Danone to transfer control of Russian dairy business at a biting cost
Danone has announced today it is to initiate a process to transfer the effective control of its Essential Dairy and Plant-based (EDP) business in Russia.
Danone considers that this is the best option to ensure long-term local business continuity, for its employees, consumers and partners,
it said.
Joining the lengthening list of global companies making costly exits from Russia over the war in Ukraine, Danone will be offloading a business that represents about 90% of the company's operations in Russia, where only its infant nutrition unit will be retained.
Over the first nine months of 2022, the EDP Russia business represented around 5% of Danone net sales and had a dilutive contribution to Danone’s like-for-like sales growth and recurring operating margin.
The transaction could result in a write-off of up to €1 billion,
the company estimated.
The company said at the time that it had ended all investments in Russia and would not take any cash, dividends or profits from its business there.
"Russia is clearly an asset they had to exit from," Pierre Tegner, analyst at broker Oddo BHF, said in a note.
"It is not only because Russia is a low-margin business with poor growth. It is mainly because this asset has generated a lot of distraction over the last 11 years for top management."
Danone did not disclose to whom its EDP division would be transferred but said that once closed, the transaction, which will be subject to regulatory approvals, "will result in the deconsolidation of Danone’s EDP Russia business."
Cover photo: Wikimedia Commons
