JEDDAH, 21 June 2006 — Saudi Dairy and Foodstuff Company (Sadafco) is restructuring itself and the process is continuing, the company’s top executive said here yesterday.
The restructuring process has made it necessary for the company to take some “unpleasant but inevitable and painful” steps including the termination and non-renewal of contracts of some employees, Sadafco’s Chief Executive Officer Antoon Van Elst told reporters on Monday night.
A statement attributed to Sadafco also says that the company has posted a net loss of SR25 million in the last financial year (up to March 2006) mainly due to a boycott of Danish products, increases in costs and high raw material prices.
The company’s sales in the first quarter of the current financial year (April-June) are down by eight percent from a year ago. The first quarter performance shows the boycott of Danish products (in the wake of the publication of blasphemous cartoons in a Danish paper) adversely impacted the company, said Van Elst, a Dutch national.
Sadafco was unfairly implicated in the boycott of Danish products, said Van Elst who assumed charge eight months ago. He has been heading the company from September 2005 and the boycott took its effect starting late January through March.
Before the boycott, the company enjoyed a “very strong” bond with its consumers. It had 47 to 50 percent of the share of the market in the milk segment, 42 percent in tomato pastes and 29 percent in ice creams. Old links between the company and a Danish partner, which used to hold a five percent capital stake, could explain why Sadafco products were hit by the boycott.
However, this relationship ended in 1987. But it must have stayed in the minds of the people, and some publications said the links still existed. “Which was untrue. It has affected our results in terms of sales and profit,” Van Elst said.
“We’re a 100 percent Saudi company. We also completely distanced ourselves from the blasphemous publications. It’s wrong. And by hurting Sadafco, brothers are hurting brothers. It’s good to experience that many consumers have understood this and are now buying their favorite Saudi brand again,” he said. Adding to the company’s problems was a rise in prices of milk powder and tomato paste, he said.
The company will be much more focused on the market and its consumers. “Sadafco is currently bleeding. Whatever measures it’s taking in the process of restructuring (including the termination of employee contracts) is to make it healthy and we hope and expect to succeed,” Van Elst said. “If we do restructuring right, our results in the second quarter will be better than the first quarter.”