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Scandal stricken Snow Brand on the up?

22-May-2002

Shares in Japan's scandal-ridden Snow Brand Milk Products Co soared more than 11 per cent on Tuesday after investors saw signs of a practical revival plan in newspaper reports it plans to cut a quarter of its workforce, Reuters reports.

Shares in Snow Brand Milk, Japan's largest dairy manufacturer, have plunged more than 75 per cent since a scandal in June 2000 when the brand was tarnished by tainted milk that left more than 10,000 people ill in a mass outbreak of food poisoning.

 

Consumer anger with the company has swelled in recent months with evidence of more wrongdoing, causing a recession-weary public tired of scandals and coverups to shun the once prestigious brand.

 

The Yomiuri Shimbun daily said on Tuesday that Snow Brand will cut 1,300 workers in a new restructuring plan to be unveiled on Thursday when the company reports full year earnings.

 

"The company's efforts to rebuild itself are finally taking shape, supporting today's rise in the stock," said Kazayuki Naito, general manager of equities and trading at UFJ Capital Markets Securities.The Nihon Keizai Shimbun business daily said the dairy producer was seeking capital injections from Asahi Breweries, Japan's largest beermaker, and Yamazaki Baking Co.Major Japanese trading house Itochu Corp had decided to invest between 2.5 billion yen (€21.64 million) and 3.0 billion yen in the company, the newspaper said.

 

In addition, the National Federation of Agricultural Cooperative Associations, or Zenno, is set to take the largest stake, or 30 per cent, worth up to six billion yen, it said.

 

A Snow Brand official declined to comment on the reports.The company, which forecasts a record group net loss of 71.4 billion yen ($569.4 million) in the financial year which ended in March, appears to be desperately seeking and securing new funds to reduce its interest bearing debt and revive its slumping business.

 

Analysts said the stock was rising on expectations that the battered company would finally move to restore its financial health and rebuild its shattered brand image.

 

Consumers were left with a sour taste when the company's meat-packing unit, Snow Brand Food Co, said in January it had falsely labelled beef to claim government funds intended to help the industry cope with an outbreak of mad cow disease.

 

Newspaper reports in March said Snow Brand Milk was mulling a 98 per cent capital reduction.Shares in Snow Brand Milk closed up 11.4 per cent or 13 yen, rising to 127 yen on Tuesday's news reports.

 

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