Thursday, Dec 04, 2008

(This item was originally published Wednesday.) 


   By Goran Mijuk and Majdoline Hatoum 
   Of DOW JONES NEWSWIRES

ZURICH (Dow Jones)--Nestle SA (NESN.VX) Wednesday said its dairy products were safe after Saudi Arabia's Food & Drug Authority warned of highly harmful traces of the chemical substance melamine in some of the milk products of the Swiss food and beverages giant.

"All Nestle dairy products sold in Saudi Arabia - just as anywhere else in the world - are absolutely safe for consumption," a company spokesperson said. "No Nestle product is made from milk adulterated with melamine."

Melamine, a chemical substance found in industrial products such as plastic, is at the center of a growing food scandal in China which erupted in September.

Six infants were reported to be killed by products contaminated with melamine and nearly 300,000 people are said to be affected. The scandal has triggered global bans on China-made dairy and chocolate products.

Nestle's response came in a reaction to a statement by Saudi Arabia's food regulator, which said on its Web site it detected melamine in four products of China-made Nestle milk powder and one product of Malaysia-made Apollo Food Industries chocolate wafer.

"The authority warns against using these products by children, and advises against consuming it by other age groups," it said. The warning, however, didn't include a withdrawal of Nestle products from sale, unlike in other countries such as Taiwan.

Nestle said in October Saudi authorities asked the Swiss food firm to withdraw its China-made Nesvita Pro Bones Low Fat milk product. While the product included traces of melamine, Nestle said the level found was "well below the limits defined by a number of governments, including Canada, New Zealand, the European Union, and by international organizations such as the World Health Organization."

Nestle has repeatedly said it's concerned Asian countries don't have minimum allowance levels for melamine.

Analysts said while the warning by the Saudi authority will hit Nestle's sales in the Middle East's largest economy and could hurt the company's products elsewhere in the Persian Gulf's Arab states, the effect on the company's sales will be manageable.

Shares of Nestle, which have lost about 18% this year so far and have sharply outperformed the broader stock market amid demand for defensive shares in the food and drug industry, however, came under pressure, partly because of profit taking. At 1448 GMT, shares were down CHF1.48, or 2.7%, at CHF42.52.

-By Goran Mijuk and Majdoline Hatoum, Dow Jones Newswires; +9714-364-4964, +41 43 443 80 47; majdoline.hatoum@dowjones.com, goran.mijuk@dowjones.com

(END) Dow Jones Newswires

04-12-08 0426GMT