Months After Takeover, European Supermarket Giant Dia Discloses Huge Losses, Plunging Revenues, Soaring Debt

Russian billionaire rues the day he bought it. “We should have been more cautious and done our due diligence better.”

Dia, once one of Europe’s largest supermarket chains but now struggling with cascading losses and a near-bankruptcy experience, has just disclosed its results for the first three quarters of 2019. The firm racked up even more losses (€504 million) in the first nine months of this year than it did in the whole of last year (€365 million), when it was rocked by accusations that its executives, with the complicity of its auditor, KPMG, had engaged in accounting fraud to conceal the true extent of the firm’s losses.

Luxembourg-based investment fund LetterOne (L1) took over the supermarket group in the summer with the purchase of 70% of the group’s shares. L1 is owned by Russian billionaire corporate raider Mikhail Fridman who had made his fortune in oil, retail and banking during Russia’s chaotic transition to a free market economy in the 1990s and who was listed by Forbes this year as London’s richest resident.

In the first nine months of this year the supermarket chain’s EBITDA (earnings before interest, tax, depreciation and amortization) plunged 80% from a year ago, to €48.3 million. Sales dropped 7.4% to €5.1 billion and its total net debt soared by €1.1 billion, from €1.5 billion at the end of 2018, to to €2.6 billion in Q3 2019.

Dia’s main creditors include not only big Spanish lenders like Santander, BBVA, CaixaBank and Banco Sabadell and European heavyweights like Barclays, Société Générale, and Deutsche Bank, but also the ECB which as of last year held at least €200 million worth of Dia’s bonds, although it may have since sold them at a multi-million euro loss.

Continue reading the article on Wolf Street

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