Brands
Q2-2015: Maggi ban hits Nestle for a loss of Rs 64.4 crores
BENGALURU: In what is probably a first, Nestle India Limited (Nestle) has reported a loss. A loss to the extent of Rs 64.4 crore in the quarter ended 30 June, 2015 (Q2-2015, Nestle’s financial year ends on 31 December). Hit by the Maggi Noodles controversy, exceptional items worth Rs 451.66 crore have wiped off the Rs 333.1 crore profit before exceptional items and tax that the company had earned.
The resulting loss of Rs 118.56 crore was mitigated by a tax credit of Rs 54.16 crore and the result was the above mentioned net loss of Rs 64.4 crore.
Last quarter, the company had reported a profit after tax (PAT) of Rs 320.28 crore and a PAT of Rs 287.86 crore in Q2-2014. For now the company has suspended manufacture of Maggi Noodles pending a decision of the Bombay High Court pertaining to a case it has filed regarding interpretation of the Foods Safety and Standards Act, 2011. The loss of the brand value, goodwill is difficult to calculate.
Note: 100,00,000 = 100 lakhs = 10 million = 1 crore
The company says that net sales worth Rs 288.38 crore has been reversed in the current quarter in relation to Maggi Noodles stock being withdrawn from trade partners and the market. The exceptional items amount of Rs 451.66 crore relates to estimates of loss on account of stocks withdrawn including incidental costs thereto and other costs incurred exclusively in the ordinary course of business, dealt with in with the Accounting Standard AS2 on valuation of inventories and Accounting Standard AS5 on net profit or loss for the period, prior period items and changes in accounting policies.
Let us look at the other numbers in Q2-2015 that have changed:
The company says that its net sales have been impacted by 20.1 per cent on account of Maggi Noodles. Nestle’s net domestic sales have decreased by 20.6 per cent , export sales decreased by 12.7 per cent impacted by lower coffee exports Russia, partly offset by export of milk and nutrition products to Bangla Desh. Nestle reported net Total Income from Operations (TIO) of Rs 1957.01 crore in the current quarter as compared to the Rs 2516.48 crore in the immediate trailing quarter and the Rs 2431.97 crore in the corresponding year ago quarter.
Total Expenditure (TE) in Q2-2015 declined to Rs 1634.38 crore as compared to the Rs 2000.75 crore in Q1-2015 and the Rs 2008.91 crore in Q2-2014. Nestle’s cost of materials consumed declined to Rs 718.80 crore in Q2-2015 as compared to the Rs 1110.50 crore in Q1-2015 and Rs 1123.47 crore in Q2-2014.
For the six month period ended 30 June, 2015 (6M-2015, YTD), Nestle reported a 5.9 per cent drop in TIO to Rs 4473.49 crore as compared to the Rs 4753.48 crore in 6M-2014. PAT in 6M-2015 declined to less than half (fell by 53.2 per cent) at Rs 255.88 crore as compared to the Rs 547.02 crore in the corresponding period of the previous year.
During 6M-2015, TE was lower at Rs 3635.13 crore as compared to the Rs 3913.13 crore in 6M-2014. The company’s cost of raw materials declined to Rs 1829.30 crore as compared to the Rs 2275.39 crore in 6M-2014.
Nestle’s board of directors at its meeting held on 29 July, 2015 based on the recommendation of the Nomination and Remuneration Committee, appointed Suresh Narayanan as managing director of the company effective from 1 August, 2015, subject to approvals. The company will seek consent of members by means of postal ballot on the proposal of the appointment of Narayanan as managing director. The board of directors has also appointed Abhinav Khosla, a chartered accountant, to act as the scrutinizer for conducting the postal ballot process in a fair and transparent manner.
Brands
Jubilant FoodWorks faces Rs 47.5 crore GST demand, plans appeal
Tax authorities flag alleged misclassification of restaurant services
MUMBAI: Jubilant FoodWorks Limited has landed in a tax tussle after receiving a GST demand of Rs 47.5 crore from the office of the additional commissioner of CGST and central excise in Thane, Maharashtra.
The order, issued under the provisions of the Central Goods and Services Tax Act, 2017, relates to an alleged incorrect classification of certain services under the category of restaurant services. According to the tax authorities, this classification resulted in a short payment of goods and services tax for the period between the financial years 2019-20 and 2021-22.
The demand includes Rs 47.5 crore in GST along with an equal amount as penalty, in addition to applicable interest. The order was received by the company on March 13, 2026.
In a regulatory filing to the BSE Limited and the National Stock Exchange of India Limited, the company said it disagrees with the order and believes its arguments were not adequately considered.
The company is preparing to challenge the decision and plans to file an appeal. It added that once the redressal process is complete, the demand is likely to be dropped.
Despite the sizeable figure attached to the notice, the company said it does not expect any material impact on its financials, operations or other activities.
The disclosure was signed by Suman Hegde, EVP and chief financial officer, who confirmed that the company received the order at 19:06 IST on March 13 and has already initiated steps to contest it.
The development places the quick service restaurant major in the middle of a tax debate that could hinge on how certain restaurant-linked services are classified under GST rules. For now, the company appears ready to take the matter from the tax office to the appeals desk.
