December 13, 2018 / 7:13 AM / in a month

Russia still a headache for Germany's Metro

BERLIN (Reuters) - Shares in German wholesaler Metro (B4B.DE) tumbled on Thursday after it said its struggling Russian business would weigh on profits again in the 2018/19 financial year.

FILE PHOTO: The logo of German retailer Metro is seen at its cash and carry store in Kiev, Ukraine, August 17, 2016. REUTERS/Valentyn Ogirenko

Metro has been restructuring its Russian business since poor performance at the unit forced it to issue a profit warning in April, hitting its shares.

Metro said it expects to see a “measurable trend improvement” in sales in Russia in 2018/19, but still forecasts a “mid- to high-single digit percentage” fall in EBITDA, although the unit is profitable.

Once a sprawling retail conglomerate, Metro has been restructuring in recent years to focus on its core cash-and-carry business, selling its Kaufhof department stores and then splitting from consumer electronics group Ceconomy (CECG.DE).

Analysts have speculated that the revamp could go further since Czech investor Daniel Kretinsky took a stake.

Metro said it was making progress on the sale process for its loss-making Real hypermarkets chain. A source close to the company said several potential bidders had expressed interest in the business, including financial investors and other retailers.

Germany’s Handelsblatt daily reported that Amazon (AMZN.O) might be interested in some Real stores, while rival hypermarket chain Kaufland, part of the Schwarz group that owns discounter Lidl, could also be a bidder, despite anti-trust concerns.

Metro and Amazon declined to comment on the report.

Chief Executive Olaf Koch told a news conference Metro was not considering offers for just parts of Real, but wanted to sell it as a whole.

He said he hoped to complete the Real transaction within four to six months and would ensure there are no anti-trust problems. Koch said last month that a nationwide strike by Real workers should not derail the sale.

Since Amazon’s acquisition of U.S. chain Whole Foods last year there has been speculation that it could be interested in food retailers in Europe, with shares of British supermarket Morrison boosted by takeover speculation earlier this week.

However, Metro’s shares, which have fallen by a quarter in the last year, were down 6.9 percent at 12.45 euros by 1044 GMT.

Metro said it expects sales to rise 1-3 percent in 2018/19, while earnings before interest, taxation, depreciation and amortization (EBITDA), excluding contributions from real estate transactions, could fall by around 2-6 percent.

Metro booked Real as a discontinued business as of Sept. 30 - the end of its 2017/18 financial year - and impaired goodwill of 64 million euros ($73 million) attributed to Real.

Reporting by Emma Thomasson and Matthias Inverardi; Editing by Susan Fenton and Elaine Hardcastle

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