The head of Segezha Group revealed the sale price of factories in Europe

Segezha Group has sold seven paper packaging plants in Europe for about €100 million, said its HEAD Mikhail Shamolin.Now her former "daughter" must repay the debt for this amount to the Segezha Pulp and Paper MillMikhail Shamolin

The amount of the transaction for the sale of Segezha Packaging, which unites seven paper packaging plants in Europe, amounted to about €100 million, Segezha Group President Mikhail Shamolin said at a briefing, RBC correspondent reports.

“The deal was made for about $1 (in euros), but with a debt of €100 million, which Segezha Packaging had left to Segezha Pulp and Paper Mill. That is, we can say that the business was sold for about €100 million, which corresponds to its assessment in the state before the [imposition of anti-Russian] sanctions,” he said.

Segezha Packaging plants, which became part of the group in 2014, are located in Germany, Denmark, the Netherlands, Italy, the Czech Republic, Turkey and Romania, their total capacity is about 700 million paper bags per year, or about 50% of the similar production of Segezha Group. The group announced the sale of the European business at the end of March, but the amount of the transaction and other details were not disclosed at that time.

According to Shamolin, the sale of factories in Europe was practically the only option to keep this business running. Due to the fact that Segezha Packaging belonged to a Russian company, since July 2022, the supply of raw materials to its plants has become impossible, he explained: the EU has banned the import of Russian timber products under the fifth sanctions package. In addition, the company could not purchase raw materials on the European market, and they refused to buy finished products - bags and other paper packaging - because of its connection with the Russian group, the top manager added.

Segezha Group considered these plants primarily as a sales channel for its paper on the European market, and not as a source of profit. She estimated the contribution of Segezha Packaging to the OIBDA (earnings before depreciation and amortization of fixed assets and intangible assets) of the entire group at €5–7 million (433–606 million rubles at the current exchange rate) per year, or about 1%. At the same time, the costs of maintaining the operating activities of European plants amounted to about 2 billion rubles. per year, said the head of the company.

However, the group will not immediately be able to receive €100 million, which its former subsidiary owes to Segezha Pulp and Paper Mill (the key asset of Segezha Group). “The debt is short-term, but we understand that the company cannot return it to us at once, taking into account zero OIBDA, so I would not expect an early return of funds,” said Vladimir Travkov, vice president for finance and investment at Segezha Group, answering a question from RBC. As Segezha Packaging's business normalizes, a repayment schedule will be determined and it will be able to repay this debt, he explained.

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Segezha Group's revenue in the first quarter of 2023 decreased by 42%, to 18.7 billion rubles, OIBDA - by 91%, to 1.1 billion rubles. As a result, the company's profitability fell from 37 to 6%. The main reasons are “structural transformation of sales markets” (the company had to completely redirect exports , which before the imposition of sanctions against RUSSIA was focused on Europe), lower product prices, as well as the strengthening of the ruble (by 15% against the DOLLAR and by 22% against yuan), according to her report. As of March 31, 2023, the group's total debt decreased by only 1% to RUB 123.2 billion, while net debt to OIBDA increased from 2.6x to 7.9x due to a decrease in estimated OIBDA over the past 12 months. But the company's net loss in January-March 2023 fell by half, to 3.76 billion rubles.