Estonian dairy group fearful after Russian indifference

- Last updated on GMT

Related tags: Milk, European union

Managers at Estonia's Estmilk dairy group have warned that the
company is on the verge of collapse after its Russian shareholder,
Nutritec, failed to inject funds into the ailing firm.

According to a report in the Aripaev​ newspaper, the company's chairman Neeme Jogi is incrawesingly convinced that the Russian firm - which only acquired its stake in late 2004 - is not planning to come to the rescue of Estmilk.

Jogi is close to declaring the company bankrupt after failing to receive any funds from the Russian shareholders. At the time of the acqusition in November 2004, Nutritec said it hoped to turn Estmilk into Estonia's biggest dairy producer, lifting sales to around EEK600 million through the investment of more than EEK100 million in the company.

Estmilk itself was formed from a number of assets previously owned by the Rapla Dairy, which itself went into bankruptcy in 2003.

Nutritec also owns Agro Piim, which in turn controls Estonia's six largest dairy farms, and was the first Russian company to invest in Estonia's dairy sector. The aim was to exploit its expertise as Russia's biggest domestic supplier of baby food to develop Estmilk's own range of products. Most of the cash to be invested in the firm was destined for a baby food production line.

Nutritec has given no indication as to why it has failed to invest the cash in its Estonian unit, but it clearly cannot be through a lack of experience - the group owns 13 dairies in Russia, Ukraine, Kazakhstan and Belarus, and has a wealth of experience in managing a variety of dairy businesses.

This, though, was the company's first foray into the EU market, and it may be that the strict quality and safety demands of the Union have made it much less cost-effective for the Russian firm to invest in Estmilk. Nutritec said it intended to use Estonia as a base to export milk products to Russia, the CIA, Iran, Iraq and Egypt.

Related topics: Manufacturers, Emerging Markets

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