Segezha sells European packaging business at 'market price' - Shamolin

MOSCOW. March 31 (Interfax) - Segezha Group has sold its European packaging business, Segezha Packaging, due to its inability to maintain these operations amid sanctions.

"The transaction has been made, [the assets in Europe and Turkey] have been sold," the Russian forestry group's president, Mikhail Shamolin told reporters in a conference call.

He declined to name the buyer and the price, but said the sale was a "market deal" done "at a market price."

"[The packaging facilities] were sold simply because it was physically impossible to maintain their operations because, on one hand, we could not supply paper due to the restrictions of sanctions and, on the other, these enterprises could not buy paper on the European market because paper manufacturers refused to supply it to them [...]. And customers refused to buy the product, paper bags, because the owner of the European assets is a Russian company. So maintaining their operations became impossible," Shamolin said.

The assets in question are seven paper packaging mills located in Germany, Denmark, the Netherlands, Italy, Czech Republic, Turkey and Romania that were part of Segezha Packaging. These mills have combined capacity to produce 704 million bags per year.

Segezha said in a report that an agreement to sell 100% of shares in Arka Merchants Limited and its subsidiaries - the seven Segezha Packaging mills - was signed on February 22, 2023.

"The company's management does not expect this transaction to have any significant impact on the Group's financial result," Segezha said. Arka Merchants Limited and its subsidiaries closed the year that ended on December 31, 2022 with a net profit of 384 million rubles on revenue of 13.747 billion rubles, and this was reflected in the results of the group's paper and packaging division, the company said.

Based on Segezha's results for 2022 - revenue of 106.8 billion rubles and OIBDA of 24.7 billion rubles - the foreign assets accounted for about 13% of the group's revenue and 1.5% of OIBDA. In the group's paper and packaging division, its second most important by revenue and first by OIBDA, the Segezha Packaging mills accounted for 34% and 3.4%, respectively.

Following the sale of the European mills, Segezha's paper packaging division includes only Russian mills, in Karelia, and Rostov and Moscow regions, with combined capacity to produce 878 million bags per year.

Segezha announced on Friday that it now plans to focus on investment projects related to increasing the efficiency of existing facilities, and put off global projects such as building production facilities in new countries for the more distant future.