Listeria may bite Tiger for hot R1bn
Recalls, lawsuits to hit hard
TIGER Brands continued its slippage on the JSE yesterday, losing a further 1.54 percent as the beleaguered company shut another factory amid reports that it could lose nearly a billion rand in product recalls and possible class action suits on the listeriosis outbreak.
The group said the financial impact of the deadly disease could be R800 million, higher than market expectations.
Valued at R66.7 billion, the food producer announced that it was facing two civil lawsuits that could cost its Enterprise Foods brand an estimated R425m following the outbreak, which has claimed 183 lives since last year.
The first class action comprised of victims who consumed meat products from its factories and who became ill as result of listeria contamination since May 2017.
The company said the second class action comprised of dependants of the people who died as a result of consuming contaminated products.
Chief executive Lawrence MacDougall yesterday admitted that the company could be linked directly to listeriosis.
“We acknowledge that we are dealing with a national crisis and want to assure the public that in the event that a tangible link is established between our products and listeriosis illnesses or fatalities, Tiger Brands will take steps to consider and address any valid claims which may be made against it in due course,” MacDougall said.
He said local and international experts were helping the company put measures in place to prevent further outbreaks.
Last week, human rights lawyer Richard Spoor said he was working with US food safety firm Marler Clark to prepare a class action against Tiger Brands for the listeria.
Ron Kiplin, a portfolio manager at Johannesburg-based Cratos Wealth, said: “The cost announced by Tiger Brands is larger than we anticipated. Overall the reputational damage will hit them hard. However, the company’s fundamentals remain strong.”
Tiger Brands yesterday also announced that it would halt production at its factory in Pretoria and said it was planning to close its abattoir in Clayville, Olifantsfontein, by the end of the month.
This comes after the Health Department earlier this month identified the Enterprise Foods factory in Polokwane, Limpopo, as the source of the food-borne disease.
Tiger Brands said it estimated the suspension of production at its Polokwane, Germiston, Pretoria and Clayville sites, including the cost of destruction of the affected products and raw materials to range between R337m and R377m on a pre-tax basis.
Tiger Brands has yet to advice its insurers of the intention to lodge a claim to cover the costs of the recall.
“No claim has been lodged as yet as the recall is still ongoing. It is anticipated that the maximum potential insurance recovery in respect of these costs will amount to R94m,” the company said.
The company said it closed the Pretoria facility as a precautionary measure.
“This decision was taken as a result of the detection of listeria monocytogenes at the facility, following heightened testing protocols which have been introduced,” the company said.
It said the impact on the profitability of the Value Added Meat Products (Vamp) business as a consequence of the suspension of operations was significant.
The company said the Vamp business was estimated to record a loss before interest and taxation of between R28m and R33m for the March trading period which runs from February 25 to March 31.
It said it was unable to give an indication as to when the Polokwane, Germiston, Pretoria or Clayville facilities would resume operations.