Polish Meat Firms Consolidate On Russia Effect
FarmFood , Sokolow , Jaroslaw and Miestar, in all of which the Federation of Swedish Farmers (LRF) hold large stakes, agreed to a merger that will create the country's largest meat producer with a 20 percent market share.
"The situation on the meat market is still difficult and so the merger plans are a form of self-defence," said Ewa Radkowska, analyst at ING BSK Asset Management in Warsaw.
After a sharp devaluation of the rouble last year, many businesses collapsed along with the buying power of the Russian currency and meat companies, unable to sell often low quality products to the west, saw a steep decline in earnings.
Sokolow, which under the merger terms will issue new shares to shareholders of the three meat firms, reported a 6.3 million zloty ($1.47 million) net loss for the first nine months of the year against a 5.3 million profit in the same period of 1998.
The firms said the current difficult situation on the meat market forced them to optimise production costs and distribution of products, which was previously carried out separately.
"At the initial stage of consolidation, the costs might be high to work out a strategy that would eliminate internal competition," said Bogna Sikorska, analyst at Pekao brokerage.
The companies said they would officially register the merger three months after Poland's Securities Commission approves the issue of Sokolow new shares. The merger plans are expected to be finalised by the end of June 2000.
RUSSIAN CRISIS CAUSES DOMESTIC PRICE WAR
The Russian meltdown, which caused Poland's current account deficit to balloon to an expected seven percent of GDP this year from above four percent in 1998, also affected non-exporters as surplus products flooded local markets, pushing down prices.
Poland's presently largest meat producer Animex , controlled by U.S. Smithfield Foods , saw a net profit plummeting to 2.3 million in the first three quarters of the year from 16.2 million in the same period last year.
"FarmFood and Sokolow have always been regarded the best meat processing companies and now after the merger they will likely to be much ahead of their main competitors," ING BSK's Radkowska added.
"The situation on the meat market is still difficult and so the merger plans are a form of self-defence," said Ewa Radkowska, analyst at ING BSK Asset Management in Warsaw.
After a sharp devaluation of the rouble last year, many businesses collapsed along with the buying power of the Russian currency and meat companies, unable to sell often low quality products to the west, saw a steep decline in earnings.
Sokolow, which under the merger terms will issue new shares to shareholders of the three meat firms, reported a 6.3 million zloty ($1.47 million) net loss for the first nine months of the year against a 5.3 million profit in the same period of 1998.
The firms said the current difficult situation on the meat market forced them to optimise production costs and distribution of products, which was previously carried out separately.
"At the initial stage of consolidation, the costs might be high to work out a strategy that would eliminate internal competition," said Bogna Sikorska, analyst at Pekao brokerage.
The companies said they would officially register the merger three months after Poland's Securities Commission approves the issue of Sokolow new shares. The merger plans are expected to be finalised by the end of June 2000.
RUSSIAN CRISIS CAUSES DOMESTIC PRICE WAR
The Russian meltdown, which caused Poland's current account deficit to balloon to an expected seven percent of GDP this year from above four percent in 1998, also affected non-exporters as surplus products flooded local markets, pushing down prices.
Poland's presently largest meat producer Animex , controlled by U.S. Smithfield Foods , saw a net profit plummeting to 2.3 million in the first three quarters of the year from 16.2 million in the same period last year.
"FarmFood and Sokolow have always been regarded the best meat processing companies and now after the merger they will likely to be much ahead of their main competitors," ING BSK's Radkowska added.
