Auchan reports profit drop on French price war, ruble fall

AFPAugust 29, 2014
A woman looks at information on products as she buys groceries in an Auchan supermarket, a branch of the French international retail group Auchan, on June 27, 2014, in a Faches-Thumesnil shopping center, northern France
A woman looks at information on products as she buys groceries in an Auchan supermarket, a branch of the French international retail group Auchan, on June 27, 2014, in a Faches-Thumesnil shopping center, northern France (AFP Photo/Philippe Huguen)

Paris (AFP) - Supermarket giant Auchan said on Friday that a price war in France and the currency effect of conflict in east Ukraine had pushed net profit down 11.5 percent in the first half.

In spite of damage to sales figures arising from fighting between Ukrainian troops and pro-Russia rebels, Auchan said its overall sales had held up because of international performance.

"The Group's performance was significantly impacted by foreign currency effects, notably in Russia and Ukraine," said chairman Vianney Mulliez.

Auchan joins Danish brewer Carlsberg and British firm Imperial Tobacco in partly attributing weak performances to an increasingly economically damaging standoff between Russia and the West over Ukraine.

Auchan said it was being vigilant but was not unduly worried regarding the effect of retaliatory sanctions by Russia against European food products.

The company said that activity in its stores in Russia was not much affected and sales were doing well, although there were some difficulties over supplies, notably of Norwegian salmon.

But in Ukraine, where Auchan has 11 supermarkets, and where business had been good, the situation had turned "delicate".

In the first six months of the year, net group profit fell to 272 million euros ($359 million).

This was offset partly by the group's expansion into Eastern Europe and China.

Global sales rose by 4.7 percent to 31.2 billion euros, boosted by a strong performance in eastern and central Europe and in Asia.

The group said it had made "good progress in emerging countries which offset the negative trends in the eurozone".

But Auchan said that crisis over Ukraine and Russia, countries in which the currencies have fallen heavily, had an unfavourable exchange rate effect on the figures.

Sales in France, the group's main market, fell by 1.9 percent from the equivalent level last year.

Auchan did not forecast figures for the full year but said it did not expect the economic climate, notably in the eurozone, to improve.

"During the first half of the year we saw sustained growth in Eastern Europe and Asia," Mulliez said in a statement, adding that the group had taken action to counter performance problems in France and Italy.

"This will help to improve our profitability over the coming periods and enable the Group to look to the future with confidence," he added.