- September 5, 2008 - CSRwire:Innovest Strategic Value Advisors' March 2008 profile of Maple Leaf Foods specifically warned clients: "MLF has not developed a robust safety policy that addresses the food safety risks of meat packaging."

Maple Leaf Foods Inc. (MFI-TO) has issued a massive recall in response to a Listeria bacteria outbreak linked to its products. The outbreak has already resulted in 15 deaths and 29 other confirmed cases across Canada, with 31 more cases under investigation. These numbers are expected to rise. The recall covers an enormous range of 220 different MLF products. The recall and shutdown of the company’s Toronto plant are the first steps in a large scale investigation into MLF by the Canadian Food Inspection Agency. MLF is a bottom-tier company within its sector.

The company is expected to take a CND 20 million charge, or 1 cent per share, loss as a result. MLF shares have plunged 10% in the days following the recall announcement. The company has been struggling all year with the closure of three processing plants and its shares have sunk 34% since January.

Class action lawsuits over the outbreak have already been launched. Four suits have been filed so far and the total potential liability could be on the order of hundreds of millions of dollars. MLF's 2007 net revenue was CND 207 million.

The profitability of meat packing as a business activity hardly compensates for the rare but devastating damage of a food safety malfeasance. As demonstrated by this case, accidents, food safety violations, contamination, and recalls can strike at any time and cause serious financial harm. Innovest has long cited meat packing as a high risk activity in the food sector.

We have specifically called out MLF on its inadequate safety strategy before. Our March 2008 profile warned: "MLF has not developed a robust safety policy that addresses the food safety risks of meat packaging. Sector peers have incorporated food safety management programs, implemented cleaning practices, and are protecting its breeding stock from diseases through biosecurity methods."

The financial wound of this outbreak will not heal quickly. The company's brands have suffered a serious tarnish; litigation battles are just beginning; and the Canadian Food Inspection Agency is likely to conclude its investigation with deleterious consequences for the company.

MLF now hopes to shift towards higher profit pre-cooked meals and meat products that are less vulnerable to swings in commodity prices. We recommend clients reevaluate their holdings in other meat packing companies with low Innovest ratings, including: Nippon Meat Packers (BB) and Tyson Foods (B). Innovest has suspended coverage of Hormel Foods

About Innovest
Innovest Strategic Value Advisors is an internationally recognized investment research and advisory firm specializing in analyzing companies' performance on environmental, social, and strategic governance issues, with a particular focus on their impact on competitiveness, profitability, and share price performance.

Innovest currently has offices in New York City, Toronto, San Francisco, London, Paris, Sydney, and Tokyo.

Innovest Strategic Value Advisors, Inc.

Innovest Strategic Value Advisors, Inc.

Innovest Strategic Value Advisors is an internationally recognized investment research and advisory firm specializing in analyzing companies’ performance on environmental, social, and strategic governance issues, with a particular focus on their impact on competitiveness, profitability, and share price performance. Innovest currently has offices in New York City, Toronto, San Francisco, London, Paris, Sydney, and Tokyo.

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