Scottish potato firm Produce Investments has warned that it faces a hit of up to £1.5 million following a contamination scare that prompted a product recall.
The Aim-quoted group’s Swancote Farms arm said in May that there was a possible issue with traces of metal being found in one of its products, sparking a recall of a number of potato salad and ready meal ranges.
“We continue to work with our insurers and our affected customers and the potential financial impact is still being analysed,” Berwickshire-based Produce Investments said today.
“We believe the financial impact will be in the range of £300,000 to £1.5m, but, due to this lack of certainty, have not accounted for this cost in the current year.”
The company, which is awaiting the delivery and installation of new machinery, said the eventual bill will be finalised when discussions are complete and recognised as an exceptional cost in next year’s financial statements.
Chief executive Angus Armstrong added: “The metal contamination issue at Swancote Foods, resulting in a product recall, was extremely disappointing. A number of process improvements have been initiated with everything being done to restore customer confidence and management remains confident in Swancote’s prospects.”
The potential £1.5m hit was revealed as Produce Investments said operating profits for the year to 27 June tumbled by more than a quarter to £8m, from £11.1m a year earlier, “driven primarily by challenging market conditions”.
Chairman Barrie Clapham said: “We also expect the retail environment to remain fiercely competitive as the market continues to evolve with continued competition from the discounters, and ever-changing consumer shopping habits.”
However, the firm said it was “confident” about its prospects for the coming year and proposed an increase in the final dividend to 4.775p a share, up from 4.55p last time, to be paid on 3 November.