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WPC recall-impacted Nutricia NZ reports 97% profits drop

By Mark Astley+

12-Jun-2014
Last updated on 12-Jun-2014 at 15:51 GMT

WPC recall-impacted Nutricia NZ reports 97% profits drop

Nutricia Limited, the Danone-owned New Zealand infant formula business hit by last year's Fonterra whey protein concentrate (WPC) botulism scare, reported a 97% drop in profits in 2013.

In its audited results for the 12 months ended 31 December 2013, lodged with the New Zealand Companies Office earlier this month, Nutricia reported profit of NZ$1.99m (US$1.73, €1.28m) - just 3.25% of the NZ$61.1m (US$53m, €39.2m) profit it recorded in 2012.

Revenue also dropped by 15%, from NZ$373m (US$324m, €239m) in 2012 to NZ$318.2m (US$2765m, €204m).

Despite its performance in 2013, Nutricia drained earnings retained from 2012 to pay a dividend of NZ$72.3m (US$US$62.8m, €46.4m) - an increase on the NZ$34.1m (US$29.6m, €21.9m) paid out in 2012 - to its sole shareholder, Netherlands-based Nutricia International.

Sales of the company's Karicare and Karicare Gold brand infant formula products in New Zealand were disrupted in the second half of 2013 by the now infamous Fonterra WPC botulism scare.

On August 2 2013, Fonterra informed eight customers, including Nutricia and its sister business Dumex, that three batches of WPC potentially contaminated with botulism-causing Clostridium botulinum had entered the supply chain.

Tests later revealed that the bacteria found were Clostridium sporogenes – a non-toxic Clostridium strain.

This information came too late, however, for Nutricia ANZ, which within days of the alert initiated its own recall.

Despite no evidence that its products were tainted, it pulled 67,000 units of Karicare and Karicare Gold brand infant formula from shelves in New Zealand. Danone-owned Dumex similarly initiated a recall of products in Cambodia, Thailand, Hong Kong, China, Malaysia, and Singapore.

In the first draft of its 2013 full-year results, published in January 2014, Nutricia said that the "total value of inventory affected by the precautionary recall is NZ$25.7m."

As a result of the Fonterra WPC incident, Danone claims to have lost sales worth €370m ($510m, NZ$593m).

In January 2014, Danone announced that it was terminating its existing supply contact with Fonterra and was planned to sue the dairy exporter "to bring all facts to light and to obtain compensation for the harm it has suffered.”

Fonterra has meanwhile budgeted for a payout of just NZ$11m ((US$9.5, €7m) to Danone, which it says represents “the maximum contractual liability to Danone."