Strauss warns of profit impact due to Salmonella incident

Strauss Group has estimated the impact of Salmonella illnesses and related recalls to be about U.S. $33 million on first quarter financial results.

The company said net profit for the first quarter of 2022 is expected to be hit by Israeli New Shekel 115 to 125 million ($33.6 to $36.5 million). The financial statement as of March 31 is expected to be published around May 25.

During an inspection of Strauss’s factory in Nof Hagalil, Israel in April, the Ministry of Health found “significant” failings in the company’s protocols. The agency has suspended the plant’s approval for three months or until issues detected during the visit have been rectified.

Elite branded items such as cakes, wafers, energy grain snacks, energy chocolate rice cakes, chewing gum and toffee candies were sent to the United States, Canada, Australia, New Zealand, Austria, Brazil, Cyprus, Estonia, France, Germany, Hungary, Italy, Luxembourg, Netherlands, Poland, Romania, Russia, South Africa, Spain, Sweden the United Kingdom and the United States.

“The company’s assessment is based on estimates that include a decrease in sales, the costs of collecting products from retailers, an estimate of the extent of total product destruction, compensation costs as determined by the company to consumers, additional ancillary costs and the tax effect,” according to a Strauss statement.

Wider profit warning
The Israeli Ministry of Health has reported 21 patients of various ages were linked to the incident and six were hospitalized.

Preliminary estimates show that because of the recall and closure of the plant, impact on net profit for 2022 is expected to range between Israeli New Shekel 170 to 230 million ($49.7 to $67.2 million).

Strauss reported that the figures for 2022 also “include estimates regarding the cost of the plant’s return to full production capacity, loss of profits due to the plant’s shutdown and the timing of the return to production and sales based on various possible scenarios including the insurance coverage for some of the damages caused to the company.”

Strauss Group said it cannot yet assess the impact on market share for the confectionery products, as this depends on the timing of returning to full operation and other indirect implications of the recall. The firm added it also cannot judge the effect of legal proceedings in connection with the recall and shutdown of the plant.

From 300 samples collected from the factory’s production line, raw materials, in-progress products and finished items both within the factory and from the market, about 30 positives have been found. Salmonella was detected on a production line and in the liquid chocolate used to make finished products.

Deaths at special needs home
In a different incident, the Israeli Ministry of Health reported three people have died at the specialist facility Beit Dafna in Holon.

In early May, an inspection of the site after reports of illness found there wasn’t strict separation of foods in the various cooking processes and no proper procedures for handling food.

Findings indicated illness resulted from contaminated meat due to poor handling and the kitchen was closed. A report has been given to the Ministry of Welfare and Israeli police.

Clostridium perfringens was found in food samples and fecal cultures from seven patients, indicating the cause of infection. Overall, 33 residents fell ill, six were hospitalized and three died.

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