Universal Robina Corp. reported impact of Vietnam recall

Universal Robina Corp. reported impact of Vietnam recall

Universal Robina Corp., the Philippines-based food and beverage group, has cut its forecasts for annual sales and operating profit after claims of lead in some of the company's drinks products in Vietnam hit its overseas revenues.

"Given by the unexpected significant decline in Vietnam, we are revising our guidance with top line growing by low- to mid-single digit and operating income slightly lower than FY2015," Universal Robina Corp. said today (12 August) alongside the publication of its results for the first nine months of its financial year.

In May, when Universal Robina Corp. filed its half-year numbers, it had issued a forecast for its top line to grow by 6-7% for the full year and for its "operating income to grow faster to 10%". However, that revenue forecast was itself a reduction from an earlier estimate.

In February, government tests conducted in Vietnam showed batches of Universal Robina Corp.'s Rong Do Ly Huong Dau and Tra Xanh C2 Huong Chanh drinks contained lead above the permissible limits.

Universal Robina Corp. said independent tests carried out on two dates in February and one in April then showed no detectable levels of lead. However, in May, Vietnam's ministry of health ruled the batches did contain elevated levels of lead and ordered a recall.

The company recalled the products despite, it told investors today, "other independent tests showing opposite results". As a consequence, the business added, its operations in Vietnam "significantly dipped in Q3", with an impact on its total results.

The group's sales in Vietnam fell 9% in the first nine months of the company's financial year, leading to a 1% decline in sales from its international branded consumer foods business to PHP24.7bn. Sales grew in Thailand, Indonesia and Malaysia but fell 6% in New Zealand. Sales from Universal Robina Corp.'s total branded consumer foods business rose 3% to PHP69.7bn (US$1.5bn) thanks to growth in the Philippines.

Universal Robina Corp. told investors tests conducted by international food-testing agency Eurofins showed "all URC drink products made in Vietnam have no detectable levels of lead". Two plants have passed an audit from Vietnam's ministry of health and the company plans to invest in the marketing of C2 and RongDo. Universal Robina Corp. also plans to "strengthen mechanism against next attack by establishing better government relations".

Speaking to investors today, Universal Robina Corp. outlined plans for other parts of its business, including the rationalisation of its "route-to-market and distribution strategy" in the Philippines and Australia. It also has plans to "progressively launch" its New Zealand biscuit brand Griffin's in markets in the ASEAN region.

For the first nine months of Universal Robina Corp.'s financial year, group-wide sales were up 4% at PHP85.7bn. EBIT grew 2% to PHP13.4bn. Net income was up 26% at PHP12.2bn.