Mon, Sep 08, 2014 - Page 13 News List

Tainted oil affect on shares to continue

UNDER PRESSURE:Analysts said that the decline in share prices for the food sector would continue, with food processing firms Wei Chuan and Ve Wong most affected

By Amy Su  /  Staff reporter

Share prices in the nation’s listed food companies are expected to remain under pressure when the Taiwan Stock Exchange (TWSE) reopens tomorrow, as the knock-on effects from the tainted cooking oil scandal are set to continue, analysts forecast.

Ahead of the three-day Mid-Autumn Festival holiday that traditionally gives a boost in demand to the food industry, the stock prices of food companies took a hit on Thursday after the government found one of the products made by Kaohsiung-based cooking oil manufacturer Chang Guann Co (強冠企業) was tainted with recycled waste oil.

The news was a bombshell to the hundreds of well-known food companies that had reportedly purchased lard oil products from Chang Guann, including Wei Chuan Foods Corp (味全食品工業), Ve Wong Corp (味王) and the cafe and bakery chain 85°C (85度C)

“The food sector overall will see stock prices trending downward in the short run due to the impact of this incident,” Taishin Securities Investment Advisory Co (台新投顧) said in a report issued on Friday last week.

The food stocks subindex plunged 1.29 percent on Friday, the biggest decline among all sub-indices, while the TAIEX edged lower by 0.22 percent, according to statistics compiled by the Taiwan Stock Exchange Corp.

Domestic food processing companies such as Wei Chuan and Ve Wong are expected to be the most affected by scandal, according to the report.

The impact on Formosa Oilseed Processing Co (福懋油脂), Fwusow Industry Co (福壽實業) and TTET Union Corp (大統益) would be relatively limited, as the firms produced plant oil and palm oil as their major products, Taishin Securities said.

However, the brokerage said domestic food stocks would only be weak in the short term.

Lard oil products only accounted for 1 percent of the nation’s cooking oil market, while plant oil and palm oil products made up 60 percent and 15 percent respectively, reflecting a rise in health consciousness, the brokerage house’s data showed.

Wei Chuan has recalled 12 food products since Thursday night and admitted that it has used recycled waste oil bought from Chang Guann.

Wei Chuan’s biggest revenue source is dairy products, not lard oil, but the scandal has hurt the company’s reputation and cut the company’s revenue in the near future, Jih Sun Securities Investment Consulting Co (日盛投顧) said in a report released on Friday last week.

Jih Sun predicted Wei Chuan’s stock price would resume strengthening soon, primarily driven by long-term investment gains including investment in China and an expected large revenue from the company’s land development project in New Taipei City’s Sanchong District (三重) when it is completed in 2016.

Wei Chuan shares plunged by the daily limit of 7 percent on Friday, closing at NT$40.4 per share.

The company said on Friday that it could take losses of NT$45.83 million (US$1.53 million) for the recall and refunds of the 12 questionable products and could see another loss of NT$33.58 million from the tainted oil in its inventory. The total losses would amount to about NT$80 million, Wei Chuan said.

Gourmet Master Co (美食達人), the operator of 85°C, saw shares drop 4.23 percent to close at NT$238, according to data provided by the TWSE.

Gourmet Master, listed on the tourism sector of the TWSE, had purchased contaminated oil from Chang Guann to fry spring onions used in some bread products, according to a company statement.

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