A tornado has caused serious damage to a third-party warehouse used by Reckitt for its baby-food products in the US.
On 9 July, a tornado struck a warehouse in Mount Vernon, Indiana, which is “an important site for the Mead Johnson Nutrition business”, the UK-based company said in a statement.
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Reckitt’s nutrition business, which includes its Mead Johnson infant nutrition subsidiary, produces the US baby food brands Enfamil and Nutramigen.
The Mount Vernon warehouse contains “a mix raw materials and finished products”.
The extreme weather event “sustained significant damage” at the production site but no employees were affected, it said.
Reckitt first gained partial access to the damaged plant on 13 July and has not resumed operations since, with all scheduled deliveries having been diverted to its other US warehouses.
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By GlobalDataIn the statement, the group said it expected its nutrition sales would “likely” see a “short-term” impact.
Reckitt said it was “working closely with all our stakeholders including customers and suppliers, to minimise disruption, by leveraging our global supply chain and managing inventory at our other North American Nutrition warehouses and held by our retail partners”.
Reflecting on any potential hit on income, it added: “Additionally, Reckitt holds comprehensive property damage and business interruption insurance, which we currently expect will largely offset the impact on earnings.”
An update on the expected impact of the tornado damage will be delivered alongside Reckitt’s half-year results on 24 July.
The disruption to the supply chain is the latest headache for Reckitt’s baby-food business.
In March, a jury in Illinois awarded $60m in damages to the mother of a baby that died after being fed Enfamil Premature 24 infant formula, a verdict Reckitt said it would appeal.
Reuters reported the premature baby of Jasmine Watson died from the intestinal disease necrotizing enterocolitis (NEC) after being given Enfamil Premature formula.
At the time, Barclays analysts said there could potentially be 400 NEC-related cases waiting for assessment in the US. It said a “£2bn settlement looks to be absolute worst case, likely far less”, but stressed that “given the unpredictability of the US legal system on tort issues, we think it’s important to consider worse-case scenarios”.
Separately to the case involving Ms. Watson, Reckitt initiated a recall in the US late last year related to Mead Johnson’s Nutramigen Powder due to possible contamination from the Cronobacter sakazakii bacteria.
Batches of Nutramigen Powder were recalled as a precautionary measure in December. Reckitt said tests carried out by Mead Johnson proved negative for the pathogen, which can cause serious illness, particularly in children.
The recall was extended to the UK in January.
Following the report of its first-quarter results in April, CEO Kris Licht was asked whether the group would consider a spin-off for the Mead Johnson business.
At the time, Licht said: “It is not prudent, I think, to speculate right now on structural moves that we may or may not consider.”
He added: “We are spending a lot of time thinking about how to best navigate the litigation, how to prevail in the litigation, and we remain confident that we will prevail because the science is clear.”
