Regional Performance Hit By Food Scandal: McDonald’s

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Regional Performance Hit By Food Scandal: McDonald’s

McDonald’s Corp announced its results had been negatively affected by China’s latest food scandal that pushed restaurants in the market into temporarily stopping serving meat.

A covert local Chinese TV report on July exposed employees at Shanghai Husi Food Co Ltd packing expired meat and faking food production dates. The factory, which is a component of OSI Group LLC, a crucial McDonald’s partner, was immediately closed by regulators.

“While this matter will negatively impact results in the near term, we cannot reasonably estimate the impact on full year 2014 earnings at this time,” a regulatory filing from McDonald’s is quoted by Reuters.

The warning from McDonald’s on Monday comes a couple of days after competitor Yum Brands Inc., which runs about 6,400 restaurants in China and whose KFC is the most popular Western product in the country, also revealed the scandal was sending China customers away.

McDonald’s stocks plunged 0.5% to $93.86 as of mid-afternoon on the New York Stock Exchange.

Shares of Macdonald’s have dropped 5.2% while Yum’s shares have slid 8.6% since the scandal was exposed on July 20.

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McDonald’s Holdings Co (Japan) Ltd on July 29 pulled its earnings projections for the full year after the China meat scandal caused sales to sink 15 to 20% every day. The firm, which operates more than 3,100 restaurants in Japan, previously had predicted full year 2014 profit of $115 million.

The company’s affected markets are responsible for 10% of its total revenue, the largest burger chain in the world said in its filing on Monday. Almost 15% of McDonald’s operating profit is generated from its unit controlling markets in Asia/Pacific, Middle East, Africa, Japan and China, analysts said.

“We will go back to the origin of the food, where the food comes from, so it will take a longer time and is not as easy as people may think,” company spokeswoman is quoted by Binary Tribune as saying.

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To contact the reporter of this story; Yashu Gola at yashu@forexminute.com