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Fonterra CEO says supply contracts intact after food safety scare

Fonterra Chief Executive Theo Spierings speaks at a news conference in Beijing August 5, 2013. REUTERS/Kim Kyung-Hoon
Fonterra Chief Executive Theo Spierings speaks at a news conference in Beijing August 5, 2013. REUTERS/Kim Kyung-Hoon

By Naomi Tajitsu and Jackie Range

WELLINGTON (Reuters) - New Zealand dairy giant Fonterra insisted that its customers were sticking to their supply contracts with the world's largest dairy exporter for the moment, even as Singapore expanded its recall of milk formula products containing a tainted ingredient produced the company.

Danone Dumex took more infant formula tins off supermarket shelves in Singapore as a precautionary measure after being told by Fonterra that the product was packed on a production line that may have held residue of the questionable material, Singapore's Channel NewsAsia reported, quoting a statement from Danone Dumex.

Fonterra CEO Theo Spierings said he had not seen any signs of a reduction in supply contracts by its clientele, which include major food and beverage multinationals, but he acknowledged the risk that its bottom line may take a hit in the future.

"The answer to that question is no," he said in response to a reporter's query at a news conference regarding whether the company has seen a reduction in orders since the announcement that Fonterra had discovered it had exported tainted whey protein powder nearly a week ago.

"Of course that discussion will come to the table, as we do have contracts...but there have been no discussions on future contracts or those kinds of things," Spierings said.

He added that Fonterra would make full disclosures on the financial impact of the ensuing global food safety scare as necessary.

Fonterra has been in damage-control mode for nearly a week, reassuring consumers from China to Saudi Arabia that all products containing a tainted dairy ingredient made by the company has been withdrawn from markets.

The company has come under fire at home and abroad for dragging its feet in saying it sold whey protein products that contained a bacteria which can cause botulism, a potentially fatal food poisoning.

New Zealand, which depends on the dairy industry for a quarter of its total exports, has been gripped by worries that a raft of recalls for infant formula in China, a major market, and other countries could snowball into a slump in demand or even bans for other dairy products.

Spierings has said that human error involving a dirty pipe at one of its New Zealand plants resulted in whey protein powder being contaminated with a bacteria which can cause botulism.

On Thursday, he said that regulators at the Ministry of Primary Industries (MPI) conducted more audits at its more than 40 plants and offices around the country, after the MPI earlier this week made the rare move of sending in officials to monitor Fonterra's product reconciling procedures.

Government officials have expressed frustration over Fonterra's drawn-out processes to locate the contaminated products in the vast global food supply chain as varying amounts have been used in products including infant milk formula and dairy drinks.

Product recalls have been ordered in nine countries, including New Zealand, China, and Thailand. Russian media on Thursday continued to report that it had placed an import ban on all Fonterra dairy products although that was denied by government officials in Wellington.

(Additional reporting by Brendan Mcbryde; Editing by Matt Driskill)

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