France’s Danone said on Wednesday it will “deconsolidate” its Russia business in July, triggering a roughly £200 million (£172m) cash impairment and a non-cash foreign exchange translation difference of about £500m.
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.
Danone said the 200-million-euro equity hit announced today will be recognised by Dec. 31 and is in addition to a €487m equity writedown it had already taken last year on its Russia business.
This brings the total impairments related to Russia to almost €700m, Danone said.
The adjustment on the balance sheet of €500m to reflect the negative currency transaction difference will also be recognised by Dec. 31, it added.
Danone will continue to provide information on material developments related to the situation of its EDP operations in Russia, the company said, adding that it would keep investigating how to protect its assets and its rights as a shareholder, with a first priority to ensure its people’s safety.
The company said the ruble-to-euro forex difference would have “no impact on the Group’s total equity.”
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 per cent in the second quarter, beating expectations for 5.6 per cent 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.