Recovery policy pulls Parmalat through

By Anita Awbi

- Last updated on GMT

Related tags: Dairy giant parmalat, Revenue, Italy

Disgraced Italian dairy giant Parmalat, still suffering from 2003's
fraud revelations, has posted a jump in first-quarter income -
thanks to CEO Enrico Bondi's recuperation strategy.

The Parma-based dairy and juice producer delivered an 18.4 per cent rise in core earnings to €73.2m (£49.8m) in the quarter ending 31 March 2006, up from last year's €61.8m.

Revenue grew 9.8 per cent to €953.2m, from €868m in 2005's first quarter. The firm attributed improved performance to increasing manufacturing and distribution efficiency, and a shift in its product mix to include more value-added items.

An alleviation of debt repayments arising from 2003's accounting scandal also helped boost the figures, and the company's share capital increased by around €5.43m, due to the conversion into shares of 127,707 warrants.

In Italy sales were slow, resulting in a marginal drop in earnings before interest, tax, depreciation and amortisation (EBITDA) from €25.7m last year to €25.2 in 2006's first quarter. The flat domestic dairy market was cited as the main cause.

The greatest revenue growth was seen in Romania and Cuba, with the regional incomes attributing to 31.1 per cent and 38.8 per cent, respectively, of overall earnings.

In Africa, first quarter revenues were way ahead of last year, rising to €91.6m - 27.8 per cent up on the €71.7m booked in the first three months of 2005.

Parmalat said Friday in a statement that "for the year as a whole, given the results achieved in the first quarter, the company expects to report higher EBITDA and net profit than in 2005, while holding its net financial position at the current level."

Since November the firm has pursued a strategy, put in place by new chief executive Enrico Bondi, to recoup the billions it lost through financial scandal and two years of Italian government administration.

The dairy producer has also worked to correct the books and repay outstanding debts accrued during the liquidation.

Legal expenses paid during this year's first quarter amounted to €23.1m, and by the end of March a court-enforced programme to repay suppliers had been completed. From April there have been no further outlays for this purpose - removing a burden that has impacted the company for six months.

With Bondi at the helm, Parmalat has worked to stave off efforts by an Italian banking conglomerate to disintegrate the group, and has initiated various legal proceedings against banks involved in the fraud.

Bondi's argument is that a number of financial institutions knew about the fraud and were partly responsible.

However, the financial institutions involved in the 2003 affair have maintained they were fooled by Parmalat's accounting chiefs.

Bondi has already claimed €8.07bn in damages from lawsuits filed against some of the group's auditors and banks.

JPMorgan Chase and Unicredito Italiano were sued for their involvement in the sale of Parmalat bonds issued from 1997 through 2001, and it was recently announced that US auditors Deloitte & Touche and Grant Thornton International must defend themselves against a $10bn (£5.32bn) lawsuit.

Parmalat went into administration in December 2003 following the revelation that a key account with Bank of America did not exist. Holes in the firm's accounts hid the fact that the company was a whopping €14bn in debt.

When the scandal, which has been dubbed 'Europe's Enron', broke, the Italian government appointed Enrico Bondi as administrator.

Related topics: Manufacturers

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