BSE scare hammers Dalgety

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The Independent Online
Analysts were downgrading forecasts for Dalgety yesterday after the food giant warned that the impact of the BSE scare would cut pre-tax profits by up to pounds 25m this year. Dalgety said it had faced "considerable uncertainty as a result of the continuing beef crisis".

Worst hit was the Spillers pet food business, which incurred write-offs totalling pounds 15m as a result of the European Union's global ban on the export of British beef.

Dalgety added that its petfood division had also been affected by an isolated, and unrelated, case of suspected product contamination at its Dutch factory. This had led to the recall of dried cat food products at an estimated cost of pounds 5m.

A further pounds 5m was lost in Dalgety's agricultural feed and food ingredients business due to stock write-offs and a fall in demand for beef-based food products for which Dalegty supplies ingredients. "These costs are largely one-off in nature," the company said.

However, analysts were disappointed with the statement and also by Dalgety's decision to do no more than maintain the final dividend this year.

"There are a number of companies across the sector who have been hit by the BSE scare, but Dalgety is the most affected," said Julien Hardwick, analyst at stockbrokers BZW. He lowered his profit estimate for the year to June 1996 to pounds 95m from pounds 115m, compared with pounds 93.7m made last year.

Richard Workman of stockbrokers ABN Amro Hoare Govett trimmed his forecasts to pounds 110m from pounds 123m, and has pencilled in pounds 130m for the year to June 1997, from pounds 160m.

Since the latest BSE scare broke in March, shares in Dalgety have slipped from 438p, though they closed a penny higher yesterday at 375p.

Share prices in other dairy and animal feed companies have also have been under pressure amid fears of a mass slaughter of dairy cows and a consumer backlash against beef.

Dalgety is the latest in the industry to warn of the impact of the beef crisis. Last month sausage casing manufacturer Devro told its annual meeting the EU ban had led to an embargo on pounds 4.5m worth of stock that used UK animal hides. The City is also braced for similarly cautious trading statements next week from two other industry leaders, Northern Foods and Unigate.

News of lower-than-expected profits from Dalgety came as British Agriculture Minister Douglas Hogg launched a new plan to eradicate "mad cow" disease in Britain and get the EU ban on UK beef lifted.

The measures, presented to EU farm ministers yesterday, include a new commitment making it illegal for farmers to possess feedstuffs containing animal remains.

British authorities also plan to recover all meat and bone meal, believed to be the main source of infection of the fatal cattle brain disease, from feed mills and farms in June and July.

And in response to pressure from its EU partners for more drastic action to eradicate the disease, Britain is also intending to extend its slaughter scheme to cattle born in a herd where BSE has been found.