In connection with the war in Ukraine, CDRL decided to suspend the supply of goods to the Russian subsidiary CDRL RUS, as well as to discontinue further investments in Russia and in a subsidiary in Belarus, the company said. CDRL believes that the sanctions imposed on Belarus may have a negative impact on the operations of the subsidiary DPM, and, as a result, on the Group’s consolidated financial results in future periods.
CDRL operates in Belarus through its subsidiary DPM spółka z o.o. with its seat in Minsk, in which it holds 74.9% of shares. The value of these shares is PLN 19 million at the end of 2021.
As at the date of publication of this report, the issuer has a receivable from DPM for the supply of goods in the amount of USD 2.3 million. DPM is a party to lease contracts classified under IFRS 16 as assets in the amount of approximately PLN 54 million as at December 31, 2021. according to the issuer’s opinion, participation of Belarus in the armed conflict in Ukraine, as well as sanctions imposed on Belarus, may have a negative impact on the activities of DPM and consequently, on the Group’s consolidated financial results in future periods, according to the companies report.
CDRL informed that from the point of view of the Group’s reporting, the occurrence of negative exchange rate differences resulting from the instability of the Belarusian currency exchange rate is very important, which causes significant and unpredictable differences in the achieved financial results, unjustified from the point of view of the actual effects of the conducted operations.
If these trends persist in the long term, as well as the further negative effects of the sanctions imposed on the Belarusian economy, this may result in the reduction or loss of DPM’s financial liquidity, and consequently on the collection of the issuer’s receivables, the company stated.
Currently, the sale of goods in Belarus takes place in the normal course, and the decrease in sales per year is lower by approx. 8-10%, which in the current situation – as the company indicates – is not an extraordinary decrease. However, a further decline or stop in sales in the future cannot be ruled out.
CDRL decided to discontinue further investments in a subsidiary in Belarus. Sales to DPM accounted for 5.8% of total sales in 2021.
The impact of revenues from the sale of goods on the Belarusian market on the Group’s financial result is, however, about 9% as at the date of the last financial statement and is significantly lower than it results from the share of this amount in the total revenues of the Group, ie about 36%, it was stated.
CDRL also announced that it has a subsidiary CDRL RUS in Russia. The total amount due to CDRL RUS is currently 162.6 million rubles and 58.9 thousand. USD for the supply of goods and 350 thousand. USD under the loan granted. In the company’s opinion, Russia’s aggression against Ukraine, as well as the sanctions imposed on Russia in connection with the ongoing conflict, may have a negative impact on the collection of the above-mentioned receivables.
Due to the ongoing armed conflict and the related sanctions imposed on Russia, the issuer decided to suspend deliveries of goods to CDRL RUS, and to discontinue further investments in Russia. The issuer’s sales to the Russian market accounted for 3.2% in total sales in 2021. Therefore, the impact of this decision on the situation of the group will be insignificant, the company stated.
In Ukraine, CDRL operates under a franchise agreement with one business partner, without having its own stores. Sales to the Ukrainian market accounted for 0.3% of the company’s total sales in 2021.
The issuer’s business plans did not envisage a significant increase in the scale of operations in Ukraine in 2022 and subsequent years. Therefore, the impact of the effects of the outbreak of the armed conflict in Ukraine on the group’s financial results should be considered insignificant, it was announced.
CDRL has receivables from a partner in Ukraine in the amount of PLN 137,000, of which USD 12,000 has been written down in previous periods. Due to the current situation, and in particular the Ukrainian partner’s inability to conduct business and the loss of the purchased goods, CDRL decided that it would not demand payment on this account and would make a write-off for the entire amount of this receivable, worth approximately 0.5 PLN million, which will have a minor impact on the financial result in Q1 2022.
CDRL does not market products that are manufactured, produced or imported from Russia or Belarus. The company also does not use materials for the production of its goods from the above-mentioned countries, therefore it does not identify the risk related to the impact of an armed conflict on the production process, as well as the sale of its goods in Poland and other European countries.
CDRL is a distributor of children’s clothing sold under its own brand Coccodrillo, which is known on four continents, including in countries such as China, Brazil and Saudi Arabia. The company debuted on the WSE main market in 2014. The CDRL Group owns its own brands Coccodrillo, Lemon Explore, Petit Bijou, Broel and the largest children’s supermarket chain in Belarus – Buslik.
Source: CDRL and ISBnews
Photo: CDRL-Coccodrillo
