Venezuela's currency devaluation could wipe up to E25m from underlying earnings at juice and dairy group Parmalat, which in November flagged an "outstanding" performance in the South American country.

Analysts at ICAP said that while it was tricky to gauge the impact of the move by Hugo Chavez, the Venezuelan president, Parmalat's Caracas-based business could suffer a halving in its contribution to group earnings before interest, tax, depreciation and amortisation (ebitda).

One area of uncertainty was the exchange rate which Venezuela would apply to products Parmalat ships in to Venezuela, with Mr Chavez unveiling two exchange rates – one of 2.6 bolivar to $1 for imports deemed essential and 4.3 bolivar to $1 for other goods.

"It remains unclear which exchange rate will be imposed on food imports," the London-based broker said.

The division was also carrying about $100m of debt which was believed to be denominated in dollars, and so will represent a heavier burden for a division paying back in devalued bolivars.

'Good relations' 

However, ICAP also noted Parmalat's apparently good standing with Venezuelan authorities, after repatriating liquid milk assets to Caracas some years ago.

"We believe that relations with the government remain good, although political risk can never be dismissed completely."

And it said the impact on group ebitda would be limited to at most 6%, given that the Venezuelan division was expected to contribute about 13%.

"We remain positive on Parmalat," the broker said, flagging changes in senior management, a divisional restructuring and the "redeployment" of E1.2bn of cash as potential catalysts to a rise in the Italian group's share price.

Market reaction 

Parmalat's shares dropped 5.5% over the first two days of the week in response to the devaluation, which was unveiled late on Friday and viewed as an attempt to stimulate Venezuelan exporters and pull the country out of recession.

The stock stood 0.8% higher at E11.88 in lunchtime trade in Milan.

Parmalat in November credited price rises imposed by its Venezuelan division for a 1.7% rise in group revenues in the third quarter, adding that the unit had "performed particularly well thanks to strong results by the fruit beverage and milk derivative division and the resumption of powdered milk distribution".

Friday's devaluation was the third since Mr Chavez in 2003 introduced currency controls, the previous one, in 2005, pegging the bolivar at 2.15 to $1.