Parmalat appears set to stay in Australia

Posted by Daniel Palmer on 4th September 2008

Parmalat has attempted to quash rumours of an Australian exit, which have escalated in the wake of their failed attempt to purchase Dairy Farmers.

Parmalat had planned to bid for Dairy Farmers but failed to come to a suitable arrangement with their proposed joint venture partner – Murray Goulburn – and consequently pulled out of the race for the Australian dairy co-operative. Prior to sale of Dairy Farmers, Parmalat Chief Executive Enrico Bondi indicated that a sale of their Australian dairy business could be on the cards if they failed in their attempts to expand.

Speculation about an exit from Australia increased following last Friday’s investor briefing in Milan when Parmalat officials informed investors that they were mulling several options for their Australian operations – including that of exiting the market.

A spokesman for the company has this week highlighted that Australia was still a part of the Italian dairy giant’s plans, but a review of options would continue in the wake of dairy industry consolidation. “Parmalat SpA has no current plans to divest its investment in Australia or to exit the Australian market,” he told Reuters.

Parmalat last week reported a 6.6% growth in consolidated revenues in Australia in the first half of 2008 to 223.1 million euros. Unit sales were down, however, with the fall blamed on increased private label competition and higher prices. The pasteurized milk and dessert sectors were the hardest hit.

The company reported that their focus in Australia would now be on improving their sales mix. “The Australian SBU is focusing its production on items with a high value added, such as flavoured milk, functional products and products that address intolerances, with the goal of improving its sales mix,” they advised in a statement. Parmalat also advised that the economic downturn had been greater in Australia than they originally anticipated.

Last week, National Foods, a subsidiary of Japanese-based Kirin Holdings, purchased Dairy Farmers for $910 million (pending shareholder approval) in conjunction with their joint venture partner – Warrnambool Cheese and Butter. The purchase will result in a major consolidation of Australia’s dairy industry.