News Archive


Facebook smashes analyst targets but executive comments spook Street


SAN FRANCISCO |
Wed Oct 30, 2013 9:23pm EDT

SAN FRANCISCO (Reuters) – Facebook Inc posted strong growth in its mobile advertising business on Wednesday but rattled investors after saying that it did not plan to boost the frequency of ads shown to users.

Shares of the world’s No. 1 online social network soared as much as 15 percent in extended trading before suddenly falling to $47.40, down 3 percent from its $49.10 close. The stock settled at $49.16.

In July, Facebook said it was showing one ad per 20 stories in the newsfeed, but Chief Financial Officer David Ebersman told analysts Wednesday that the current ratio, although slightly higher than 5 percent, would not increase much more going forward.

Ebersman’s comments, combined with remarks suggesting that young teenage users in the U.S. were beginning to use Facebook less frequently, soured the mood abruptly on an afternoon when the company topped Wall Street’s targets with a whopping 60 percent increase in revenue, driven by its accelerating mobile business.

“There seems to be concern about the ad load not going up,” said BTIG analyst Richard Greenfield.

But Greenfield said he believed investors were over-reacting, noting that increasing advertising prices, rather than the volume of ads, is more important for growth in Facebook’s topline.

Facebook’s newsfeed ads, which inject paid marketing messages straight into a user’s stream of news and content, have boosted Facebook’s revenue and its stock price in recent months. The ads are ideally suited for the smaller-sized screens of smartphones and other mobile devices, from which nearly half of Facebook’s monthly users now access the service.

But the company has had to balance showing more ads inside its users’ newsfeed with the fear that too many of them would irritate fickle users and drive them elsewhere.

That’s a reality that some investors may have overlooked, after Facebook reported strong third-quarter financial results on Thursday, with advertising revenue up 66 percent.

“There’s some degree to which you can expand, but there’s an optimal level after which you risk losing your audience,” said Pivotal Research Group analyst Brian Wieser, referring to the portion of ads that Facebook shows on its service.

Still, he said the stock’s “reaction and counter-reaction was probably a little extreme. This was under any estimation a good quarter.”

AD ENGAGEMENT

Revenue from mobile ads, which appear on smartphones, represented 49 percent of Facebook’s total advertising revenue in the third quarter, or roughly $880 million. Mobile ads generated roughly $150 million in the year-ago period, when Facebook was just beginning to develop its mobile ad business.

And Facebook said that its ads were getting noticed: The average daily user of Facebook is “engaging” with more than one ad per week, Chief Executive Mark Zuckerberg said during the conference call.

“It looks like they’re firing on all cylinders,” said JMP Securities analyst Ronald Josey.

He said that Facebook’s strong mobile advertising revenue in particular has put to rest the worries that many investors had at the time of the company’s 2012 IPO.

“They clearly have the product, they have the traffic and now they have the advertising solution,” said Josey.

Facebook shares have doubled in the past three months, as Wall Street has warmed to the Internet company’s ability to thrive as consumers increasingly access the Web on smartphones and other mobile devices.

Facebook said the number of its monthly active users increased to 1.19 billion as of the end of September, up from 1.15 billion at the end of June. Facebook said it counts roughly 507 million daily active mobile users.

Facebook said it earned net income of $425 million, or 17 cents a share, in the three months ended September 30, compared with a net loss of $59 million, or 2 cents a share in the year-ago period. (link.reuters.com/xas34v)

Excluding certain items, Facebook said it earned 25 cents per share, above the average analyst expectation of 19 cents.

Facebook’s total revenue in the third quarter was $2.016 billion, ahead of the average analyst expectation of $1.911 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Alexei Oreskovic and Gerry Shih; Editing by Bernard Orr)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/wUAJSHDBeyg/story01.htm

US Airways, American consider merger settlement: sources


WASHINGTON |
Wed Oct 30, 2013 8:42pm EDT

WASHINGTON (Reuters) – US Airways Group (LCC.N) and American Airlines are considering giving up takeoff and landing slots at Washington’s Ronald Reagan National Airport to win regulator approval of their $11 billion merger, two people familiar with the matter said.

