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Spanish DIA announces loss, layoffs in midst of takeover bid

Spanish DIA announces loss, layoffs in midst of takeover bid

Dia announces falling revenue, net loss in 2018. Discount store plans to lay off around 5 pct of workforce. Plans rights issue by mid-April to restore balance sheet. Says investigating possible irregularities leading to writedown

Jose Elías Rodríguez and Andrés González

Struggling Spanish supermarket chain DIA was under pressure to take action to restore its balance sheet after it announced on Friday falling revenue and a net loss for 2018, saying it would lay off thousands of staff.

The chain also said it had hired investigators to look in to possible accounting irregularities in Spain and Brazil which led to an asset writedown with an impact on equity of around 70 million euros against 2017 earnings announced last year.

DIA is planning a 600-million-euro rights issue, which CFO Enrique Weickert said on Friday it aimed to finalise before reporting first quarter earnings around mid-April.

The company has been steadily losing market share in Spain, where its low-cost model flourished during a painful recession. It is now finding it hard to keep up with competitors including Germany discounters Aldi and Lidl, and domestic rival Mercadona.

It has also received a takeover bid.

The company declined to comment on Friday on the bid by its largest shareholder, Russian tycoon Mikhail Fridman, who currently holds just under 30 percent of the company through his LetterOne (L1) investment company. On Tuesday, L1 offered to buy the whole group, valuing it at more than 400 million euros ($453 million).

On Friday, the company’s market value stood at just over 450 million euros.

After the L1 bid, DIA said its creditors had indicated support for extending financing until 2023, provided it went ahead with a rights issue to restore its net equity position which was negative to the tune of 166 million euros end 2018.

However, Fridman said on Tuesday that its takeover bid was dependent on the rights issue not going ahead, and added that if its offer was successful, it would raise some 500 million euro through its own capital hike.

DIA has said it would explore L1’s bid, but has noted that it was concerned over the feasibility and timing of the refinancing strategy.

In the meantime, the store group said 2,100 workers or around 5 percent of its total workforce would lose their jobs.

DIA’s core profit fell 25.6 percent in 2018 to 385.4 million euros, in line with guidance of between 350 and 400 million euros which did not include the impact of inflation in Argentina.

The company gave the guidance figure in October after issuing three profit warnings in 12 months.

Dia posted a net loss of 352.6 million euros in 2018, compared to a profit of 101.2 million euros a year earlier, and said sales were 7.3 billion euros for the full year, down from 8.2 billion euros in 2017.

Dia shares, prone to volatility after an almost 85 percent drop in the last year, slipped 0.28 percent broadly in line with the overall market.

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