Oak Brook-based McDonald's Corp.'s Japan business withdrew its forecast for the first gain in profit since 2011 after halting sales of chicken nuggets supplied by a company that admitted to food safety problems at its Shanghai plant.
"We are losing 15 percent to 20 percent of our daily sales projection" following the sales suspension of chicken nuggets processed at the Shanghai unit of Aurora,-based OSI Group Inc., Row Imamura, vice president of the Tokyo-based chain, said at a press conference today. "It is highly difficult for us to achieve our earnings forecast."
McDonald's Holdings Co. Japan Ltd. said it will strengthen inspections of suppliers, halt all chicken imports from companies in China and switch to sources in Thailand, according to the statement. Closely held OSI Group said it was replacing its China business's management team more than a week after a Chinese television report on July 20 showed workers at the unit Shanghai Husi Food Co. giving expired chicken and beef sell-by dates of another year.
The meat processor's practices are "unacceptable," and "disturbing," McDonald's Japan Chief Executive Officer Sarah Casanova said at a press conference today. The company said it is assessing the full impact from the scandal that drove away some customers.
McDonald's Japan had previously forecast a 17 percent gain in net income to 6 billion yen ($58.8 million), the first increase since 2011. Sales were forecast to fall 4 percent at 250 billion yen.
McDonald's in China pulled beef, pork and chicken items from its restaurants as OSI recalled products made in the country. The meat processor withdrew all products manufactured by Shanghai Husi, OSI said. The company had 55 facilities in 16 countries as of last year and was targeting capacity to process about 300 million chickens a year in China, according to its website.
McDonald's Japan, facing rising competition from convenience stores and coffee shops, also today reported profit that slumped 78 percent in the second quarter as sales dropped 8 percent.
Meat from Shanghai Husi accounted for about 20 percent of the chicken nuggets McDonald's sold in Japan, the company said.
To contact the reporter on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10bloomberg.net To contact the editors responsible for this story: Stephanie Wong at swong139bloomberg.net Dave McCombs