Raisio to drop Russian potato operation

By Anthony Fletcher

- Last updated on GMT

Related tags Investment

Raisio plans to divest its food potato business in Vihanti and
negotiate a withdrawal from its Russian flake mill project.

"This deal is in line with the company's targets,"​ said the Finnish firm in a statement.

The company said that while income from its food potato business has a minor, but positive, impact on the company's results, the company's overall target was to clarify the organisation structure and enhance operations.

Furthermore, the withdrawal from the construction of a flake mill in Burunduk, Russia comes after an assessment of foreign investment projects started in December 2006.

"The evaluation of solidity of assets and investment projects initiated by the new management in December 2006 is now completed by these measures,"​ said Raisio's CEO Matti Rihko.

"Raisio has taken the first steps in focusing its business portfolio with decisions concerning diagnostics and potato businesses but the streamlining of the company will continue. Raisio's main target for 2007 is to improve profitability."

To cover the probable risks related to changes made to the project agreements, the company will include a write-down of approximately €5.8 million in the financial statements for 2006.

Raisio said that it would continue to sell and market flake products in Russia.

In November, Raisio reported a set of Q3 results that showed the companys operating result back in the black. The Finnish group's turnover for the quarter was on a par with the prior year period (€113.8m compared to €110.7m) - but the operating profit slipped from €3.8m last year to €2.1 this year.

The company's decision to execute a preliminary agreement on selling the Vihanti operation is therefore part of a larger restructuring effort in order to improve performance and rationalise operations. Such initiatives are targeted at annual cost savings of €9m, the firm said in November.

The transaction will be completed in the first half of 2007. The buyer has announced it will continue production in Vihanti.

The Vihanti-based potato product plant had a turnover of some €16 million in 2006 and employs approximately 50 people. The plant uses annually nearly 50 million kilos of Finnish potato acquired from contract farmers.

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