Smurfit Kappa writes down €60m of Venezuelan assets

Cardboard box-maker Smurfit Kappa has decided to deconsolidate its troubled Venezuelan operations from its balance sheet, after losing control of the unit to the local government, which will result in the writedown of its €60 million of net assets.

The move comes a month after the Caracas government decided to seize Smurfit Kappa Carton de Venezuela (SKCV) for 90 days amid complaints about prices that the company was charging for its products in an alleged abuse of its dominant market position – at a time when the country is grappling with hyperinflation.

“Since the notification of the occupation order, the company has been subject to government interference, including through the arbitrary harassment of its employees by the Directorate General of Military Counterintelligence through unauthorised visits which have had the effect of intimidating the company’s workforce, resulting in increasing absenteeism,” Smurfit Kappa said on Monday.

Arrested

Smurfit Kappa said it was using “all available means” to secure the release of two of its employees who were arrested last month by Venezuelan authorities.

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“SKCV has been providing goods and services to its customers in Venezuela for almost 65 years, giving employment today to almost 1,600 direct employees and generating more employment indirectly,” it said. “During that time, the company has operated to the highest business and ethical standards.”

Smurfit Kappa's chief executive, Tony Smurfit, said at an event in Dublin last Friday that Venezuela was "a country where populist politics have effectively destroyed businesses and the country as a whole".

“I must say that I am very proud of our management in [SKCV], who, despite atrocious conditions, have kept the show on the road for as long as they have,” he said.

Abandoned assets

A number of other multinationals, including Kellogg's, General Mills and General Motors, have abandoned assets in the country or sold them off cheaply, rather than continue to do business in the country.

Venezuela accounted for less than 1 per cent of the group’s €724 million of earnings before interest, tax, depreciation and amortisation (ebitda) in the first half, down from 2 per cent for the corresponding period last year. The value of its Venezuelan assets fell to €60 million in June from €128 million in December.