. — AFP