Danone, a leading player in the food and beverage industry, has asserted its legal ownership over assets seized by Russia two weeks ago, amidst ongoing challenges in the country’s food manufacturing sector.
The Kremlin recently placed Danone Russia under the temporary management of government property agency Rosimushchestvo, a move that has raised concerns in the industry.
Moscow further appointed Yakub Zakriev, a Chechen minister for agriculture, to lead Danone’s Russian subsidiary, causing further uncertainty.
In response to these developments, Danone clarifies that while it no longer has control over the management of its Essential Dairy and Plant-Based (EDP) division in Russia, it remains the legal owner of these assets.
The company expresses its commitment to investigating the implications of the Russian authorities’ decisions and ensuring the ongoing operations of its EDP division in Russia while prioritizing people’s safety.
This situation has led to a cash impairment of approximately €200m ($221.5m) for Danone, and the company will “deconsolidate” the affected assets.
Additionally, Danone has booked a non-cash RUB/EUR FX translation difference of around €500m, which does not impact the group’s total equity.
As a result, the company will exclude any results from the EDP business in Russia from its second-half underlying performance.
CEO Antoine de Saint-Affrique emphasizes the company’s focus on people’s safety and maintaining operational continuity during this sensitive situation.
Danone had previously announced its decision to exit its dairy and plant-based business in Russia, with this development expected to result in a potential impact of up to €1bn.
Despite the challenges faced in the Russian market, Danone’s group net sales for the first six months of 2022 increased by 6.3% to €14.18bn, driven by strong like-for-like sales growth of 8.4%.
The company reported a 9.4% rise in prices, offset by a 1.1% decline in volume/mix.
Danone’s recurring net income grew by 7.8% to €1.05bn, while reported net income reached €1.09bn, representing a significant increase of 48.2%.
Looking ahead, Danone remains cautious but hopeful about its performance, stating that any material changes will likely be attributed to minor currency-related variations in the second semester.
Despite recent challenges, Danone continues to adapt and innovate in response to evolving trends and consumer demands in the food and beverage industry. The company remains committed to sustainability, complying with regulations, ensuring safe packaging, and leveraging effective marketing strategies to cater to changing consumer preferences. The ongoing pursuit of these goals sets Danone apart as a leading player in the industry.
