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Friday, Feb. 8, 2008
Japan Tobacco stands to lose billions due to 'gyoza' food-poisoning scare
Japan Tobacco Inc. said Thursday it may lose billions of yen in earnings due to the food-poisoning scare linked to pesticide found in made-in-China frozen "gyoza" dumplings imported by one of its subsidiaries.
JT group sales could suffer up to ¥8 billion and operating profit could fall by up to ¥3 billion in the business year to March 31 if its frozen food business fails to generate any sales in February and March due to the gyoza scare, JT Executive Deputy President Munetaka Takeda said.
The subsidiary, JT Foods Co., was forced last week to recall frozen food it imported from Tianyang Food in Hebei Province after at least 10 people were sickened by dumplings laced with pesticide.
However, the parent company's revised earnings forecast announced the same day did not take into account the impact of the food poisonings.
Takeda said the overall impact, including the recall costs and possible compensation to the victims, isn't known yet.
The news comes a day after JT and instant noodle maker Nissin Food Products Co. said that due to the widening gyoza scare, they have scrapped plans to merge their frozen food divisions to become the industry leader in terms of sales.
Asked if JT plans to pull out of frozen food altogether, Takeda told a news conference: "No, we are not planning to scrap the division.
"What we should do now is recover our lost trust as soon as possible," he said.
In the same news conference, JT said it is expecting ¥6.41 trillion in group revenue, a ¥422 billion operating profit and a ¥246 billion net profit for the business year to March 31.
Takeda said the frozen dumplings case will not seriously hurt the group's earnings, because its food and beverage business, including frozen food, account for only about 5 percent of its overall sales.
However, the food poisonings mark a setback to JT's efforts in recent years to diversify its business amid a global antismoking trend.