Posted on 06/12/2007 7:15:19 PM PDT by JACKRUSSELL
TORONTO (CP) - Units in Menu Foods Income Fund (TSX:MEW.UN) shed more than one quarter of their value Tuesday as investors and customers continued to desert a beleaguered pet-food giant still struggling to put a months-old poisoning scandal behind it.
Less than a day after the Mississauga, Ont.-based company said one of its biggest customers had dropped a large order, Menu units had lost $1.04, ending an active-trading day on the Toronto Stock Exchange at $3.05 - a whopping 25.4 per cent loss.
Robert Silgardo, an analyst at Dundee Securities Corp. in Toronto, said it's not surprising customers are fleeing Menu in response to their customers, who are demanding changes to where their pet food comes from.
"It's all optics. It's just damage control," said Silgardo, who's had a sell and a no-target price on the units for a while now.
"This whole pet-food thing has been a PR nightmare for everyone and some steps have to be taken even though it's been found that Menu Foods is not at fault."
The company had said after markets closed Monday that a "significant customer" - reported to be Procter and Gamble - had dropped a contract worth 11 per cent of sales last year.
With revenues of about $356 million last year, the loss represents a hit worth close to $40 million.
The customer, which had previously put its order on hold, would continue to purchase "loaf" products or solid canned food, Menu said in brief statement.
Neither Paul Henderson, CEO of Menu Foods, or Mark Wiens, the company's chief financial officer, returned phone calls Tuesday seeking comment.
The fund's units have lost more than half their value since tainted wheat gluten from a new supplier in China that wound up in Menu Foods products poisoned hundreds of dogs and cats across North America earlier this year.
In March, after several pets had died from the tainted "cuts-and-gravy" food, Menu was forced to initiate one of the continent's biggest-ever recalls. About 60 million cans and pouches of wet pet food were affected.
The trust, which faces 90 class-action lawsuits over the poisoning scandal, lost $17.5 million in its first quarter, a period which included half a month of the recall which began March 16.
Sales for the quarter were down 31 per cent from a year earlier at $64.5 million.
Menu Foods, which has about 900 employees, had initially estimated the recall would cost $40 million, excluding the impact of reduced sales or the costs of litigation.
Menu was North America's biggest supplier of pet food, selling one-billion containers last year under store-brand labels and under contract for international names such as Iams.
"They're in a bind," Silgardo said.
"It is extremely, extremely tough for them to turn it around. It will be very, very tough because they have no brand to fall back on."
Menu products are produced at company facilities in Emporia, Kan., Pennsauken, N.J., North Sioux City, S.D., and Mississauga just west of Toronto.
While the company's future is "cloudy at best," Silgardo said Menu's best hope is to try to hang on to as many customers as possible and reassure them that internal quality processes have changed so as to preclude a recurrence.
Working in Menu's favour he said is the loyalty of some customers, the confidence of financial backers, the tightness of pet-food supplies in North America, and the difficulty of shifting production elsewhere.
As far as I’m concerned anyone who does business with China can crash and burn.
Reported to be “Procter and Gamble”. Why do they beat around the bush? It is just like when a crime happens and it is obvious what the race of the perp is, but they never state it!
“This whole pet-food thing has been a PR nightmare for everyone and some steps have to be taken even though it’s been found that Menu Foods is not at fault.”
How do they figure? Don’t they test their own products before they go out the door?
I’m surprised that is all!!!
I would never buy any product associated with these companys ever again.
Not just Menu Foods, but Iams, all “store brands”, anything that even might come from China.
This is not a “boycott”. I don’t trust them.
They have the ultimate responsibility for what they make and sell with those imported things.
A few liability law suits for shoddy workmanship or poison may make North American workers look like a deal
I agree.
Boycotting China here..
Thanks for the ping mom.
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