The airlines are hoping to reach a settlement with the U.S. Justice Department before the trial, due to begin November 25, paving the way for a deal that would create the world’s largest air carrier, the sources said.

The companies’ stock prices have climbed in anticipation of a deal, and they rose further on Wednesday after a Dow Jones report on a potential proposal to overcome regulatory concerns. American Airlines’ parent company AMR Corp (AAMRQ.PK) closed up 4.3 percent at $7.30 and US Airways Group Inc ended 0.94 percent higher at $22.58.

US Airways and AMR declined to comment. The Department of Justice did not respond to a request for comment.

In a complaint filed in August aimed at stopping the proposed transaction, the Justice Department focused on Reagan National. The two carriers control a combined 69 percent of takeoff and landing slots at the airport, which is used by many members of Congress to travel to and from their home districts.

In its complaint, the federal government also listed more than 1,000 city pairings where the two airlines dominate the market and where a merger could conceivably drive up prices or cut the number of flights.

Dow Jones reported that one of the two people familiar with the proposed settlement said that the airlines still expected to go to trial.

Earlier this week, the two sides agreed on a mediator, according to a court filing. Both the airlines and the Justice Department have said that they are open to a settlement.

Wednesday’s developments came as the carriers and interested parties, including unions, continue a full-court lobbying press in favor of the merger.

Business leaders, mayors and members of Congress representing many of the cities where the airlines have hubs have this month thrown their support behind a deal.

Four unions allied with airlines, many of whose workers would get raises if the deal goes through, took out a full-page advertisement in The New York Times on Wednesday supporting the merger.

Unions of flight attendants, pilots and others have held rallies in Washington and other cities where American and US Airways have hubs in recent months and pressed attorneys general in states that joined the government lawsuit to drop out.

Texas Attorney General Greg Abbott withdrew from the U.S. lawsuit earlier this month, raising the prospect that other states might follow.

Other states still involved in the suit include Arizona, Florida, Michigan, Pennsylvania, Tennessee and Virginia, as well as the District of Columbia.

Tom Hoban, an American pilot and Allied Pilots Association spokesman, said earlier on Wednesday that the lobbying will likely continue.

“That’s part of the overall strategy. We want to compel those that initially came out in support of DOJ and help them get religion on the subject,” he said.

US Airways’ spending on lobbying has surged during the fight to win approval for the merger. The company spent $1.68 million on lobbying in 2011, $2.8 million in 2012, as it was ramping up for the deal, and $4.2 million in the first three quarters of 2013, according to the Senate Lobbying Disclosure Act database.

The case at the U.S. District Court for the District of Columbia is No. 1:13-cv-1236.

(Additional reporting by Soyoung Kim; Editing by Stephen Coates)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/gTRnrurCzFs/story01.htm

Sins of past, present and future haunt banks


LONDON |
Wed Oct 30, 2013 8:02pm EDT

LONDON (Reuters) – The cost to banks of cleaning up past misdeeds has soared over $100 billion and is leaving lenders running scared from areas that put them in potential danger of upsetting regulators.

This week alone, Deutsche Bank (DBKGn.DE), UBS (UBSN.VX) and Lloyds (LLOY.L) revealed mounting legal bills and Dutch agricultural specialist Rabobank became the latest lender to be fined in a global scandal over interest rate rigging with a $1.1 billion penalty.

Bankers fear that paying for the sins of the past and preventing future misdemeanors could be the biggest headache yet for an industry still trying to bulk up on capital and liquidity reserves in the wake of the 2007-09 financial crisis.

“This is a new world of regulation that has emerged post the financial crisis and I think the whole industry is struggling to catch up with it,” Mike Rees, head of wholesale banking at Standard Chartered (STAN.L) told Reuters.

