Danone today (26 July) asserted its legal ownership over the assets seized by Russia a fortnight ago.
On 16 July, the Kremlin said it had placed Danone Russia under the “temporary management” of government property agency Rosimushchestvo.
Last Wednesday, it was reported Moscow had appointed Yakub Zakriev, a Chechen minister for agriculture, to lead Danone’s Russian subsidiary.
In a statement today alongside the publication of Danone’s annual results, the French giant addressed the seizure of the assets, which it underlined centre on its Essential Dairy and Plant-Based (EDP) division.
“On July 18, 2023, the Russian authorities indicated that the board of directors and CEO of Danone Russia (EDP) had been changed. These changes took place without the knowledge of, or approval by, Danone. While Danone no longer retains control of the management of its EDP operations in Russia, it remains their legal owner,” the company said.
“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. Danone will continue to provide information on material developments related to the situation of its EDP operations in Russia and keeps investigating how to protect its assets and its rights as shareholder, with a first priority to ensure people safety.”
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The group said it would “deconsolidate” the assets, sparking a cash impairment of around €200m ($221.5m).
Danone also booked a “non-cash RUB / EUR FX translation difference of approximately €500m”, which the company said “has no impact on [the] group’s total equity”.
Its second-half underlying performance will exclude any results from the EDP business in Russia.
Speaking to analysts after Danone published its results, CEO Antoine de Saint-Affrique said: “Given the sensitivity of the situation, I hope you will understand there is not much we can say at this stage other than the fact that we remain focused on people’s safety and on continuity of operations.”
Asked if there would be further impairment charges, CFO Juergen Esser added: “I think it’s fair to say that we do not expect a material change on that. Yet we are looking into the second semester that there could be some currency-related minor variations but that should be basically it.”
Danone announced in October last year that it would shed its dairy and plant-based business in Russia.
Danone Russia is the country’s largest dairy company and has around 8,000 employees. The company has previously indicated the sale of its business would result in a hit of up to €1bn.
EDP forms the majority (90%) of its Russian activities, the rest being what Danone calls specialised nutrition.
In the wake of the invasion of Ukraine, Danone halted its investment in Russia in response to the invasion of Ukraine but maintained its manufacturing and distribution of products “to still meet the essential food needs of the local population”.
Earlier this month, Danone announced it would rename its Activia dairy brand in Russia to AktiBio in what the French giant described as a “localisation” move.
In the first six months of 2022, Danone’s group net sales rose 6.3% to €14.18bn. Like-for-like sales increased 8.4%.
The like-for-like growth was higher than analysts were expecting. Danone reported a 9.4% rise in prices and a 1.1% fall in “volume/mix”.
“Recurring” net income grew 7.8% to €1.05bn. Reported net income was 48.2% higher at €1.09bn.
Shares in Danone were down 2.78% at €55.18 at 11:25 CEST.