Adidas warns of irregularities in Indian business
Adidas Group on Monday announced 38% growth in net profit to €289 million ($382 million) in the January-March quarter and raised outlook for the full year, even as commercial “irregularities” were discovered at its Reebok unit in India.business Updated: May 01, 2012 00:01 IST
Adidas Group on Monday announced 38% growth in net profit to €289 million ($382 million) in the January-March quarter and raised outlook for the full year, even as commercial “irregularities” were discovered at its Reebok unit in India.
In a preliminary statement, Adidas Group said commercial irregularities discovered at its Reebok India Company unit are likely to cost it an estimated €125 million in pre-tax charge.
The company said the group might have to restate its financial statements from last year.
“As these irregularities have been deemed to have occurred prior to the 2012 financial year, the Adidas Group might have to restate prior-year consolidated financial statements in line with the requirements of IAS 8,” Adidas said.
“... commercial irregularities discovered at Reebok India Company, in India, will likely affect the consolidated financial statements of the Adidas Group. The currently estimated maximum negative impact could be up to a pre-tax amount of €125 million,” Germany-based Adidas said in a statement.
The company, however, did not give any further detail of irregularities at Reebok India Company.
“Management assures its stakeholders that it has, and will continue to, vigorously pursue a course of action to protect the group’s interests, which has already resulted in the appointment of a new local leadership team in India at the end of March,” Adidas said.
Under the new leadership team, Adidas is planning an accelerated restructuring of its business activities in India, including significant changes to its commercial business practices. This could lead to additional one-time charges in the remaining quarters of 2012 in an estimated amount of up to €70 million euros.
The sportswear maker said that due to the sensitivity of the ongoing investigation in India specific details will be disclosed as appropriate in due course. The company would release its final earning report on Thursday.