Greencore Falls After Horse DNA Found in Sauce: London Mover

Greencore Group Plc shares fell the most in 14 months after the Irish company said it supplied beef bolognese sauce that Wal-Mart Stores Inc.’s Asda chain withdrew after traces of horse DNA were found.

Greencore is awaiting results of further tests to confirm the presence and extent of horse DNA in the meat sauce, it said yesterday in a statement. The shares plunged 9.5 percent, the greatest drop today on the FTSE All-Share Index.

Greencore Chief Executive Officer Patrick Coveney is the brother of Irish Agriculture Minister Simon Coveney, who this week convened a meeting of European agriculture ministers to discuss the horse-meat crisis, which has spread across the continent.

European Union nations should test thousands of processed beef products for horse meat to establish the scale of a labelling scandal that has spread from Ireland to Germany, EU Health and Consumer Commissioner Tonio Borg said in Brussels on Feb. 13. The scandal began after the Food Safety Authority of Ireland said last month it found horse DNA in beef burgers sold by retailers Tesco Plc, Aldi and Dublin-based Dunnes Stores.

Greencore said the meat used in the sauce supplied in Asda’s Chosen By You 350-gram beef bolognese sauce was provided by a plant in County Tipperary, Ireland. The Irish company has a 28 percent market share in the chilled Italian meals market in the U.K., according to a presentation in November.

Precautionary Withdrawals

Asda withdrew three other Greencore products as a precautionary measure. Greencore fell to 92.5 pence at the close in London, giving the Dublin-based company a market value of 364 million pounds ($565 million). The stock declined as much as 22 percent earlier in the day.

“Clearly, this will negatively affect sentiment but until the extent of any contamination is confirmed it is difficult to quantify the impact on Greencore,” Damian McNeela and Graham Jones, analysts at Panmure Gordon & Co., said in a note today. “The longer the scandal runs, the greater the likely impact on the group’s financial performance.”

Supermarkets in the U.K., Ireland, France, the Netherlands and Germany have pulled tainted frozen beef burgers and lasagnas from shelves. and France has threatened sanctions for negligence and fraud since the scandal erupted. Borg said passing off horse meat as beef isn’t considered a food-safety issue. “We are now treating this as a fraudulent misuse of the labelling system for economic gain,” Borg said.

Food-Chain Fraud

Simon Coveney, the government minister, said this week in Brussels that “there is fraud in the food chain.” He called for a European response, as Ireland currently holds the presidency of the European Union. “It is becoming clear that this is an EU-wide problem that needs an EU-wide solution,” he told reporters.

European Union-wide tests for equine DNA in beef and bute in horse meat are to begin immediately, the EU said today.

Tesco, Asda and Aldi have removed some ranges of frozen beef burgers from their shelves in the past month as concern has escalated over tainted meat. A line of lasagnas produced by Findus Group Ltd. was found to contain more than 60 percent horse meat, and Tesco said Feb. 11 that tests found the same percentage of the meat in some spaghetti bolognese products.

“Of more concern is the potential reputational damage,” Liam Igoe, an analyst at Goodbody Stockbrokers, said in a note today. Igoe said he doesn’t expect any long-term loss in customers for Greencore, though sales of meat sauces and ready meals containing beef will probably be hurt in the short term.

‘Overreaction’

Panmure Gordon’s McNeela cautioned that the extent of the share decline earlier today was a “significant overreaction.” After the initial screening test, “it hasn’t even been proved that it is horse DNA” or that any presence of horse meat is at an actionable level, he said in an interview.

About 1 percent of beef products tested in the U.K. contained horse meat, the U.K. Food Standards Agency said today. None of the 2.501 samples tested contained phenylbutazone, a potentially harmful veterinary drug known as bute, the food safety watchdog said today at a press conference in London.

Greencore produces about 150 million prepared meals, and more than 200 million jars of cooking sauces, pickles and condiments a year, according to its 2012 annual report.

The three other products withdrawn by Asda are 600-gram beef broth soup, 500-gram Meat Feast pasta sauce and 400-gram chilli con carne soup, Greencore said.

“The company is participating in full with the intensive industry testing program to examine the full supply chain in order to restore consumer confidence,” it said.

The chief executive officers of 11 food providers and retailers, including Greencore, Tesco and Asda, published a joint letter today to declare their resolve to restore consumer confidence “as quickly as possible.”

To contact the reporter on this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

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