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Edible oil maker dragged unwittingly into scandal

2013/10/21 20:20:55

Taipei, Oct. 21 (CNA) A Taiwanese producer of cottonseed and sesame oil saw its shares fall 16 percent on Taiwan's emerging market Monday after being pulled into an edible oil scandal that it may have nothing to do with.

Shadows have been cast over the producer, Flavor Full Food Inc., through guilt by association with another edible oil producer recently embroiled in a scandal -- Chang Chi Foodstuff Factory Co.

Changhua County prosecutors suspect Chang Chi has been importing cheap crude cottonseed oil, processing it, and then blending it into its "100 percent pure" olive oils and other products or passing it off as another type of oil altogether to drive up profits.

Coverage of the Chang Chi scandal has given cottonseed oil a bad name in Taiwan, portraying it as potentially unsafe or something used to dupe consumers, and because Flavor Full is the only other importer of crude cottonseed oil in Taiwan, it has been dragged into the commotion.

The linkage affected its stock price, which fell to a low of NT$60 per share Monday from a close of NT$79.32 last Friday before rebounding to NT$66.

At a hearing of the Legislature's Social Welfare and Environmental Hygiene Committee on Monday, Vice Health Minister Shiu Ming-neng was questioned by lawmakers about Flavor Full's operations.

Shiu confirmed that of the 7,619 tons of crude cottonseed oil imported into Taiwan since last year, Chang Chi had imported nearly 40 percent of it and the rest went to Flavor Full, which like Chang Chi is based in Changhua County.

Citing local health authorities' reports, Shiu said Flavor Full refines the crude oil and then exports processed cottonseed oil to foreign markets, but he added that an investigation into the company's downstream sales has been launched.

In a statement responding to the suspicions, Flavor Full said it has the technology to refine cottonseed oil and eliminate gossypol -- a toxic substance naturally found in the cotton plant and crude cottonseed oil.

It stressed that refined cottonseed oil, free of gossypol, is a legal edible oil and said that all of its cottonseed oil is directly exported overseas and has never been sold domestically.

Later Monday afternoon, Flavor Full Executive Vice President Lin Hsiu-jung reiterated that the crude cottonseed oil the company imported was used in the production of refined oil ordered by clients in Singapore.

"The company's oil products marketed in the domestic market have nothing to do with cottonseed oil," Lin stressed.

Lin also countered a claim by opposition Democratic Progressive Party Legislator Lin Shu-fen that Flavor Full had produced sesame sauce packets used for various convenience store products on a contract basis.

The executive said it sold all of its products domestically under its own brand and that the contractors supplying the sesame sauce to the convenience stores used its branded sesame paste.

Full Flavor exports its sesame-related oils to 24 countries, the Ministry of Health and Welfare said.

According to financial data filed with the emerging stock market, Flavor Full had sales of NT$1.66 billion (US$56.5 million) and net income of NT$129 million, or NT$3.05 per share, in the first half of the year.

(By Lung Ruei-yun and Elizabeth Hsu)