Zagreb, Oct 10 - Croatia's biggest food group Podravka aims to regain its leading regional position in the next few years by boosting profitability and cutting costs, Chief Executive Zdravko Sestak said on Friday.
In an interview with Reuters, he also said the ambitious business plans should not suffer because of the global financial turmoil.
"Of course, it is difficult to say how and when this crisis will end. Still, I believe we will not have problems to finance our business development, given our long-term and transparent presence on the capital markets and good relations with local as well as with some banks in Austria and Germany," Sestak said.
Podravka operated in southeast, central and east Europe, producing powdered food seasoning Vegeta, soups and meals, pasta, canned meat and children's foods. It also has a profitable pharmaceutical arm.
However, the company, listed on the top tier of the Zagreb bourse, has long been seen by the market as an underperfomer that has failed to streamline its business.
"We have not tackled necessary changes for years. The new management is ready to undertake the restructuring needed to make the company more profitable and efficient. We want to become a leading regional player again," Sestak said.
The new management took over this summer and Sestak said he expected first positive results "in terms of operating profit already this year".
Restructuring would include layoffs and rearranging of the production mix to open space for more competitive products.
"We've yet to decide how much of our operating profit this year will be used for restructuring. There will also be some reduction in workforce, but we'll do it through very stimulating severance payments," Sestak said.
NO SALES DROP SEEN
Podravka's 2007-year net profit was a meagre 18.3 million kuna ($3.52 million), down from 60.4 million kuna in 2006. In the first six months of 2008, it posted net earnings of 22.9 million kuna.
"Our efforts to improve profitability will be seen also at the bottom line level at the end of the year," Sestak said.
The government, with its 26.5 percent stake was the biggest single shareholder, has said several times in recent years that it had no intention of keeping its holding.
However, Sestak said the state's presence in the company was not necessarily bad.
"Food industry is in difficulties worldwide, amid rising costs. What companies now need is a stable long-term ownership structure, and I believe the state fits into that at the moment".
He said he did not foresee any significant fall in sales because of the global crisis.
"We have a production mix that is regularly consumed in households and restaurants. I'm not afraid that we will suffer a major reduction of demand," Sestak said.
Podravka's shares were quoted at 290 kuna on Friday morning, or 9.94 percent below Thursday's close, in line with the plunge of all stocks in recent days.
Podravka was eyeing acquisitions in the markets where it was already present, including buying already established brands from other food producers.
"I cannot go into details at the moment, but I hope we will have fresh news in that field even before the end of the year," Sestak said.