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The tainted deli-meat crisis at Maple Leaf Foods will cost the company at least $20-million, it said Sunday, 10 times more than originally expected as it pulls more than 220 products off shelves across the country.
Its Toronto processing facility was confirmed over the weekend as the source of a listeria outbreak tied to four deaths and dozens of illnesses. Maple Leaf has recalled more than 570,000-kilograms of meat produced at the plant, although production continues at its other 22 facilities across the country.
Chief executive officer Michael McCain updated the company's costs at a Sunday press conference, saying the money would be spent reimbursing customers for returned products and sanitizing its factory. He warned the figure was liable to change, if the company increases its advertising budget amid lower sales.
“Going through the crisis there are two advisers I've paid no attention to,” Mr. McCain said at a press conference Sunday. “The first are the lawyers, and the second are the accountants. It's not about the money or the legal liability, this is about our being accountable for providing consumers with safe food.”
A sign for the Maple Leaf food processing plant is seen in Toronto August 21, 2008. (Mark Blinch/Reuters)
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Mr. McCain said the expanded recall is a precautionary measure and no traces of the bacteria have been found in any products beyond those initially recalled.
The company's shares fell 10 per cent last week to $9.80, as investors unloaded their holdings as the recall developed. It's been a particularly bad year for the company's shares, down 34 per cent as of Friday's close, as higher grain and fuel costs have eaten into profits.
In its second quarter results released at the end of July, the company reported a $9.3-million loss, compared to a loss of $1.6-million in the year-ago quarter. Mr. McCain told analysts at the time that the second half of the year would “show a substantial recovery” as restructuring efforts yielded results.
The analysts will meet with management Monday for an update on the restructuring, which has the company shifting its focus away from fresh-pork exporting and moving toward the more profitable packaged-meat industry. The analysts who follow the company's shares had left their profit expectations intact through the crisis, as they waited for confirmation of the listeria outbreak's source.
“Until we receive further clarity on whether or not there is a direct link between Maple Leaf Foods and the Ontario death and any resulting legal action, we are moving to a ‘hold' recommendation,” Octagon analyst Robert Gibson wrote in a note to clients, as he left his 12-month price target at $12.50.
The company has posted a full list of products affected.
