South Africa's biggest food producer, Tiger Brands, said a recall of cold meat products in response to a deadly listeria outbreak has cost it R365-million so far and weighed heavily on its half-year earnings.
The company suspended production in March at four plants in South Africa that produced polony and other cold meats linked to the largest listeria outbreak known in history, which has killed 200 people since early 2017.
Those facilities are likely to stay closed for much of the second half of the year, the company said on Thursday, as it completes remedial work and awaits guidance from the department of health.
Chief executive Lawrence MacDougall said the recall "impacted our headline earnings quite significantly" after the company reported a 16 percent decrease in headline earnings per share (EPS) to 868 cents in the six months to March 31. EPS, which strips out certain one-off items, is the main profit measure in South Africa.
Tiger Brands' shares had fallen by 4.9 percent to R332.01 per share at 9.58am.
Recall and related costs to date amount to R365-million net of initial insurance claims, the company said. These costs exclude ongoing trading losses.
The company is now busy deep-cleaning the facilities and has allocated R50-million of capital expenditure to ensure that the plants are ready for product relaunches.
"We're using this time of the shutdown to make all the repairs and maintenance and structural changes that we intended to make, and new ones that have been suggested by international experts over this period," MacDougall told shareholders at the results presentation, without giving much detail.
Tiger Brands faces a combined class-action lawsuit filed in March by Richard Spoor, a human rights advocate, on behalf of the families affected by the listeria outbreak.
MacDougall told a conference call that the group did not yet have details on the total amount of the claim.
"The application for certification of the classes is in progress, while our legal representatives are in discussion to explore further collaboration," he said.
Tiger Brands, which makes bread, breakfast cereals and energy drinks, is battling intense competition and pressure on pricing from consumers chasing value, and group revenue was down by 4 percent to R15.7-billion.
The closure of the cold meat facilities weighed on the company's value-added meat products business, with revenue falling by 9 percent and operating income plunging by 78 percent to R13-million.
Profit before tax from continuing operations decreased by 18 percent to R1.9-billion.
"The outlook for the balance of the year remains challenging, with intense competitor activity in the domestic market and no meaningful recovery expected in international markets," Tiger Brands said.
The company declared an unchanged interim dividend of 378 cents per share.