Should you sell Patties Foods Limited?

Hepatitis A scare pummels Patties Foods Limited (ASX:PFL), but will it have a big impact on profits?

| More on:

What: Patties Foods Limited (ASX: PFL) shares plunged 9% on Monday morning after the company announced over the weekend that it was recalling one-kilogram bags of Nanna’s frozen mixed berries and 300g and 500g packs of Creative Gourmet Mixed Berries following a Hepatitis A scare.

So What: Hepatitis A, an acute infectious disease of the liver, was found in four adults in Victoria and New South Wales and advice provided by the Victorian Health Department resulted in Patties issuing the voluntary recall.

Patties has suggested that it’s too early to determine the financial impact of the recall, or whether the infections were caused by a contamination originating at Patties factories, however early reports are that there is no indication of the infection stemming from Patties products.

What Now: Investors would remember many food recalls over the years that impacted local companies. A small goods supplier was severely impacted in the 2000s by a ham recall around Christmas time and many other suppliers have been less impacted by minor recalls involving nut contamination or unexpected allergies.

At this early stage it’s difficult to tell what impact this recall will have on Patties, however it’s pleasing to note that the initial investigation has failed to reveal any signs of contamination at Patties’ factories.

The berries in question were sourced from China and Chile, which may be the issue, however with the packing taking place at Patties, one would expect that quality control will be looked at in the short term.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned.  You can find Andrew on Twitter @andrewmudie

More on Investing