Struggling Snow Brand Milk Products Co. said Thursday it posted a group net loss of 71.74 billion yen for the 2001 business year, 35 percent worse than the year before, due to plunging sales in the wake of a food mislabeling scandal at its meat packing subsidiary.
Snow Brand’s consolidated net losses were 52.93 billion yen the previous year.
Under a new rehabilitation program, the dairy product maker plans to reduce its capital by 98 percent, slash its workforce by 1,300, and will ask its main lenders for 50 billion yen in financial assistance.
Snow Brand will then form capital alliances with several companies, including the National Federation of Agricultural Cooperative Associations (Zen-Noh) and trading house Itochu Corp.
The firm will write off 75 billion yen in special losses for the current business year, including 4.2 billion yen to cover costs for its retirement program and 25 billion yen to pay for restructuring its milk business.
The restructuring plan will return the company to profitability in the 2003 business year, according to Snow Brand Milk President Kohei Nishi.
Snow Brand’s current management team will step down in June to take responsibility for the recent scandals.
The new management team will include two board members from Norinchukin Bank, the firm’s main bank, and the Central Union of Agricultural Cooperatives. An outside company official will also join the board. The reshuffle needs to be approved at a shareholders’ meeting June 27.
Under the restructuring plan, Snow Brand Milk, a former parent company of scandal-hit Snow Brand Foods Co., is asking its creditor banks, including Norinchukin Bank, to provide 50 billion yen in financial aid through debt waivers and a debt-for-equity swap.
It plans to reduce its capital from the current 27.8 billion yen to about 500 million yen by the end of July. It is expecting to get approval for this plan at the shareholders’ meeting.
To strengthen its capital, Snow Brand Milk will issue new shares totaling 10 billion yen through a third-party allocation by the end of March 2003.
The firm hopes Zen-Noh will purchase 5 billion yen worth of shares and Itochu 3 billion yen, asking four to five other companies, including Asahi Breweries Ltd., to become its capital partners, Nishi said.
Zen-Noh would become its largest shareholder, followed by Norinchukin Bank and Itochu, Snow Brand Milk executives said.
The dairy product maker has been hit hard by a series of scandals, including a beef-mislabeling scam by subsidiary Snow Brand Foods, which was disbanded at the end of April.
Facing high hurdles to maintain its group, Snow Brand Milk decided to concentrate on milk products and spin off its other businesses.
As a result, it will cut 1,300 jobs — about 25 percent of its workforce of 5,000 — by the end of September through a voluntary retirement program.
Another 2,200 employees will be asked to move to group companies by the end of next March, the company executives said.
Snow Brand Milk will set up a joint venture for its milk business with Zen-Noh and the National Federation of Dairy Cooperative Associations (Zenrakuren) in January.
It will sell 15 percent of its stake in Yukijirushi Access Inc., its profitable food wholesale subsidiary, to Itochu, leaving Itochu with a 25 percent stake in the wholesaler.
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