Danone writes down Russia assets

Beats on like-for-like sales
calendar icon 27 July 2023
clock icon 2 minute read

France's Danone said on Wednesday it will book a further 200-million-euro write down on its Russia business after it was effectively taken over by the state, taking the overall write down on its Russian operations to around 700 million euros, reported Reuters.

The company also took a 500 million "adjustment" on its balance sheet due to the depreciation of the rouble against the euro.

The Russian state this month took control of Danone's Essential Dairy and Plant-based (EDP) subsidiary, along with beer company Carlsberg's stake in a local brewer.

"Danone will continue to investigate the situation to understand the implications of the decisions of the Russian authorities on the ongoing EDP operations of Danone in Russia, as well as on the ongoing sale process," the maker of Activia yoghurt, Evian water and Aptamil infant milk said in a statement.

The company said last October it was seeking a buyer for its dairy food business in Russia, in a deal that could lead to a write-off of up to 1 billion euros ($1.1 billion).

Danone said the 200-million-euro equity hit announced today will be recognized by Dec. 31 and is in addition to a 487 million euro equity writedown it had already taken last year on its Russia business.

This brings the total impairments related to Russia to almost 700 million euros, Danone said.

The adjustment on the balance sheet of 500 million euros to reflect the negative currency transaction difference will also be recognized by Dec. 31, it added.

Danone will continue to provide information on material developments related to the situation around its EDP operations in Russia, the company said. It will keep investigating how to protect its assets and its rights as a shareholder, with a first priority of ensuring its people's safety, it added.

The company said the rouble-to-euro forex difference would have "no impact on the Group’s total equity."

Shares in Danone were down about 3% at 0814 GMT on Wednesday.

"I'm still digesting the news, to be honest," Richard Saldanha, a portfolio manager at Danone investor Aviva, said.

Danone also reported a better-than-expected rise in quarterly like-for-like sales, as it increased prices again to make up for rising costs.

Like-for-like sales rose 6.4% in the second quarter, beating expectations for 5.6% growth in a company-compiled consensus of 18 analysts.

The world's largest yoghurt-maker is one of several major consumer goods companies - from Nestle to P&G - who have in the past two years struggled to manage high input costs.

Their problems began with the COVID-19 pandemic and unusual weather patterns hurting agricultural commodities, and have worsened since Russia's invasion of Ukraine.

($1 = 0.9047 euros)

© 2000 - 2023 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.