The Activia yogurt maker reported a $767 million write off after Russia took control of local operations and appointed a new CEO.
Dive Brief:
- Danone will move forward with deconsolidating its Russia subsidiary, which was seized by authorities in July, the Activia yogurt maker reported last week in its first half of the year results.
- The deconsolidation will trigger an overall writedown of 700 million euros, or approximately $767 million, when considering the depreciation of Russia’s currency. The hit has no impact on total equity and will be reflected in the company’s second half earnings, it said.
- Russia took operational control of Danone’s Essential Dairy and Plant-based subsidiary last month, also seizing assets of beer company Carlsberg.
Dive Insight:
Russia’s takeover upended the planned sale of Danone’s Russia business, which was initially announced last October and was “progressing according to the expected schedule,” according to its first-half earnings report.
Although Danone no longer retains operational control of the subsidiary, the dairy giant said it is still moving forward with deconsolidation as it remains the company’s legal owner. It is investigating “how to protect its assets and rights as a shareholder, with a first priority to ensure people safety.”
Russia President Vladimir Putin signed a decree July 16 to transfer control of Danone’s local operations to the state property agency. Two days later, Russia’s authorities indicated to Danone that the CEO and board of directors had been changed.
“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 company said in its earnings report.
Changes in management were also made at Carlsberg’s Baltika Breweries, which was seized by Russia, and the company said it no longer “retains control of the management or operations.” Like Danone, the changes were made with the knowledge or approval of either company.
Danone said the deconsolidation process would occur in July 2023. When asked about the progress, a spokesperson for the company referred back to comments made in the earnings report.
