YHS risks RM9m losses from potential Indonesian recall

KUALA LUMPUR: Yeo Hiap Seng (Malaysia) Bhd (YHS) may lose RM6 million in revenue and another RM3 million in expenses as its Indonesian subsidiary may have to recall its products after 15 out of 31 registration numbers (ML numbers) for foreign food were cancelled by that country’s food and medicine authority (BPOM).

In a statement yesterday, YHS said the authority had in its letters dated Aug 24, 2009 cancelled the 15 ML numbers issued to its subsidiary PT YHS Indonesia for the marketing and sales of Yeo’s products in Indonesia.

BPOM gave YHS Indonesia two months’ grace period, until Oct 24 to clear its stock in the market affected by the cancellation. ML number means approved product code for import, marketing and sale of food/beverage products in Indonesia.

YHS said the cancellation was as a consequence of the Jakarta Supreme Court decision on a case between PT Kharisma Inti Persada (KIP) against BPOM. KIP alleged that they were the distributor of Yeo’s products in Indonesia and the ML numbers issued by BPOM to YHS Indonesia were not valid and requested that the ML numbers be cancelled. The Jakarta Supreme Court ruled in favour of KIP on May 5, 2008.

YHS claimed that the BPOM letters were mistakenly sent to a wrong address and YHS Indonesia came to know of the cancellation only on Oct 14, 2009.

It said YHS Indonesia had applied to BPOM to extend the deadline by six months, until April 13, 2010, for clearing its stock. YHS Indonesia has yet to receive a response from BPOM.

“If BPOM does not extend the deadline, the affected products need to be recalled. It is estimated that for the financial year ending Dec 31, 2009, the group’s revenue will be affected by RM6 million and the cost of carrying out the recall is estimated to be RM3 million,” it said.

For FY08, the group’s revenue was RM568 million and pre-tax profit was RM4.6 million — out of which Indonesia contributed revenue of RM37.3 million and suffered a net loss of RM0.6 million. YHS said YHS Indonesia would continue to sell the products with unaffected ML numbers and was in the process of applying for new ML numbers.

Meanwhile, YHS announced it posted a net loss of RM2.96 million in its third quarter ended Sept 30, 2009 versus a profit of RM1.02 million a year earlier, due to impairment charges of RM5.3 million.

Revenue fell 8.2% to RM137.7 million from RM149.7 million due to a drop in sales from the food and canned beverages sector attributed to a temporary packing and raw materials supply issue. For the nine months to Sept 30, the group incurred a net loss of RM9.56 million versus a profit of RM2.32 million, while revenue fell 5% to RM408.8 million from RM430.48 million.