South Africa’s RCL Foods estimates it incurred costs of around ZAR75m (US$6.4m) from the country’s listeria outbreak, which forced the company to issue a product recall and suspend production of its polony processed meat brand.
The outbreak of the listeria strain ST6 has so far killed more than 180 people in South Africa since it was identified in December 2017 and has embroiled both RCL and fellow polony firm Tiger Brands in recalls and production suspensions.
RCL was forced to close its Wolwehoek site, which makes the company’s Rainbow Polony brand, as a precautionary measure early in March after the presence of listeria was found at a polony facility in Polokwane owned by Tiger Brands‘ subsidiary Enterprise Foods.
While the plant at Wolwehoek has since been declared free of the listeria strain, RCL said in a statement yesterday (26 March) the financial impact so far amounts to ZAR75m on a pre-tax basis and is based on management estimates only.
The polony suspensions and the ”unexpected impact” on RCL’s other processed meat and chicken categories is also likely to hit profits.
”This indirect impact is difficult to determine or quantify at this stage, but management estimates the profit impact to be approximately ZAR20m per month,” according to the statement. ”Management is actively engaging [the] government in order to resume operations at the Wolwehoek processing plant as soon as possible.”
RCL booked headline earnings of ZAR548.5m in the year to June 2017 based on sales of ZAR25bn.
Meanwhile, Tiger Brands said last week it had been served with two class actions suits amounting to ZAR425m with respect to itself and Enterprise Foods. Local media in South Africa are now reporting that the list numbers about 100 people.
Tiger Brands has said it expects to incur between ZAR338m-ZAR377m in costs on a pre-tax basis from its own recalls and suspension. Its value-added meat products business is also expected to book a loss before interest and taxes of ZAR28m to ZAR33m for the March trading period running from 25 February to 31 March.