Parmalat would consider Australian market exit if fails in Dairy Farmers bid

MILAN, Jul 31, 2008 (Thomson Financial via COMTEX) -- PMLAY | Quote | Chart | News | PowerRating -- Parmalat SpA would consider exiting the Australian dairy market if it fails in its joint bid with Murray Goulburn Cooperative Co Ltd to acquire Australian Co-Operative Foods Ltd (Dairy Farmers), said Parmalat officials in a conference call with analysts.

Parmalat and Murray Goulburn's bid for Dairy Farmers faces queries from the Australian antitrust authority as well as competition from other bidders in market consolidation efforts.

"We are working on the Australian project (to buy Dairy Farmers). Depending on this situation we will to re-evaluate" the position, said an official.

"There is consolidation in the Australian market", and if Parmalat does not win Dairy Farmers "we will remain third or fourth in the market and would have to evaluate the situation", he said.

"An exit is a serious alternative," he said.

Analysts have said that Parmalat has until August 21 to respond to the antitrust queries. Some analysts say Parmalat currently does not have sufficient scale in the Australian market.

In wider comments on expansion, CEO Enrico Bondi said the company reiterates its policy of first trying to deploy its hefty cash resources on dairy sector consolidation and expansion.

"This company is very young and started getting cash six months ago. For a reasonable programme of expansion you need two years. We are working to finalise this programme," he said.

If the company is unable to spend the cash, mainly obtained from various legal settlements over its December 2003 collapse, it will consider returning the money to shareholders, he said.

Bondi was responding to a question from an analyst who said Parmalat has a 900 million euro cash balance, representing about half its market capitalisation, and could also add debt.

In other comments, company officials said negotiations are continuing with Unicredit SpA on a settlement of Parmalat's claim against the bank.

Last week, both companies confirmed the talks after reports that Unicredit is close to a settlement in which Unicredit would pay 300 million euros.

On Parmalat's $2.2 billion claim against Citigroup, officials reiterated they see a verdict in the ongoing New Jersey trial in October.

Parmalat's full year legal expenses may go "a little higher" than the 54 million euros budgeted by the company, one official said.

On raw milk prices, officials said in Italy, the company has recently agreed fixed term contracts with farmer to end-2008 at 40.2 cents per kilo, against the 41 cents agreed by a major competitor.

European spot milk prices have fallen to 31 cents in Germany and Austria, against 45 cents a year ago, they said.

In Canada, Parmalat sees a 3 to 4 percent price increase in milk for making cheese and yogurt products from September, with the company able to pass this onto its customers, they said. nigel.tutt@thomsonreuters.com nt/rw

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