Parmalat's Hungarian unit in danger

- Last updated on GMT

Related tags: Company, Italy, European union, Milk, Parmalat

Parmalat representatives from across Europe will meet today to
discuss the measures that the new management will take to help its
distressed units. Trade union leaders in Hungary claim that the
Eastern European country's unit may close putting 450 jobs at risk.

The financial crisis that erupted last year as a result of a €14b black hole being dicovered in the company's books has had an affect on many of the company's subsidiaries. Units from Brazil to the US have suffered as a result of the company's collapse. The worst affected industry was the Italian industry itself.

The problems appear to be easing in many of the company's subsidiaries. For example, the units in Spain and Portugal have said that it is business as usual. However, the problem is nearing crisis point for the Hungarian unit.

On Tuesday union leaders in Hungary disclosed that the company is facing liquidation. They are calling for measures to be taken by the new management team set up in Italy to help the struggling sites.

Earlier in the year it was reported that farmers that are producing milk for the company were not paid for 60 days. Now however, the company has announced a weekly payment scheme to the producers.

In Hungary 1.2 billion litres of milk is produced for suppliers like Parmalat. The majority of milk produced is bought by the company Friesland, which purchases 400 million litres yearly. In comparison Parmalat Hungaria purchases 100 million litres yearly, and 5 per cent of the milk market.

It is thought that if the unit was to close then another supplier in the industry would buy the two plants. But Danone and Mizo, two of the sectors biggest players have stated that they are not interested in the company.

Industry observers claim that the area of must interest to a potential buyer would be the processed dairy sector of the company. They claim that there is little room for growth in the fresh milk sector.

Earlier in the year the Swiss packaging company Tetra Pak said that it would continue to supply packaging for the company's UHT milk. It is unclear however if a new contract would be formed if the company was to be sold to a competitor.

Last week Parmalat's Dutch and Luxemberg subsidiaries applied for temporary protection from creditors an were declared insolvent. Following today's meeting it is possible that the turn around experts at Parmalat will decide that the unit should file for the same treatment.

The Italian unit has has been protected from bankruptcy since December last year and yesterday announced that it was opposed to any plan to split up the Italian unit.

Related topics: Manufacturers

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