Thursday March 28th, 2024 12:42PM

ConAgra: Peanut butter recall will cost $50 million-$60 million

By by The Associated Press
OMAHA, Neb. - ConAgra Foods Inc. said Tuesday its nationwide recall of peanut butter will cost between $50 million and $60 million, hurting its third-quarter earnings.

ConAgra announced last Wednesday that it would recall all Peter Pan and Great Value peanut butter made at its Sylvester, Ga., plant.

Federal officials have linked the peanut butter to a salmonella outbreak that has sickened almost 300 people nationwide since August. No deaths have been reported.

The Omaha-based company said the recall costs of 6 cents to 8 cents a share will drag its fiscal 2007 results to the lower end of its recent forecast.

ConAgra had said in December that it expected its fiscal 2007 earnings to come in between $1.28 and $1.33 per share. Analysts surveyed by Thomson Financial had been projecting 2007 earnings of $1.34 per share.

Shares of ConAgra rose 31 cents, or 1.2 percent, to close at $26.25 on the New York Stock Exchange. The stock fell modestly last week after the recall was announced.

The company's Sylvester plant remains closed while the FDA investigation continues, ConAgra spokesman Chris Kircher said Tuesday.

The company still doesn't know how much peanut butter is involved in the recall, but Kircher said peanut butter typically generates about $150 million in sales.

He said ConAgra's estimate includes the costs of getting the product back and destroying it as well as the peanut butter itself.

ConAgra chief executive Gary Rodkin told analysts at a conference in Arizona Tuesday that he was proud of the way the company responded to the peanut butter concerns, and he's confident in the safety of ConAgra's products, which include well-known brands such Healthy Choice, Banquet and Chef Boyardee.

Most of Rodkin's presentation focused on ConAgra's reorganization plan that the company announced about a year ago. The company sold off several of its less-profitable brands last year as part of the plan, so it could focus on brands company officials believe have the most potential.

Rodkin said the company now has a healthier base to grow from because of the changes it has made, and he's confident in ConAgra's future.

Citigroup Inc. analyst David Driscoll said in a research note that aside from the recall costs, ConAgra's business remains strong, and the company's reorganization plan seems to be working. He said ConAgra would be expecting earnings near the high end of its predicted range this year if not for the recall.

``We consider this news to be another important reflection of the strength of ConAgra's momentum, and we continue to see long-term potential in ConAgra's turnaround,'' Driscoll said.

At least three lawsuits have been filed against ConAgra by people who say they became sick after eating the company's peanut butter.

Seattle-based law firm Marler Clark, which handles many cases of food-borne illness, said it sued ConAgra on Tuesday in federal court in Seattle, seeking class-action status. The lawsuit was filed on behalf of two identified plaintiffs and seeks to include ``all other individuals who became ill with salmonella infections'' after consuming the peanut butter in question, the firm said in a statement. Lawyer William Marler said more than 2,200 families have contacted the firm about the peanut butter recall.

``We feel that a class action is the most efficient means for achieving fair compensation for people who were not hospitalized but have strong evidence of a salmonella infection,'' Marler said.

ConAgra has not commented on the lawsuits except to say consumer safety is its top priority.

All of the jars of peanut butter involved have a product code on the lid beginning with ``2111,'' which denotes the plant. ConAgra said customers may return the lids or full jars of peanut butter to the store where they bought them for a refund.

Great Value peanut butter is a Wal-Mart store brand made by several manufacturers. Great Value peanut butter that does not have the ``2111'' code is not included in the recall.

Salmonella sickens about 40,000 people a year in the U.S. and kills about 600. It can cause diarrhea, fever, dehydration, abdominal pain and vomiting.

To get a refund, consumers can return the product at the place of purchase or mail in lids with their names and addresses to ConAgra Foods, P.O. Box 3768, Omaha, NE 68103. For more information, call (866) 344-6970 or visit ConAgra's Web site at http://www.conagrafoods.com

(Copyright 2007 by The Associated Press. All Rights Reserved.)
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