February 13, 2008 / 9:20 PM / 10 years ago

UPDATE 1-Menu Foods swings to loss on pet food recall woes

OTTAWA, Feb 13 (Reuters) - Menu Foods Income Fund MEW_u.O said on Wednesday that it swung to a fourth-quarter loss as a big writedown and lower sales related to its massive recall of pet food more than offset a restructuring gain.

The company, which makes pet food sold under such labels as Iams, Eukanuba, and President’s Choice, said it lost C$21.7 million, or C$1.11 a unit. That compares with a profit of C$1.8 million, or 9.4 Canadian cents a unit, in the same period a year earlier.

A goodwill impairment loss of C$30.6 million in the quarter more than offset a gain of C$11.45 million from the sale of a production plant in South Dakota.

Revenue fell to C$55 million from C$87.9 million and volume dropped 33 percent.

Menu Foods, which lost customers representing about 37 percent of its 2006 sales, said a stronger Canadian dollar also cut revenue by C$6.3 million.

The company halted shipments and recalled at least 60 million packages of pet food in 2007, saying they contained contaminated wheat gluten imported from China. The recall, first announced last March, was expanded several times and is now one of the biggest in North American history.

“It would not be an overstatement to say that 2007 was the most unsettling time in Menu’s 37 year history,” Chief Executive Paul Henderson said in a statement.

The company, which cut its staff by 27 percent last year, said recall costs total about C$55 million.

Menu Foods is the target of lawsuits in the United States and Canada, a U.S. Food and Drug Administration investigation and a criminal probe by the U.S. attorney for the Western District of Missouri.

Units of the company, which also produces private label pet foods for major grocery chains and pet stores, rose 2 Canadian cents to 70 Canadian cents on the Toronto Stock Exchange on Wednesday. That’s well below the 52-week high of C$7.47 set last March.

$1=$1 Canadian Reporting by Susan Taylor; Editing by Rob Wilson

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