JOHANNESBURG - JSE-Listed consumer goods and milling company RCL Foods estimates the cost of product recall and suspension of operations due to listeriosis at R75million.
The share price fell 1.42 percent to close the day at R18.73 on the JSE yesterday.
The food producer said that the figure included the cost of recalls and returns from customers; and distribution and handling costs; destruction and dumping; and testing costs. Media and in-store communications costs were also included in the figure.
RCL Foods said there was a financial impact associated with the lost contribution on polony products being out of trade, as well as the “unexpected impact” on the balance of Rainbow’s chilled processed meats and other chicken categories.
“This indirect impact is difficult to determine or quantify at this stage, but management estimates the profit impact to be approximately R20million per month,” the company said.
RCL Foods emphasised that the estimates provided were on a pre-tax basis and were management estimates only, and had not been reviewed or reported on by the company’s auditors.
Potential insurance recoveries in respect of the costs were not expected to be significant.
The company was engaging with the government to resume operations at the Wolwehoek processing plant, where RCL Foods suspended production of its Rainbow Polony brand as a precautionary measure following the outbreak of listeriosis.
The company has since said tests conducted by an independent laboratory in France showed the facility to be clear of the ST6 strain, which has claimed more than 182 lives in the country.
RCL Foods’ Stephen Heath said: “Our focus right now is on people and their safety and wellbeing, not on speculation as to what may or may not happen at a business continuity level in the future. Our roots at RCL Foods go back more than 125 years in this country, and we believe that if we continue to work for the good of our loyal customers and thousands of employees, we can restore full confidence in our business and our brands.”
RCL Foods ran a full-page advert in a daily newspaper yesterday, reading, in part: “Rainbow Fresh and Frozen chicken is safe, reliable and still one of South Africa’s much loved brands.”
‘Amazed’
Marketing analyst and adviser Chris Moerdyk said he was “amazed” that the company had taken so long to get their advertising campaign going.
“I have no doubt that this kind of advertising is helpful, even though it’s inevitable that in the short term the brands affected by listeriosis will suffer,” he said.
“But I have no doubt that when those recalled products start re-appearing at the shops again, the sales will pick up.
“You’d recall the time when Ford Kugas kept bursting into flames; that damaged the Ford brand. But a couple of years later the sales of Ford Kugas are back to where they were,” Moerdyk added.
Last week, food giant Tiger Brands said the financial impact of listeriosis could be R800m, higher than market expectations.
Tiger Brands, which is valued at R66.7 billion, has said it was facing two civil lawsuits that could cost its Enterprise Foods brand an estimated R425m.