Danone suffers €1bn damage from exit from Russian dairy unit

Danone will seek a buyer for the Russian operations of its dairy and crops division, and a sale could result in a write-down of up to 1 billion euros ($978 million), the French food giant said.

The company, which owns the country’s leading dairy brand, Prostokvashino, accounted for about 5% of Danone’s sales in the first nine months of the year.

The company suspended investments in Russia after Moscow invaded Ukraine in February, but is now taking a more decisive step with the war in its eighth month. While many Western multinationals have pulled out of Russia, food companies have maintained some operations there, arguing they have a moral imperative to feed the people. Nestle continues to import products like baby formula into the country and British rival Unilever still has factories in Russia after pledged to continue selling key products.

Danone shares rose as much as 1.4% on Friday morning in Paris amid a rally in European stock markets.

The entity Danone wants to sell is Russia’s largest dairy company with 12 production sites and 8,000 employees. The French company entered the Russian market three decades ago and expanded its position with the acquisition of Unimilk in 2010. However, the business has underperformed, according to Bernstein analyst Bruno Monteyne.

“The business was very complex to operate given all the restrictions,” he said. “At the same time trying to improve the business is absolutely not possible.”

Selling could be complicated by the fact that Danone sells both local brands and international brands like Activia. It’s unclear if the new operator would sell Danone’s global offerings and on what terms.

Western groups leaving Russia have often sold their businesses to local management, partners or state entities. Renault, for example, sold its stake in automaker Avtovaz to Russia’s Central Research and Development Institute for Automobiles and Engines, with an option to buy it back in six years.

Danone will continue to export some specialized nutritional products to the country.

Bloomberg

https://www.independent.ie/business/farming/agri-business/danone-to-take-1-billion-hit-from-exiting-russia-dairy-unit-42066110.html Danone suffers €1bn damage from exit from Russian dairy unit

Fry Electronics Team

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