France's Danone said on Wednesday it will book a further €200 million 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.
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.
Read More: Moscow Takes Control Of Russian Subsidiary Of Danone And Carlsberg's Stake In Brewer
Possible Write-Off
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.
Danone said the €200 million equity hit announced today will be recognised by 31 December and is in addition to a €487 million equity write-down it had already taken last year on its Russia business.
This brings the total impairments related to Russia to almost €700 million, Danone said.
The adjustment on the balance sheet of €500 million to reflect the negative currency transaction difference will also be recognised by 31 December it added.
Material Developments
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.
Better-Than-Expected Increase
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 Nestlé 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.
Read More: Danone Raises Sales Outlook As Shoppers Absorb Price Hikes
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