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Parmalat faces uncertain future in Central Europe

05-Feb-2004

The financial troubles of Italian food group Parmalat stretch well beyond the home front. In both Romania and Hungary the company's divisions are facing acute problems that threaten its future in the region. But business will continue, Parmalat officials have insisted.

With investigations into Parmalat's investments now suggesting that the company's hidden debts could amount to more than €14 billion, it seems that the group's global operations are most under threat. In its home country of Italy, the food giant does at least have the backing of the government and growing sales.

Elsewhere things aren't looking quite so assured. In the US and in Brazil things "crisis units" have had to be set up in order to keep suppliers afloat and now in the company's central European operations are beginning to feel the pinch.

 

Currently Parmalat has business operations in 30 countries and employs around 36,000 people. In central Europe its primary operations are the Romanian and Hungarian businesses - both significant players in the respective dairy sectors.

 

The situation at Parmalat Hungary does not look so clear cut. The division conceded that it was behind with payments to suppliers and that it was trying to get negotiate its future financing. All this came about amidst press reports that the Hungarian division was negotiating a possible take-over bid from French dairy giant Danone - allegations that have subsequently been denied by Danone.

 

However, to dispel rumours, the Hungarian division has assured both investors and its suppliers that the business will continue to operate and that future financing would seen be firmed up.

 

Likewise, Parmalat Romania has assured the national press that its position is safe, but that creditors may suffer.

 

"Parmalat Romania is a safe, fast-growing and profitable company," said Salvatore Lucisano, special administrator and sales manager for Eastern Europe in an interview with the national press. The spokesman backed up his belief by emphasising the fact that the Italian Prodi Law protected big industrial groups, which in turn is providing the company with a safety net. The spokesman also denied that there would be an imminent take-over.

 

Parmalat Romania has production facilities in Bucharest and Baia-Mare, and employs 120 staff. The facilities have a production capacity of 150 million litres per year and account for around 6 per cent of the juice and dairy market. It also has around €1 million earmarked for the future development of the production facilities.Parmalat's share of the Hungarian market is similar in size to that in Romania. Currently it is the sixth largest dairy producer in the country, with a 5 - 6 per cent share of the market and produced 112 million litres of juice and dairy products last year.