Pharmalys set for disposal

Pharmalys set for disposal

Hochdorf said it plans to focus its operations on the baby food market after the Swiss infant formula and dairy producer launched a business review in May.

To that end, the company also plans to exit its cereal and ingredients business, although some parts will be integrated into Hochdorf's dairy division. A spokesperson told just-food all options for Pharmalys, the Africa-based infant-formula maker in which it holds a 51% stake, are on the table including a sale or expansion of the operation.

Also, Hochdorf said in a statement it is selling its 90% holding in Hochdorf South Africa to African Chocolate. 

The announcements follow fresh warnings in May Hochdorf would struggle to meet its first-half results, adding to a series of other previous warnings on profits. The chief executive position has also yet to be filled after CEO Thomas Eisenring left the business earlier in the year.

Hochdorf said today (8 July) its cereals and ingredients unit operations lack the "required critical size and scaleability" but the company added it is talking with its financial partners and "credit institutions" over funding to integrate parts of the business into dairy ingredients division and expand others.

Reflecting on Hochdorf's announcement, Alain Oberhuber, a consumer goods analyst at MainFirst Schweiz, said: "We think that the banks will grant Hochdorf's new board of directors a couple more months. Therefore, the assets will be sold as fast as possible. This will probably result in distorted valuation multiples."

He added: "The most important point of the strategic change is that all options are open for the 51% Pharmalys participation. We assume that its stake could be divested back to the founder, Amir Mechria. Hochdorf was not able to manage this business with a reasonable investment, as working capital was far too high in recent years.

"We know that Amir Mechria has a pre-emptive right to buy back the 51%. However, the question remains at what price or valuation multiple this would occur, and if there is a penalty involved."

Meanwhile, a new strategy for Hochdorf's dairy ingredients business will be developed over the next 12 months.

Hochdorf said it will now manufacture baby nutritional food exclusively in Switzerland, meaning its factory in Germany is surplus to requirements. It is therefore putting the Uckermärker Milch site up for sale.

Within cereals and ingredients, Hochdorf will retain what it calls "valuable product categories" such as speciality aerosol products, which are not milk-based, while health supplements will be integrated into the dairy ingredients business segment. Strategic opportunities for vegetable-oil unit Marbacher Ölmühle, snacks business Snapz Foods and dried-fruit-and-veg supplier Zifru Trockenprodukte are also being assessed, with a review expected to be completed by the end of the year. 

The business transformations are expected to put further pressure on Hochdorf's results after the company said in May its first-half performance would be "significantly" below the previous year. It will publish those numbers along with a new economic outlook on 20 August.