Feb. 25 (Bloomberg) — Orion Corp., a South Korean snack maker, fell by the most in seven weeks in Seoul trading after food regulators started probing its products for possible contamination of an industrial chemical.

Orion shares dropped 7.5 percent to 148,000 won at the close on the Korea Exchange, set for the steepest decline since Jan. 2. The benchmark Kospi stock gauge gained 0.3 percent.

South Korean authorities found melamine in imported food additives used to make iron-fortified products, and issued a temporary ban on the distribution and sale of 12 products that used the ingredient, including seven of Orion’s snacks, the Korea Food & Drug Administration said on its Web site yesterday.

Orion’s brand image may be hurt and sales could drop in the near term regardless of the result, Morgan Stanley said in a note late yesterday.

Sales of the products account for 5 percent to 6 percent of Orion’s domestic confectionery sales, the brokerage said. The company’s net income is expected to decline 1.9 percent in 2009 should sales fall 1 percent, it added.

Orion’s internal tests showed its products weren’t tainted with melamine, and will monitor the results of the regulator’s probe before issuing an official response, Hwang Hee Chang, a company spokesman, said by phone today.