May 24, 2018 / 11:13 AM / 3 months ago

UPDATE 2-South African food producer's earnings hit by meat recall after listeria outbreak

* Headline EPS down 16 pct

* Revenue hit by fierce competition, price pressure

* Cold meat products recalled after deadly listeria outbreak

* Recall and related costs amounted to $29.2 mln

* Company also faces class action lawsuit

* Maintained interim dividend (Adds details on listeria update, share price)

By Nqobile Dludla

JOHANNESBURG, May 24 (Reuters) - South Africa’s biggest food producer Tiger Brands said a recall of cold meat products in response to a deadly listeria outbreak has cost it 365 million rand ($29 million) so far and weighed heavily on its half-year earnings.

The company suspended production in March at four plants in South Africa that produced polony and other cold meats that were linked to the world’s largest ever listeria outbreak, which has killed 200 people since early 2017.

Those facilities are likely to stay closed for much of the second half of the year, the company said on Thursday, as it completes remedial work and awaits guidance from the Department of Health.

Chief Executive Lawrence MacDougall said the recall “impacted our headline earnings quite significantly” after the company reported a 16 percent drop in headline earnings per share (EPS) to 868 cents for the six months ended March 31. EPS, which strips out certain one-off items, is the main profit measure in South Africa.

Tiger Brands’ shares fell 4.9 percent to 332.01 rand by 0958 GMT.

Recall and related costs to date amounted to 365 million rand net of initial insurance claims, the company said in a statement. These costs excluded ongoing trading losses.

The company is now busy deep cleaning the facilities and has allocated 50 million rand of capital expenditure to ensure that the plants are ready for product relaunches.

“We’re using this time of the shutdown to make all the repairs and maintenance and structural changes that we intended to make and new ones that have been suggested by international experts over this period,” MacDougall told shareholders at the results presentation, without giving much detail.

Tiger Brands faces a combined class action lawsuit filed in March by Richard Spoor, a human rights advocate, on behalf of families affected by the listeria outbreak.

MacDougall told a conference call that the group did not yet have details on the total amount of the claim.

“The application for certification of the classes is in progress, while our legal representatives are in discussion to explore further collaboration,” he said.

Tiger Brands, which makes bread, breakfast cereals and energy drinks, is battling intense competition and pressure on pricing from consumers chasing value and group revenue fell 4 percent to 15.7 billion rand.

The closure of the cold meat facilities weighed on the company’s value-added meat products business, with revenue falling by 9 percent and operating income plunging by 78 percent to 13 million rand.

Profit before tax from continuing operations decreased by 18 percent to 1.9 billion rand.

“The outlook for the balance of the year remains challenging, with intense competitor activity in the domestic market and no meaningful recovery expected in international markets,” Tiger Brands said in its statement.

The company declared an unchanged interim dividend of 378 cents per share. ($1 = 12.4848 rand) (Reporting by Nqobile Dludla Editing by Edmund Blair and Susan Fenton)

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