The Swiss Times - Swiss News in English

Milk processor Hochdorf hopes to be rescued by an investor

The struggling milk processor Hochdorf is up for sale. Despite a return to operating profitability, a restructuring of the Bimbosan manufacturer under its own steam is off the table - the financial burdens of the past weigh too heavily.

Hochdorf now wants to broaden its approach to potential investors. Various options are being discussed, as the baby food and milk powder manufacturer announced on Tuesday. The focus is on a sale or partial sale, with the aim of keeping the operating business together. However, no decisions have yet been made.

Management and the Board of Directors will "do everything in their power to ensure that the business can continue to operate on a sustainable financial basis and that jobs can be retained". Hochdorf currently has around 333 employees. The top management is confident about the future of the company: the positive operational development confirms that the milk processor has a viable business model.

Operational progress

Hochdorf has undergone a realignment and made some tough cuts in recent years. For example, the company decided to close production in Hochdorf, Lucerne, by 2025 and to concentrate production in Sulgen in eastern Switzerland. On the other hand, however, new revenue was also to be tapped into, for example with the planned entry into the US market next year.

Hochdorf made good progress in this respect, as the company announced on Tuesday. Both turnover and operating profit for the financial year exceeded the company's own expectations, it said. At an operating level, the company returned to the profit zone with EBITDA in the high single-digit million range. In the previous year, the company had posted a loss of a good 10 million.

And the operating business is no longer burning money, but will generate a cash flow in the double-digit million range in 2023. Liquidity for ongoing operations is also secured, as Hochdorf points out.

Interest payments too high

And yet: in the foreseeable future, the management and Board of Directors see no way in which the company can shoulder its high financial burdens alone. After a further review, the conclusion was reached that even a competitive earning power would not be sufficient in any plausible scenario to carry the increasing legacy burdens from the complex financing and capital structure, Hochdorf writes. Recapitalization also proved to be virtually unfeasible.

Hochdorf has been struggling with financial problems for several years now. The company's earlier aggressive expansion course quickly proved to be a burden. Some acquisitions, such as the purchase of the long-established Swiss company Bimbosan in 2018, proved successful. However, Hochdorf has already given up other acquired subsidiaries. The baby food marketer Pharmalys, for example, whose majority shareholding Hochdorf acquired in 2016, was a burden for a long time. The company also took on high interest payments by issuing a hybrid bond in 2017.

After a difficult 2018 financial year - in which Hochdorf had to issue two warnings about a massive deterioration in results - the shareholders went on the barricades. The Board of Directors was replaced and the company sold Pharmalys again in 2019 - at a lower price. As part of a complete realignment, the company was now to focus on the infant formula business. At the same time, the management went in search of money and warned of a serious crisis.

Despite the sale of foreign subsidiaries, the closure of unprofitable plants and other restructuring measures, Hochdorf has not really got back on track financially since then. The coronavirus pandemic and cost inflation also put additional pressure on the company. Now there is still hope of finding a new investor.


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