Flügger initiates sale of Russian and Belarusian companies
Flügger initiates sale of Russian and Belarusian companies. At the same time, expectations for the financial year 2021/22 are downgraded and the strategic target for 2023/24 is suspended.
We are shocked by the war in Ukraine and the terrible consequences that have impacted the people. We clearly dissociate ourselves from Russia's invasion of Ukraine, which is a human tragedy in every way.
On May 11, 2021, Flügger acquired 70% of Eskaro, which has factories in Estonia, Finland, Belarus, Russia, and Ukraine. The remaining 30% of Eskaro is still owned by the original founder. The best-earning market in Eskaro before the war was Ukraine, where a modern paint factory is placed. Through Eskaro, Flügger has approximately 900 employees in Russia, Belarus, and Ukraine.
After careful consideration of Flügger's future presence in Russia and Belarus, we have decided to explore the possibilities of a divestment of our companies in Russia and Belarus.
As a consequence of the above decision, the companies in question will be classified as an activity intended for sale in the consolidated financial statements. The financial assets of the companies are measured at fair value less cost of disposal, and a write-down of DKK 115 million will be executed for all the companies in Eskaro. This is based on an assessment of goodwill of DKK 76 million in Eskaro and large parts of receivables in Belarus, Russia and Ukraine have been lost.
In the first nine months of the financial year 2021/22, the companies in Russia and Belarus contributed with a turnover of approximately DKK 150 million and an operating profit of DKK -4 million.
The operations of the companies in Russia and Belarus will continue until the sale is completed, to secure our local employees and to avoid nationalization of the company.
Our thoughts are with the people of Ukraine, and we are hoping for a solution soon.
In addition to the above, Flügger has experienced declining sales to private consumers, as well as negative developments in export markets affected by the war in Ukraine, combined with continuing increase in costs of raw materials, transportation, and energy. The development has affected expectations for EBIT for the financial year 2021/22 for segments 1 and 2, where an EBIT between DKK 170-180 million is now expected against the previous expectation of DKK 200-220 million.
The expectations for segment 3 Eskaro were suspended as a result of the war in Ukraine. With the effectuated write-down of DKK 115 million, a negative EBIT in the range of DKK 120-130 million is now expected.
Revenue, including activities intended for sale, is still expected to continue in the range of DKK 2,500 - 2,600 million. The total EBIT is now expected to be in the range of DKK 40 - 60 million, including the write-down of DKK 115 million.
Flügger's strategic goal, a turnover of DKK 3.5 billion and an EBIT margin of 10% in the financial year 2023/24, will be suspended as a result of the decision to leave Russia and Belarus. Since part of the strategy was based on organic growth and acquisitions in Eastern Europe, we will use the coming period of time to reassess the strategic objective.
Inquiries related to the above may be directed to the CEO of Flügger group A/S, Sune Schnack, on telephone +45 2011 4826.
Board of Directors,
Flügger group A/S