Fujiya Co. announced Thursday it posted a whopping net loss of 8 billion yen in the 2006 business year, down from a 1.8 billion yen loss the year before, after being hit by a sanitation scandal that forced the famous confectioner to suspend operations in about 890 shops and restaurants nationwide.

Fujiya, which admitted in January to using expired ingredients in cream puffs, cakes and other products, said sales dropped 24.7 percent to 63.9 billion yen and that it would post an operating loss of 6.6 billion yen.

“Most of the losses were incurred as a result of the business suspension” for most of January through March, President Yasufumi Sakurai told a news conference.

Sakurai said the company will replace its entire board to take responsibility for the the scandal except him. Sakurai took the top job in January.

Shareholder will approve the new board at a general shareholders’ meeting on June 27.

On the list will be five executives from Yamazaki Baking Co., including Yamazaki President Nobuhiro Iijima. Kensuke Yamada, Yamazaki’s vice president, will be nominated for chairman and representative director.

In April, Yamazaki purchased 35 percent of Fujiya’s shares for 16 billion yen, turning the top confectioner into an affiliate.

Fujiya has been struggling to recover from revelations that it was using old milk, cream, eggs, blueberry jam and apple filling in its products and falsifying the packages’ expiration dates.

Fujiya’s retail division logged a 4 billion yen operating loss and its wholesale division logged a loss of 1.4 billion yen.

Fujiya resumed cakes sales on March 23, but only 608 shops had reopened as of the beginning of the month, about 230 shops fewer than the end of March 2006.

Due to the management reshuffle, Fujiya has not yet drawn up a mid-term business plan that details how it intends to create greater synergy with Yamazaki, Sakurai said.

The sweets maker said it hopes to unveil the plan in July and include such strategies as joint supply of products and sales under the brand of the supplier.

Although Fujiya still expects to stay in the red this business year, Sakurai said he will do his utmost to turn a profit by the end of March 2009.

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