Hochdorf announces restructuring program

By Jim Cornall

- Last updated on GMT

Earlier this year, the company launched its Bimbosan goat milk infant formula.
Earlier this year, the company launched its Bimbosan goat milk infant formula.

Related tags Dairy

After examining the financial strategy options for stabilizing the balance sheet and supporting sustainable corporate development, Switzerland’s Hochdorf Group said it is initiating a 'far-reaching' restructuring program.

The measures take into account the group's site-related set-up, its new strategy and the current strained balance sheet situation. The board of directors and group management intend to concentrate production at the Sulgen site by the end of 2023. The headquarters and administration will remain in Hochdorf. The proceeds from the planned sale of the land and building in Hochdorf will relieve the balance sheet.

In recent quarters, Hochdorf said it has succeeded in stabilizing its operating business and selling or closing some assets of the business. Nevertheless, the group continues to suffer from an excessive debt burden of approximately CHF 100m/$109.4m (excluding hybrid bond of CHF 125m/$136.8m), which is attributable to the forward strategy that the company said failed in 2019.

The company said measures for further efficiency improvements and cost savings are necessary to put the operating business on a long-term sustainable basis and to lead the company back into profit. To ensure further debt reduction and a return to profitability, production will be centralized and optimized at the Sulgen site.

The company currently operates two sites, Hochdorf and Sulgen, with Sulgen already employing about twice as many production staff as Hochdorf. The Sulgen plant has facilities for the Baby Care division and sufficient capacity reserves for future strategic development. Hochdorf said the relocation will make the Sulgen plant more profitable in all areas, increasing the volume of raw materials processed and thus also the plant utilization. It said considerable investments would have to be made to the plant at Hochdorf over the next few years, which will not be possible for the company economically.

Management, administration and central services such as sales, marketing, development, product management, quality and human resources management, regulatory affairs, customer service, communications, finance and IT will remain at the headquarters. The departments associated with production in Hochdorf will be phased out by the end of 2023. Some production and packaging processes, as well as production-related departments including raw material procurement and quality assurance, will gradually transfer to Sulgen.

Hochdorf said it expects annual cost savings of CHF 7m to 9m($7.7m to $9.9m) from 2024 through the site optimization. It is also an important step in the implementation of the group strategy, which focuses on organic growth with higher-margin baby care and "smart nutrition" products.

In order to relieve the balance sheet and reduce debt, the site in Hochdorf will be sold with the aim of identifying a buyer by the end of 2021.

The planned restructuring will lead to a gradual reduction in the number of employees in Hochdorf over the next two years, from about 190 to around 70 by the end of 2023. The plan will see the number of employees at the Sulgen site increase by around 45 over the same period.

The first relocation steps are planned from the beginning of 2023. Until then, the product assortment and the milk demand in Hochdorf will remain unchanged.

Related topics Manufacturers Nutritionals

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