The recall of Nanna’s frozen berry products due to a hepatitis A scare has cost owner Patties Foods (PFL) $1.5 million in lost earnings, or around 10% of the food group’s annual earnings.
Patties issued its warning yesterday in a statement to the ASX .The company said its underlying profit for the 2014-15 financial year will fall to about $15 million from $17 million the previous year.
It warned that on top of the lost earnings, the Nanna’s recall could also lead to a number of potentially significant asset writedowns. That will be from the value of the brands and other costs associated with the recall.
“We have been significantly impacted in FY15 through loss of NPAT of approximately $1.5 million as a result of the frozen berries recall event,” CEO Steven Chaur said in yesterday’s statement.
And the Patties Foods board confirmed the company could drop its final dividend due to the cost of the berries recall affecting its Nanna’s brand, after its interim payment was omitted earlier in the year. The board will make a decision on the payment of a final dividend closer to the full year result is released in late August.
PFL 2Y – Berry recall takes a bite from Patties profit
Patties also provided an earnings update to the market in yesterday’s statement, saying that with the important trading months of April and May completed the company expects underlying net profit after tax for fiscal 2015 to be around $15 million, 10% lower than the $16.7 million profit reported in 2013-14.
The underlying profit forecast excludes restructuring costs of $792,000 after tax, booked in the first half.
However, Patties said the company’s range of savoury and sweet pastry foods had recorded a solid performance.
Earlier this year four cases of hepatitis A were discovered in Victoria and NSW with the initial, and still only, suspect being Patties Foods’ Nanna’s brand of frozen mixed berries. Further cases quickly followed across the country, triggering a wave of debate and calls for action over food safety..
In April, Patties Foods claimed the integrity of its quality-assurance systems had been vindicated after its own testing failed to find any trace of the disease.
Testing by the federal government’s health officials detected some small traces of hepatitis A in random packs, delivering a mixed result for the company.
To date there have been no more cases of hepatitis A linked to its frozen berries products.
“Patties continues its ‘positive release’ protocol on all its frozen berry products, which means every batch is now tested in Australia for HAV and E.coli, and are only released to market when negative test results are provided,” the CEO said in yesterday’s statement.
"All Nanna’s and Creative Gourmet berries now being released to supermarkets have passed this test with nil detection. Nanna’s and Creative Gourmet berries are amongst the most rigorously microbiologically tested berries now sold in the Australian market."
Mr Chaur said in yesterday’s statement that the 2015 results would be affected by potentially materially significant, but primarily non-cash, impacts relating to the frozen berries recall. He said this would likely result from an end-of-year review of asset valuations and various recovery processes currently underway.
During 2015 the company had invested a further $1.6 million in branded marketing activities, mainly a Four’N Twenty brand activation and the launch of new products.
Mr Chaur said the performance of the company’s core savoury and sweet pastry brands, which include Four’n Twenty, remain "solid, despite significantly increasing meat prices".
