Saudi milk contamination finding rejected by Nestle

By Souhail Karam

RIYADH (Reuters) - Saudi Arabia said on Wednesday that harmful concentrations of melamine had been found in milk powder made by a Nestle plant in China but the world's largest food group rejected the report.

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

Saudi Arabia's Food and Drug Authority reported on its website (www.sfda.gov.sa) that high concentrations of the industrial chemical were found in products sold in the kingdom and warned consumers they could be harmful to health.

By 1352 GMT, shares in Nestle had fallen some 3 percent to 41.42 Swiss francs, underperforming a 2.26 percent drop in the Dow Jones Stoxx European food and beverage index.

"Now the company's denied it and said all products are safe, but it looks like nobody believes it because the shares are still being sold," one Zurich-based trader said.

Saudi Arabia named the product as a 400-gramme pack of Nesvita Pro Bones and said the batch was produced on May 6, 2008 by a Nestle plant in China. The authority said the product must not be used by consumers of any age.

It said it had also found melamine concentrations harmful to children in three other batches of the same brand -- in 1,800- and 900-gramme packs, which were made November 19, 2007 and on February 25, 2008.

Nestle said it had organized a withdrawal of Nesvita Pro Bones Low Fat after a request from Saudi Arabia on October 18 to pull milk products made in China, pending results of tests.