Prepared Foods October 17, 2005 e-newsletter

Dairy and fruit juice company Parmalat SpA has mandated KPMG Corporate Finance to sell its German business, the daily MF said without giving a source.

The unit has annual sales of 40 million euros ($48 million) and two dairy production sites, MF said.

The dairy and fruit juice company Parmalat SpA will focus on about 30 key brands by phasing out non-strategic ones and does not plan any significant disposals, said head of operations Carlo Prevedini.

The refocusing is “a clean-up” of the group's portfolio, which will be gradual in order to avoid losing sales volumes, he added in a presentation to analysts.

The presentation was held as Parmalat returned to the stock market after a 22-month suspension following the group's collapse in December 2003.

Earlier this week, the company recreated its share capital by enacting a debt for equity swap, that gave Parmalat's creditors ownership of the company.

During the meeting, the company said it expects full-year 2005 sales of 3.782 billion euros ($4.53 billion), higher than the 3.554 billion euros ($4.26 billion) expected earlier, and gross operating profits of 302 million euros ($361 million), against 306 million euros ($366 million) predicted before.

For 2007, the food group said it expects sales of 3.895 billion euros ($4.66 billion) and gross operating profits of 454 million euros ($544 million).

In 2004, Parmalat had sales of 3.732 billion euros ($4.47 billion) and gross operating profits of 269 million euros ($322 million).

The forecasts do not take into account the bakery business that the group has agreed to sell for about 19 million euros ($22.8 million) to Italy's Vicenzi Biscotti SpA.

Parmalat intends to increase its gross operating margin to 11.6% of sales in 2007 from 7.2% in 2004 by “focusing on innovative and high value-added products, fewer brands, cost cutting, a strengthening of its central organization and an improvement of its logistics and distribution channels,” Prevedini said.

He added that the group has not lost market share in its main markets during the nearly two years in which it has been in administration.

In Canada, which has overtaken Italy as the company's largest market, sales are expected to rise 10.8% this year to 1.315 billion euros ($1.58 billion) and gross operating profits to rise 17% to 102.3 million euros ($123 million).

In Italy, 2005 sales are forecast rising 1.6% to 1.135 billion euros ($1.36 billion) and gross operating profits 7% to 96.2 million euros ($115 million).

Administrator Enrico Bondi said despite the restructuring undergone under his tenure the company continues “to be a work in progress,” but he is confident that Parmalat will reach its financial targets.

He declined to comment on possible future strategic moves, highlighting that his mission ends when the group's shareholders elect a new board.