Snow Brand posts record loss
revival plan including financial aid and job cuts as it aims to
stay afloat after posting another record loss in the latest
business year.
Japan's scandal-ridden Snow Brand Milk Productshas unveiled a revival plan including financial aid and job cuts as it aims to stay afloat after posting another record loss in the latest business year.
Japan's largest processor of dairy products, its image sullied by a huge tainted milk case and a scam involving deliberate mislabelling, is pinning its hopes on aid from banks and capital injections from farm co-operatives and on cutting its staff by 70 per cent to 1,500.
Snow Brand said it stayed in the red for a third straight year to March, with its group net loss at ¥71.74 billion (€623 million) compared with ¥52.93 billion the previous year, and forecast more losses for the next year.
The loss was in line with revised forecasts it made in March.
"We have now twice betrayed the trust of our customers and posted a huge group and parent loss this year," said Snow Brand president Kohei Nishi. "So we were in a position where we had to radically alter our restructuring plans."
Nishi and the other eight members of the board will resign at a shareholders' meeting on 27 June to take responsibility for the scandal and the losses.
Aiming to get back on its feet and rebuild trust in its once highly respected brand, Snow Brand said it would seek a financial assistance package of ¥50 billion from its main creditor banks, including Norinchukin Bank.
"A revival for the company is not impossible but it won't be easy," said Tokyo-Mitsubishi Securities analyst Masato Takano. "They've lost a lot of trust and it's only natural that they've seen their sales fall. The question is, when is this going to bottom out? We still haven't seen the bottom yet."
Itochu said it was seriously considering an injection of funds into Snow Brand, as well as raising its stake in a Snow Brand wholesale food subsidiary, Yukijirushi Access, to over 25 per cent from its current 10 per cent.
As part of restructuring, Snow Brand plans to slash its workforce to 1,500 from 5,000 by April 2003, with the first 1,300 job cuts coming by September.
It plans to establish a new company for its drinking milk division by January, to be capitalised at ¥15 billion. Snow Brand said Zennoh would be the largest shareholder in the new company, while Snow Brand would remain independent in its dairy products business.
The milk producer and processor has seen earnings and sales sour since it tried to cover up reasons for a tainted milk scandal two years ago that made more than 10,000 people ill.
More recently, Snow Brand Milk became the target of public outrage after its meat packing unit said it had deliberately mislabelled beef to pocket government subsidies aimed at helping the industry following an outbreak of mad cow disease in Japan.
The fallout from the scam had led Snow Brand to triple its loss forecast for the latest year to ¥71.40 billion.
Snow Brand Milk expects to stay in the red again in 2002/03 with a net loss of ¥23 billion on revenues of ¥616 billion, sharply down from its 2001/02 revenues of ¥1.16 trillion, mainly from the spin-off of its drinking milk business.
Many analysts, however, were sceptical as to whether the restructuring plan would be effective because of the company's sullied image with the Japanese public.
