Shares of Wei Chuan Foods Corp (味全食品工業), one of the nation’s leading food product suppliers, took a beating yesterday morning after the company announced the previous night that it was recalling 12 products said to be made with recycled waste oil.
Many investors have feared that the revelation that Wei Chuan used problematic oil to make its products has raised concerns over food safety, which is likely to adversely impact the bottom line of the food sector, dealers said.
The selling of Wei Chuan shares spread to other food stocks, particularly edible oil makers, to send the entire food sector into a tailspin, they added.
Wei Chuan opened down 7 percent, the maximum daily decline, where it stayed until the end of the session to close at NT$40.40. Dealers said that the stock could suffer more downward movement.
Selling in Wei Chuan spread to other food stocks, with Ve Wong Corp (味王), a local manufacturer of food, drinks and seasonings, down 3.32 percent at NT$23.30 and Gourmet Master Co (美食達人) down 4.23 percent at NT$238.00. The food sub-index ended down 1.29 percent.
The weighted index on the Taiwan Stock Exchange closed 0.22 percent lower at 9,407.94 points.
“The oil issue revealed by Wei Chuan has hit consumer confidence in the local food business hard,” Hua Nan Securities analyst Kevin Su (蘇俊宏) said. “It was no surprise that shares of Wei Chuan faced heavy downward pressure soon after the local bourse opened, and the weakness continued with no signs of any immediate rebound.”
According to Su, there have been piling orders placed by investors, waiting to sell an additional 4.4 million Wei Chuan shares in yesterday’s morning session.
The current share price of Wei Chuan is a new low since January last year.
“Wei Chuan’s daily turnover reached about 1 million shares on average. The selling orders could push the stock down further at a time when many investors have been afraid that the impact from recycled oil problems will snowball,” Su said.
On Thursday, Wei Chuan said it was recalling 12 products, including its popular pork canned fiber and meat paste, after it admitted they had been made using oil provided by Kaohsiung-based Chang Guann Co (強冠企業) since April. Wei Chuan promised consumers a refund of these products.
The Chan Guann product used material provided by an illegal Pingtung County-based company which, according to prosecutors, reclaimed oil from kitchen waste.
Wei Chuan said the recall and refunds could cost it NT$45.83 million, and the inventory of problematic products could cost another NT$33.58 million, bringing total losses to about NT$80 million.
In November last year, Wei Chuan was caught using adulterated ingredients in 21 of its edible oil products.
In the first half of this year, Wei Chuan posted NT$0.85 in earnings per share, down NT$1.09 from the same period last year.
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