Business

Pet food recall to cost Menu Foods $45M

Menu Foods' massive recall of pet food will cost the company at least $45 million, and that doesn't take into account the drop in future sales or legal settlements not covered by insurance, the company says.

Menu Foods'massive recall of pet food will cost the company at least $45 million, and that doesn't take into account the drop in future sales or legal settlementsnot covered by insurance, the Ontario-based company estimates.

Theprojected lossis inthe Streetsville company's latest financial statement, which showed the recallcost it a third of itssales and all its profit in the first quarter.

The maker of dog and cat food said its Q1 profit last year turned into a $17.5-million loss this year. Sales fell from $93.9 million last year to $64.5 million.

"Menu, along with several other pet food manufacturers in the United States, were the victims of a terrible fraud, and the [Menu Foods Income] Fund's results for this quarter reflect the costs," the company said in a statement.

It also said two of its customers that account for 4.5 per cent of saleshave cancelled contracts with Menu Foods. A third customer, which accountedfor 11 per cent of Menu's total sales last year, said it has put future orders for the cuts and gravy dog and cat food products on hold.

In March, investigators banned imports of wheat gluten from the Xuzhou Anying Biologic Technology Development Co. in China after finding melamine — a chemical used in plastics, countertops, glue and fertilizers — in samples of recalled wet and dry pet food and treats. The chemical was also found in cats who died after eating the contaminated food.

Several other pet food makers in North America had to recall pet food afterreceiving contaminated wheat gluten from the same source.

Menu Foods' recall was the biggest. It began with60 million cans and pouches of its cuts and gravy style of food, and was later expanded several times.

Menu Foods said it was the first pet food manufacturer to removeitems from the marketplace.

"Our proactive action in recalling suspicious product, despite the fact that it tested clean for all known toxins, undoubtedly saved the lives of many cats and dogs," it said.

Many pet owners inCanada and the United States have filed lawsuits against Menu Foods.

Units of Menu Foods slipped 10 cents to close at $4.03 on the TSX.