“Everyone has focused on the liquidity standards and the capital standards, but I think the bigger cost for the industry will be about meeting the standards being required of us in terms of the code of conduct.”

JPMorgan (JPM.N) – which had emerged from the financial crisis as the poster child for good risk management – is close to a record $13 billion settlement with U.S. authorities over the mis-selling of mortgage-backed bonds.

That could take the cost of credit crisis and mortgage-related settlements by U.S. banks to almost $85 billion in the last four years, according to SNL Financial. European firms, mostly in Britain, have paid or set aside more than $40 billion to compensate customers or pay various fines.

Further penalties are expected to hurt profits for years to come and are encouraging banks to quit business lines and less-regulated countries to shield themselves from future risk.

“Banks have to stand back and say what’s strategically important, where’s the risk, what’s the strategic value? And they have to make some choices,” said a senior bank executive.

In many cases, businesses are not worth the cost of policing their potential risks.

HSBC (HSBA.L) has pulled out of a number of business areas and countries, including Panama and other Latin American countries, since being fined a record $1.9 billion by U.S. authorities last year over lax money laundering controls.

The British-headquartered bank, which is spending about $800 million more each year on compliance costs across its operations in 80 countries, retrenched from banking embassies and consulates this year, sending diplomats into a panic.

“It was almost a nightmare for us. If we hadn’t found an alternative we were thinking about closing down our embassy,” said John Belavu, deputy high commissioner for Papua New Guinea in London.

“We had been banking with them for the last 25 years … it was a big shock for us. We were given six months to find alternative banking arrangements.”

HSBC said the retrenchment was a commercial decision based on its review of all businesses since May 2011. Belavu said it didn’t give him any further explanation, and his embassy is now with a smaller bank, after other big lenders shunned it.

SHOWER GEL AND MILLIONAIRES

Credit Suisse (CSGN.VX) and Barclays (BARC.L) have pulled out of dozens of less regulated private banking markets such as Belarus and Turkmenistan as the risk of fines outweighs the potential fees from banking rich clients.

With a global clampdown on tax evasion, Barclays has also shut down much of a profitable tax advisory business, which had drawn the ire of British politicians.

After halting the sale of U.S. student loans and exiting physical commodities trading in the face of increased regulatory scrutiny and rising compliance costs, JPMorgan is now reviewing a whole host of other business lines, including cutting services for about 500 foreign banks.

JPMorgan – which has increased annual spending on compliance and risk by $1 billion, including adding 4,000 staff in the area since last year – is also reviewing lending to pawn shops, payday lenders and some car dealers, according to a person familiar with the matter.

Britain’s banks have warned that tough guidelines on preventing financial crime could see fewer pensions and investment products on offer for retail customers and make it unviable to provide trade finance for smaller firms.

Trade finance has a long list of potential “red flags” as business is screened for sanctions-busting goods or clients, or weapons of mass destruction. A side-effect of that is that all military shipments get bogged down in costly red tape.

Importing any amount of shower gel for soldiers requires one unnamed bank to get the approval of its reputational risk committee, according to a consultation document released by Britain’s financial regulator in July.

“THE PEOPLE WILL SUFFER”

While there is a general admission among bankers that the industry played fast and loose with rules of conduct prior to the crisis there is also a fear the new zero tolerance regime will push some people and businesses out of the banking net and into the arms of criminals looking to make a quick buck.

Money transmissions, long seen as a weak link in the fight against money laundering and terror financing, are set to get more difficult and costly as big banks withdraw.

HSBC pulled back from the industry last year, and Barclays has this year closed accounts for most of about 100 money transmission firms it banked, putting it under fire from Somalis who had relied on those firms to send money home.

“The people will suffer, the economy will suffer and the security of the country will suffer,” said Omar Abdinur, who left Somalia in 1989 and wires money from London to his mother, brothers and other relatives there every month. “Charges will go up and less money will go home.”

