Fonterra on Tuesday repeatedly dodged questions about why it delayed telling the New Zealand Government and the public about its contamination scare.
Thirty-eight tonnes of whey protein produced in May 2012 was tainted by a dirty pipe at one of the company's processing plants in Waikato with a bacterium that can cause the paralytic illness botulism.
Gary Romano. Photo: RNZ
Testing in March this year indicated a problem and the whey tested positive for clostridium botulinum last Wednesday. But Fonterra didn't tell the Ministry for Primary Industries (MPI) until Friday afternoon, the public found out on Saturday and the Stock Exchange was advised on Monday.
Ten percent of the contaminated product that Fonterra has sold customers overseas remains unaccounted for.
At a press conference in Auckland on Tuesday afternoon, Fonterra's managing director of New Zealand milk products Gary Romano refused to answer questions about the delay.
"There will be a time when we'll need to go through that timeline. And that timeline will be subject to our own internal review, as we've said. MPI will have oversight of that review, so if you could leave those questions around that timeline away from today, I'd appreciate it."
In New Zealand, infant formula company Nutricia has recalled all batches of Karicare Stage 1 New Baby Infant Formula and Karicare Gold Plus Stage 2 Follow On Formula. There have also been product recalls overseas, including China.
Fonterra spokesperson Kerry Underhill said on Tuesday that 90% of the contaminated protein has either been recalled, contained by Fonterra's customers or deemed safe. However, he admitted the company doesn't know where the remaining 10% is.
Mr Underhill said Fonterra's customers are moving quickly to try to identify where the products are through their own supply chain.
Financial regulator wants answers also
The body that regulates New Zealand's financial markets said Fonterra should explain why it took so long to tell investors about problems with tainted products.
Fonterra could be fined $1 million and its directors $100,000 each if it is found to have kept the information secret.
In a statement on Tuesday, the Financial Markets Authority said it is worried about about Fonterra's delay in telling the Stock Exchange and would discuss the matter directly with the company.
The Stock Exchange's rules state that listed companies must disclose material information as soon as they become aware of it.
Fonterra said it has begun talking to its lawyers about the matter.
Investor Rickey Ward of fund manager Tyndall is also concerned, saying if Fonterra knew enough to tell the Government about the problem on Friday, it could have told investors also.
"The reaction of the share price and a number of other things would indicate that you probably should've been a bit easier to the investor by simply saying, 'Look, we believe we should be in a trading halt pending the release of this information'.
"I'm a little bit surprised they didn't adopt that methodology - a conservative, more prudent approach."
Fund manager Brian Gaynor thinks an inquiry by the FMA could prove difficult to carry out effectively. He said the inquiry might want to broaden disclosure rules generally, but would not have much power to discipline Fonterra.
"I doubt if there's anything really that they can do of any severity, except to warn them to be more transparent in the future."
