Swiss dairy and infant formula group Hochdorf announced a “massive collapse of earnings” in the first half of the year and warned it is “currently in the grip of a serious crisis”.
It said its problems are linked to the “negative performance” of its 51%-owned subsidiary Pharmalys, a Switzerland-based infant formula maker.
In the six months to 30 June, Hochdorf recorded a loss of CHF63.6m (US$64.8m), compared to a loss of CHF2.2m in the same period in 2018, while net sales amounted to CHF242.9m, against CHF281.6m.
Hochdorf said in July it planned to focus its operations on the baby food market following a business review in May.
Today it announced it must “reorient itself,” and said that, following a reassessment of operational risks with Pharmalys, it was “necessary to set up considerable provisions for doubtful debts” amounting to CHF35.2m, which contributed to its loss.
It said the measures taken to reschedule the debt will “ensure the continuity of Hochdorf”.
Last month, Hochdorf said it planned to exit its cereal and ingredients business, although some parts will be integrated into Hochdorf’s dairy division.
It said all options for Pharmalys are on the table including a sale of the business and revealed it was selling its 90% holding in Hochdorf South Africa to African Chocolate.
The announcements followed fresh warnings in May that 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.
Reacting to today’s results announcement, analyst Alain Oberhuber of MainFirst said: “The new management can secure the future of Hochdorf if the steps announced on 8 July are implemented quickly and consistently.
“There was no guidance given for FY-19. However, we expect that market expectations will now be for a significant loss.”
He described the action to be taken in relation to Pharmalys as a “major challenge” for Hochdorf and said that, more generally, the company’s turnaround plan needs to be achieved at high speed.
“The main goal is to save and accumulate cash, as the commercial banks have agreed to support Hochdorf’s new management for the next couple of months,” he said.