Smurfit Kappa Deconsolidates Venezuelan Unit Following State Seizure
Published on Sep 25 2018 9:17 AM
Ireland's Smurfit Kappa will deconsolidate its Venezuelan arm following its temporary seizure by the state last month, resulting in a €60 million write-down in net assets at Europe's biggest packaging group.
Venezuelan authorities temporarily took over Smurfit's local unit in the city of Valencia in August and arrested two managers on charges of price speculation, boycotting, destabilising the economy and smuggling.
Smurfit, which operates in 35 countries in the Americas and Europe, said it had since become impossible for it to manage its affairs in Venezuela in a way that complies with normal business standards, and it was no longer able to exercise control of the business.
"Since the notification of the occupation order, the company has been subject to government interference, including through the arbitrary harassment of its employees through unauthorised visits, which have the effect of intimidating the workforce, resulting in increasing absenteeism," it said in a statement.
"In light of these circumstances, and in order to protect the interests of its stakeholders and mitigate operating risks, SKG has notified the government that full responsibility for the company's operations has passed to the Venezuelan state."
Venezuela's Information Ministry did not immediately reply to a request for comment.
Smurfit, a designer and manufacturer of packaging for the likes of Unilever, Nestle and Procter & Gamble, said it reserved the right to initiate international arbitration proceedings to protect the interests of its stakeholders and seek compensation for Venezuela's unlawful measures.
Its Venezuelan unit represented less than 1% of the group's €724 million of core earnings in the first six months of 2018 and just over 2% of its net assets, down from 15% five years ago.
Smurfit has operated in Venezuela since 1986 with a staff of almost 1,600 employees, it said.