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Shares in Danone fell sharply on Monday after the French consumer goods group joined Nestlé in recalling batches of infant formula products over fears they could be contaminated with a dangerous toxin.
The maker of Evian and Activa yoghurt said on Friday evening that it was recalling a “very limited number of specific batches” of infant formula, following similar moves by other producers, including Nestlé and French dairy giant Lactalis.
Danone’s shares fell by 5.9 per cent on Monday morning, extending a drop of more than 10 per cent last week.
The group has recalled products in Singapore and Europe over possible contamination with cereulide, a toxin that can cause nausea and vomiting.
Investors have been spooked by the recalls and by investigations, led by France’s health ministry, into the deaths of two babies who were fed potentially contaminated formula produced by Nestlé.
On Friday the Food Safety Authority of Ireland (FSAI) said it had asked Danone to recall batches of formula produced at its Irish factory, which supplies formula to several other European countries.
The FSAI said the recall was connected to the same ingredient — an arachidonic acid oil (ARA oil) manufactured in China — that had triggered the Nestlé and Lactalis recalls of the past few weeks.
“This is a very unfortunate development for the industry and the companies/brands tainted by any level of health risk,” said Jefferies analyst David Hayes, adding that the recalled products amounted to less than €40mn in sales.
Danone said in a statement that routine controls and additional targeted analyses found that its products are “safe and fully compliant with all applicable safety regulations”.
It added that it was withdrawing a limited number of batches after some local food safety authorities were “evolving their guidance”. Danone’s shares are trading at a one-year low of €64 a share, down from highs of €80 in November.
Last Wednesday Lactalis said it was recalling six batches of one of its infant formula milks due to possible contamination of ARA oil used in its formulas.
Nestlé has launched a global recall of infant formula products over the past few weeks in connection to the ingredient, which analysts at Jefferies now estimate could cost the company up to €1.6bn, or 1.7 per cent of group sales.
Nestlé, which has apologised for the recall, said it does not expect a significant financial impact.
Bernstein analyst Callum Elliott said that unlike Nestlé’s recall, which affects more than 50 markets, the Danone recall was more targeted.
“We would estimate direct recall impacts of less than €50mn of revenue,” he said. Elliott added, however, that if Danone’s key Aptamil brand, which contributes 30 per cent of group profits, was implicated in the recall, it could result in “brand taint”, particularly in key Asian markets.