Somalis living overseas send about $1.3 billion home a year, typically for schooling, medicine and food, and about 60 percent of households in the East African country rely on money transfers, according to Oxfam.

Bankers regret the impact their withdrawals are having but with their reputation and potentially huge fines on the line, they say hard choices are inevitable.

“Financial inclusion and de-risking are real challenges,” John Paul Cusack, head of anti-money laundering compliance at UBS (UBSN.VX), said at a financial crime conference last month.

“Everyone is sympathetic to (the need for) financial inclusion, but we’re more sympathetic to not being fined, so our first priority is to manage our risk.”

(Additional reporting by Chijioke Ohuocha in Lagos. Editing by Carmel Crimmins and David Evans)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/-obQkrZYLc4/story01.htm

U.S. attorney wants DOJ to take civil action against BofA: filing


NEW YORK |
Wed Oct 30, 2013 7:38pm EDT

NEW YORK (Reuters) – Staff of a U.S. Attorney’s office recently told Bank of America Corp that they plan to recommend the U.S. Department of Justice file a civil action against the bank related to securitization of mortgages, according to a regulatory filing on Wednesday.

That investigation is one of several the second-largest U.S. bank is trying to resolve over mortgage practices of its own legacy business, as well as those of Countrywide and Merrill Lynch, which it acquired during the 2007-2009 financial crisis.

The bank did not name which U.S. attorney was planning to make the recommendation.

Bank of America also lifted its estimate for possible losses above what it has already set aside to cover litigation expenses, according to its 10-Q filing with the U.S. Securities and Exchange Commission.

Bank of America now estimates its litigation losses may exceed reserves by up to $5.1 billion, up from a prior estimate of $2.8 billion.

(Corrects to show a U.S. attorney’s office, not the U.S. attorney’s office)

(Reporting by Lauren Tara LaCapra, Peter Rudegeair and David Henry; Editing by Bernard Orr)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4x-2gxu78qU/story01.htm

McDonald’s and Kraft to test grocery coffee sales in 2014


Wed Oct 30, 2013 7:33pm EDT

(Reuters) – McDonald’s Corp (MCD.N) and Kraft Foods Group Inc (KRFT.O) plan in 2014 to test sales of McCafe-branded packaged coffees at grocery stores and other retail locations in multiple U.S. markets, the companies said on Wednesday.

The tests will include packages of whole bean and ground coffee as well as “single-cup” options, which typically include K-cups for Green Mountain Coffee Roasters’ (GMCR.O) popular Keurig brewer. Test markets and pricing were not disclosed.

“We want to work with McDonald’s to help consumers enjoy McCafe premium coffee in the comfort and convenience of their own homes,” Kraft Foods CEO Tony Vernon told analysts on a conference call, disclosing the test for the first time. Kraft will handle the marketing and distribution of the McDonald’s brand coffee.

McDonald’s said in a statement it was “building on the momentum of our McCafe beverages in our restaurants by expanding these options.”

Sales at McDonald’s have gotten a big boost from its introduction of McCafe beverages, which include coffee and espresso drinks like those popularized by Starbucks Corp (SBUX.O). Coffee chains such as Starbucks and Dunkin’ Donuts sell packaged coffee and K-cups through their shops and other retailers.

McDonald’s last year starting selling packaged coffee at some of its Canadian restaurants.

Kraft got back into the U.S. premium grocery coffee business in August 2011, with a deal to sell Gevalia coffee in supermarkets. Vernon said on the call Gevalia sales have exceeded company expectations.

Kraft had a contentious split with Starbucks in March 2011. Starbucks on Wednesday said it expected to resolve its dispute before the end of calendar 2013.

