Parmalat operating profits steady as creditors loom
profit for the first four months of the year has steadied, as a
government-appointed administrator prepares to meet creditors next
week in an attempt to ward off liquidation.
Parlamat's revenues at businesses slipped from €1.10bn a year ago to €1.17bn to April 30, while earnings for core activities rose from €70 m to €78.3m. Government representative, Enrico Bondi, will set out the conditions under which various debt holders can receive equity in restructured groups. Dozens of the group's subsidiaries have issued debt, although each has different financial health and value to potential equity stakeholders.
The company is in the process of negotiating a debt-for-equity swap with institutional investors, and the four-monthly results are expected to lay the foundations for the exchange. Should investors reject the terms the group will be forced into liquidation.
The company had been a multinational symbol of Italian industrial success until last December, when it collapsed with €14.5bn worth of debt. Amid one of the biggest financial fraud scandals in history, it emerged that €4bn of unaccounted funds were found in various 'phantom' company accounts.
Calisto Tanzi established Parmalat in the 1960's through long-life milk, and the company went on to produce juice, milk, water, yoghurt and biscuits to 31 countries across six continents. The company employs 36,000 workers worldwide, and 5,000 dairy farms depend on the company for the majority of their business. Even now it is ranked as the eighth largest industrial group in Italy, with a turnover of €7.6 billion in 2002, representing 0.8 per cent of Italy's GDP.
Much of Parmalat's downfall is attributed to the company's rapid expansion. Once Tanzi had cornered the long-life milk market he went on to buy up most of his competitors. But his family's divergence into football and tourism, together with a £30m loss on a television network were financially disastrous.
Last month the Hungarian division of Parmalat announced it is to shed 30 per cent of its workforce at the end of June in a bid to reduce overheads, following an earlier announcement that it would cut 15,000 jobs worldwide to ease its $16.9 billion debt, while in Brazil, where Parmalat has invested heavily in recent years, and where much of its worst operating problems lie, revenues fell from €122m to €38m, and the gross operating loss widened to €12.2m from €7.8m. Brazilian operations are involved in ongoing legal battles with the company.