Restaurant chain Ajisen slumps as trading resumes

Updated: 2011-08-16 08:04

By Tang Zhihao (China Daily)

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SHANGHAI - Trading of Hong Kong-listed Japanese-style fast food chain operator Ajisen (China) Holding Ltd (ACHL) resumed on Monday, with the share price slumping some 7.24 percent.

Trading was suspended from Aug 5, after the company became involved in a controversy over the ingredients in its noodle soup.

Media reports in late July said that the restaurant chain used concentrated ingredients, even though it claimed the dish was made with fresh ingredients.

ACHL was found in 2009 to be using the additive sorbitol in noodles and fined 786,600 yuan ($123,065).

The fine was levied in May last year, although sorbitol became a permitted additive in noodle products from January 2010.

Shares of ACHL opened at HK$10.50 ($1.35) and closed at HK$9.74 on Monday.

The shares slumped 12.26 percent on Aug 1, the largest decline in 2011, not long after the issue came to public attention.

The restaurant chain issued its latest statement on the soup ingredients on Aug 12, in which it apologized to consumers and promised to be more responsible.

The company admitted in the statement that the soup was made from concentrated ingredients, which it said were provided by a company in Tai'an, Shandong province.

However, analysts said that the statement was similar to others issued previously.

UBS AG, the investment bank, was quoted by Reuters as saying that the Aug 12 statement was a clarification and did not mention how the company would rebuild its reputation or adjust its short- and long-term strategies.

Earlier, on Aug 5, UBS said in a report that the controversy might have a permanent effect on the company's profitability if it couldn't rebuild its reputation quickly. At that time, the bank downgraded its 12-month rating on the stock from "buy" to "hold". UBS also lowered the stock's target price by 35 percent to HK$13.

ACHL operates about 590 stores around China, and its products are also sold abroad in countries including Australia and Singapore.

The China Consumers' Association (CCA) issued a statement on Aug 5 urging food providers to respect consumers and reveal more detailed information on food ingredients.

"Foreign-style fast food has taken a big market share in China. The chain operator should be aware that not only does an advanced management system contribute to business success.

"The trust of customers also supports business growth," the CCA said.

A poll by 163.com found that more than 90 percent of 2,434 consumers surveyed said the controversy would affect their decisions about where to eat.

"I think I will not visit Ajisen Ramen for a while to see what will happen next.

"I wonder why the company cannot provide detailed information about what was used in the food and assure consumers feel assured," said a Shanghai resident surnamed Li.

China Daily

(China Daily 08/16/2011 page17)