(Reporting by Lisa Baertlein in Los Angeles and Phil Wahba in New York; Editing by Lisa Shumaker)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/QRGyFYxTDZA/story01.htm

JP Morgan puts London FX chief on leave, Citi reported to do same


LONDON |
Wed Oct 30, 2013 7:05pm EDT

LONDON (Reuters) – JP Morgan has put its chief currency dealer in London, Richard Usher, on leave, a source familiar with the matter said on Wednesday, and Bloomberg reported Citigroup Inc had done the same with its chief dealer.

This mirrors developments at Standard Chartered, which has also put one of its senior forex traders on leave, according to a source familiar with the matter. Matt Gardiner joined StanChart from Swiss bank UBS only last month.

JP Morgan is one of several banks cooperating with the Financial Conduct Authority in Britain and other regulators around the world looking into allegations of currency manipulation in the $5.3 trillion-a-day global market.

It was unclear whether JP Morgan’s decision to put Usher on leave had anything to do with this investigation.

However, Bloomberg reported that both Usher and Citi’s Rohan Ramchandani went on leave after regulators probing forex manipulation started investigating traders’ use of an instant-message group. (r.reuters.com/xes34v)

Ramchandani, Citigroup’s head of European spot trading, was told on Wednesday he would be placed on leave, Bloomberg said, quoting someone with knowledge of the matter.

Ramchandani was a member of chat rooms that are a subject of the probes, the Wall Street Journal reported, quoting people with knowledge of the matter. The probes are continuing but no wrongdoing by Ramchandani had been discovered, it said. (r.reuters.com/cus34v)

Usher, head of spot G10 currency trading, joined JP Morgan from Royal Bank of Scotland in May 2010. He remains a full-time employee at JP Morgan and has not been suspended. But he hasn’t been at his desk for around two weeks, the source said.

Usher could not be reached for comment, and JP Morgan and Citigroup declined to comment.

Usher is still listed as “active” on the UK Financial Conduct Authority’s register, and is listed as one of the 13 members of the Bank of England’s Joint Standing Committee’s chief dealers group at the end of last year.

The Bank of England declined to comment, however, on whether he was still on that committee.

Royal Bank of Scotland said on Wednesday it had sought to reassure clients about the foreign exchange rates they were being offered and rival Barclays said it was cooperating with regulators scrutinizing the market.

(Reporting by Jamie McGeever and Richa Naidu; Editing by Mark Heinrich and Eric Walsh)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/oXSwRYyWBoc/story01.htm

S&P 500’s rally ends after Fed; Expedia up late


NEW YORK |
Wed Oct 30, 2013 7:01pm EDT

NEW YORK (Reuters) – U.S. stocks fell on Wednesday, with the SP 500 snapping a four-day streak of gains after the Federal Reserve said it had a weaker growth outlook for the economy, even as it held steady with its stimulus program for the time being.

Trading was volatile following the release of the statement, with the major U.S. stock indexes cutting losses to turn flat and dropping to session lows. Almost 70 percent of stocks on both the New York Stock Exchange and Nasdaq declined, while all 10 SP 500 sector indexes fell.

While it had been widely expected that the U.S. central bank wouldn’t announce any adjustments to its bond-buying program, the statement wasn’t enough to extend a rally that has driven both the Dow and the SP 500 to repeated record highs, including in early trading on Wednesday.

“While there were essentially no changes between this statement and previous ones, it is clear that even this wasn’t as dovish as some investors were expecting, especially with the bull market getting a bit long in the tooth,” said Michael Mullaney, who oversees about $10.7 billion as chief investment officer of Fiduciary Trust Co in Boston.

While the Fed’s stimulus has kept a floor under stock prices this year, there have been signs that growth is slowing, including weak economic data and an earnings season marked by tepid revenue growth.

In trading following the market’s close, Expedia Inc (EXPE.O) surged 18.3 percent to $59.10 after reporting its results, while Facebook (FB.O) erased an after-hours gain of more than 15 percent to trade down 3 percent at $47.57 after comments during the earnings call.

