Danone to liquidate Russian dairy for 1 billion euros

PARIS, Oct 14 (Reuters) – French food company Danone ( DANO.PA ) will take over its dairy business in Russia on Friday, a deal that could result in write-offs of up to 1 billion euros. ($978 million)

Joining the list of international companies making costly exits from Russia due to the war in Ukraine, Danone will cut business in Russia, representing 90% of the company’s business, where only the baby nutrition division will remain.

“This is the best option to ensure the long-term continuity of domestic business,” said Danone’s statement, adding that the Russian dairy unit accounted for 5% of the group’s net sales in the first nine months of the year.

Shares in Danone rose more than 1% in early trading, as analysts welcomed news that the company was reducing its presence in Russia, which it said would herald a broader overhaul of its operations.

CEO Antoine de Saint-Africa, who took over the leadership in September last year, said the company will part with non-performing businesses as part of a restructuring plan launched this year.

“Russia is clearly an asset that should have been exited,” Pierre Tegner, an analyst at brokerage Odo BHF, said in a note.

“It’s not just because Russia has low margins and poor growth. It’s mainly because this asset has created so many distractions for senior management over the last 11 years.”

Other areas where the group is reviewing non-core activities include liquid milk and basic dairy products in Brazil, Argentina, Mexico and Morocco, as well as organic milk in the United States, baby food in France and Italy and small water operations in Spain and Poland.

The French company is the world’s largest yogurt producer and controls the Russian dairy brand Prostokvashino.

In March, Danone said it would continue to produce essential milk and baby food products in Russia, but cut ties with the country because of the war in Ukraine.

The company said at the time that it had ended all investments in Russia and would not take any money, profit or loss from its business there.

Danone did not say who the Essential Dairy and Plant (EDP) unit would be transferred to, but said the transaction would result in a divestiture and divestiture of the business.

($1 = 1.0224 EUR)

Reporting by Tasilo Hamel, Silvia Aloysi and Richa Naidu Editing by David Goodman

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