Menu Foods paying stiff price

Friday, 12 October 2007

Menu Foods Income Fund is decimating its workforce and raising the estimated cost of its tainted pet-food recall by $10 million as it struggles to recover from a scandal that arose from the deaths of a number of pets. The pet-food income trust said yesterday it will book restructuring charges of slightly more than $25 million, of which $6.2 million entails cash outlays. Menu Foods, the largest maker of wet cat and dog food in North America, plans to cut 10 per cent to 15 per cent of its 900-plus employees, 90 to 140 people -- victims of its disastrous business disruption since the massive mid-March recall provoked by reports of pets falling ill and some dying of kidney failure after eating its products. The problem was traced to wheat gluten contaminated with melamine -- a coal derivative used in making plastics -- from a Chinese supplier. The number of animals affected is unclear, but the trust has said it faces more than 100 class-action lawsuits. It also has suffered an exodus of customers for its name-brand and private-label products, notably Procter & Gamble, which was said to account for more than one-fifth of its sales. In total, the trust says it has lost clients representing 37 per cent of last year's volume. Analysts have said sales are unlikely to normalize before mid-2008. Menu Foods also said yesterday it had completed the previously announced sale of its plant in North Sioux City, S.D., which employs about 130 people and provided 16 per cent of last year's production. The proceeds of the sale to Mars Inc. will be used to repay secured lenders. In addition to the job cuts, the restructuring charges involve writeoffs of inventory, a customer relationship, receivables and idle assets. The fund's chief executive has reduced his compensation by 22 per cent, "with the objective of 'sharing the pain.' " Paul Henderson was paid a base salary of $460,000 last year, along with a $380,000 bonus, $23,600 in long-term incentives, $10,300 in miscellaneous compensation and 134,500 trust units. Other senior executives and board members will take pay cuts of 17 per cent to 20 per cent. News found on:The London Free Press By ROMINA MAURINO, CP http://lfpress.ca/newsstand/Business/2007/10/11/4567049-sun.html

 

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