Starbucks Corp (SBUX.O) shares fell 2.8 percent to $78.60 after the bell because the world’s biggest coffee chain gave a 2014 profit outlook that was below expectations.

The Dow Jones industrial average .DJI slipped 61.59 points, or 0.39 percent, to end at 15,618.76. The Standard Poor’s 500 Index .SPX dropped 8.64 points, or 0.49 percent, to finish at 1,763.31. The Nasdaq Composite Index .IXIC fell 21.72 points, or 0.55 percent, to close at 3,930.62.

The Dow industrials hit a record intraday high of 15,721 shortly after Wednesday’s opening bell, while the SP 500 also reached a lifetime intraday high of 1,775.22 early in the session.

Many analysts expect the Fed to delay until at least March in easing the stimulus measures that have encouraged investors to buy riskier assets, like stocks, contributing to the SP 500’s gain of more than 20 percent this year.

The central bank has held interest rates near zero since late 2008 and quadrupled the size of its balance sheet to more than $3.7 trillion through three rounds of bond buying.

Private-sector employers hired the fewest workers in six months in October, according to a report released on Wednesday, while the U.S. consumer price index showed benign inflation. Both indicators supported the Fed’s stimulus policy.

In the latest batch of earnings, General Motors Co (GM.N) rose 3.2 percent to $37.23 after the U.S. automaker reported stronger-than-expected quarterly profit because of strength in its core North American market and a smaller-than-anticipated loss in Europe.

On the downside, Yelp Inc (YELP.N) dropped 2.6 percent to $67.05 a day after it reported a wider third-quarter loss, while Western Union (WU.N) shares slid 12.4 percent to $16.85 after the company posted a steep drop in third-quarter earnings. ID:L3N0II3TR

“Earnings haven’t been amazing, but they’ve been steady and sustainable, which the market likes enough to help us reach all-time highs,” said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds in New York, which has $400 billion in assets under management.

“When the season ends and we focus on the macro again, that probably won’t be good for the market.”

Of the 313 companies in the SP 500 that had reported earnings through Wednesday morning, 68.4 percent have topped Wall Street’s expectations, above both the 63 percent beat rate since 1994 and the 66 percent rate for the past four quarters, according to Thomson Reuters data.

Revenue performance has been mixed, however, with 53.7 percent of SP 500 companies beating expectations, well below the 61 percent average since 2002, but slightly above the 49 percent rate for the last four quarters.

(Editing by Jan Paschal)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/s1lOu0GWISw/story01.htm

Barrick mulls options to raise cash, reduce debt: sources


TORONTO |
Wed Oct 30, 2013 6:39pm EDT

TORONTO (Reuters) – Barrick Gold (ABX.TO), which is attempting to reduce its debt load, is considering a wide range of options from a strategic equity investment to further streaming deals that yield upfront cash, according to several sources familiar with the situation.

The sources, who asked not to be named because the talks are confidential, said the discussions have so far been exploratory in nature and no deals are imminent at this time.

A spokesman for Barrick declined to comment on the matter.

One source said Barrick’s management has met with top fund managers in Asia and the Middle East to gauge the interest in a possible private placement-style equity deal, in order to raise capital and bring on board a large, long-term strategic investor as a move to boost market confidence in the company.

Such a move would be similar to the one taken by diversified miner Teck Resources Ltd (TCKb.TO), which in 2009 sold a roughly 17 percent stake in itself to Chinese sovereign wealth fund, CIC or China Investment Corp. At the time, Vancouver-based Teck was struggling under a massive debt load as it acquired Fording Coal for $14.1 billion, just as the global financial crisis began and commodity prices imploded.

Barrick, the world’s top bullion miner, has faced a similar struggle over the last year, as the price of gold has fallen 21 percent and costs at Pascua Lama – its massive gold project on the border of Chile and Argentina, have soared.

