INVESTORS sold off Monde Nissin Corp. shares last week following the recall of some of its instant noodle product lines in some countries due to traces of antimicrobial pesticide ethylene oxide.
Data from the Philippine Stock Exchange (PSE) showed a total of 59.06 million Monde Nissin shares worth P794.20 million were traded from July 4 to 8, making the stock 11th most actively traded in the local bourse last week.
Shares in the food manufacturer finished at P13.04 apiece on Friday, unchanged from their July 1 close. Monde Nissin has lost 16.9% since the P15.70 finish on the first trading day of the year.
Analysts pointed out that the ban of Lucky Me! products in some countries dragged the share price of Monde Nissin and could affect its financial performance.
“We expect that this news will negatively affect investors’ sentiment toward the stock. First, the revenues from the countries imposing a ban will decline especially if they will not lift it soon. Second, since consumers were already aware of the situation, the demand for Lucky Me! noodles may drop as long as the ban remains,” Philstocks Financial Research Associate Claire T. Alviar said in an e-mail.
“On the upside, the negative sentiment may somehow be tempered once the Philippine food regulators assured the public that it is still safe to consume the said products,” she added.
“We think that this incident may cause anxiety among investors regarding the impact of this incident to the company’s sales and brand reputation. Hence, the sell-off we have seen in the past couple of days,” Philippine National Bank (PNB) Senior Equity Research Analyst Jonathan J. Latuja said in an e-mail.
The company made a statement after the Food Safety Authority of Ireland released last week a food alert regarding the recall of Lucky Me! Instant Pancit Canton Noodles Original Flavor with a best-before date of July 20 showing “unauthorized pesticide” ethylene oxide.
On Thursday, Monde Nissin said it was aware of the information being shared about some of its products in an ongoing recall in the European Union and Taiwan caused by the presence of the chemical, commonly used to treat spices and seeds to control microbial growth.
“Rest assured that all Lucky Me! products are Philippine FDA (Food and Drug Administration) registered and comply with local food safety standards and even the US FDA standards for ethylene oxide,” the company said.
Monde Nissin, a global food and beverages company based in the Philippines, has a portfolio of market-leading brands across fast-growing categories, including Lucky Me! noodles, SkyFlakes crackers, Fita crackers, Monde Nissin baked goods and Quorn meat alternative products. Its manufacturing plants in the country are located in Laguna, Cebu, and Davao.
Monde Nissin’s attributable net income went up by 4.4% to P2.33 billion in the first quarter from P2.23 billion a year ago.
Its consolidated revenues increased by 5.3% year on year to P18.45 billion due to the strong performance of the Asia-Pacific branded food and beverage (APAC BFB) domestic business.
“Once the demand for Lucky Me! noodles declines, this may significantly affect the financial performance of Monde Nissin particularly since its noodles segment contributes over 50% to its revenues,” Ms. Alviar said.
“We haven’t accounted for this yet in our forecasts and its potential impact on revenues, but as long as it will not affect the Philippine business (which accounts for more than 70% of Monde Nissin’s consolidated revenues), we think that topline impact could be minimal,” Mr. Latuja said.
PNB expects for 2022 that revenues for the APAC BFB segment of Monde Nissin to grow by 7% year on year. “We are more keen on the impact of inflation to the company’s margins and profitability,” added Mr. Latuja.
“Stock price movement will depend on any developments that will unfold regarding the product recall and how the Philippine regulator will respond to the issues raised by the overseas regulators. On the other hand, this can provide buying opportunities if the stock price continues to fall,” Mr. Latuja said.
“For next week, we are expecting a sideways movement but if it falls near the support level of P12.75, bargain hunting may start especially after its two-day decline by almost 10%. We pegged the psychological resistance at P14.00 then the next one is at P14.40-P14.50,” Ms. Alviar said. — L.O. Pilar