Shares in Barrick have fallen 46 percent over the last 12 months. The company’s shares hit C$14.22 in July, their lowest point since 1992, but have since rebounded a bit and the stock closed on Wednesday at C$21.55.

The Toronto-based gold miner will be announcing its third-quarter results on Thursday, and is expected to provide analysts and investors an update on capital costs at Pascua Lama, which were last pegged at up to $8.5 billion.

Another source briefed on the matter, said Barrick is also considering a further streaming deal to pay for any additional capital outlay at Pascua Lama. Such deals, give miners cash up front in exchange for an agreement to sell future production of a by-product like silver at a discounted price.

Barrick already has a streaming deal in place at Pascua Lama – In 2009, Silver Wheaton Corp (SLW.TO) bought 25 percent of the life-of-mine silver production from the project.

Bloomberg, earlier on Wednesday, reported that the company is also considering selling part of its copper business, or even a stake in Pascua Lama, citing people with knowledge of the matter. The report said Barrick has not settled on a strategy, and that there is no certainty a deal will occur.

In an interview with Reuters last month, Barrick’s Chief Executive Jamie Sokalsky categorically denied that the company has any plans to sell its copper assets.

“They are still core assets for us,” said Sokalsky during an interview in Denver. “It is not about just gold or copper, it’s about an asset that generates returns and free cash flow.”

Barrick owns copper mines and projects in South America, Africa and the Middle East.

The company, in August, agreed to sell three of its higher-cost gold mines in Australia to Gold Fields (GFIJ.J) for $300 million.

Sokalsky told Reuters last month that the company remains in talks about some further asset sales with the focus on divesting smaller, higher-cost mines.

(Reporting by Euan Rocha and Allison Martell; Editing by Tim Dobbyn)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/kOptCM0v7_8/story01.htm

Cargill bans Zilmax from beef supply until issues resolved


CHICAGO |
Wed Oct 30, 2013 6:10pm EDT

CHICAGO (Reuters) – Cargill Inc, one of the world’s largest beef processors, threw a wrench into Merck Co.’s plans to reintroduce its feed additive Zilmax, stating it will not accept Zilmax-fed beef into the Cargill supply chain “until we are 100 percent confident the animal welfare issues are resolved.”

Cargill told Reuters Wednesday its ban on Zilmax applies both to beef it processes, as well as to cattle in its own feed lots. In addition, Cargill said it will not use Zilmax-fed beef “until Asia and other trading partners accept it in their markets.”

Pharmaceutical giant Merck on Tuesday told Reuters that it is seeking to reintroduce Zilmax, the controversial feed additive temporarily pulled from the market in August after reports that it caused lameness in cattle.

A spokeswoman for Merck’s Animal Health unit said that while “it is too early to speculate on when we will resume sales for Zilmax in the U.S. and Canada,” Merck was pushing forward with its quality control program to ensure the drug was being properly used.

Merck did not immediately respond to request for comment on Cargill’s action.

Merck’s August decision came after Tyson Foods Inc. (TSN.N) said it would stop accepting Zilmax-fed beef after cattle were observed arriving for slaughter with signs they were having difficulty walking or moving. Reuters had reported in August that, at a major cattle industry conference, an animal-health expert from JBS USA JBS.UL had shown a video of lame cattle arriving at its slaughterhouses.

Merck’s audit over how its product has been used in the field is ongoing, according to the company. Merck was “committed to completing this as quickly as possible, while also ensuring it is conducted appropriately and with rigorous scientific measures,” company spokeswoman Pamela Eisele said in an email Tuesday.

Among other steps, Merck has formed an advisory board that includes representatives from meat processors, cattle feeder operations, producers, veterinarians, academics and industry consultants to review animal safety research data on Zilmax. The company declined to say who had been appointed to the board, which convened for the first time in October.

(Reporting By P.J. Huffstutter; Editing by Tim Dobbyn and Andrew Hay)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fdQFGyT67KY/story01.htm