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ROSHEN Confectionery Corporation Statement about the Situation at its Enterprises in Russia

21 March 2014

As it was previously informed on July 29, 2013 Rosspotrebnadsor banned import of confectionery products of ROSHEN  Corporation to the Russian Federation. As of March 20, 2014 ROSHEN Corporation has not received any official statement from Russian part, which would justify the ban. Though they say the reasons are known.
Despite occurred circumstances ROSHEN Company continued developing confectionery production at ROSHEN Lipetsk Confectionary Factory.
Throughout the period of Russian enterprises business activity, ROSHEN Corporation has been investing on regular basis in the production development, setup of new production lines to develop a greater variety of products. The Corporation invested in construction of new facilities in Lipetsk oblast’, specialized on chocolate products, which would allow to increase the overall production turnover in 1.5 times.
In February 2014 one more new production line was launched and construction of new facilities have been in full swing, with a planned launch in 2014. Only for the last 4 years investments in construction reached 9 billion of Russian rubles.
As it occurred to us, a criminal action was opened against Russian enterprises of ROSHEN Corporation initiated by UNICONF Holding (Moscow, Russia). According to the Tver’ District Court decree under the civil suit as part of the above mentioned criminal action on March 14, 2014 all  bank accounts  of ROSHEN Corporation’s Russian enterprises were seized.
Cash funds on these bank accounts were intended exclusively for business activity on the territory of the Russian Federation and for investments in new factory construction. The amount of cash funds, which was seized, equals 2 800 000 000 Russian rubles.
 Due to the seize of all monetary resources of the abovementioned enterprises, ROSHEN Corporation is unable to conduct its business and production on the territory of Russia. The company is deprived the opportunity to meet the cost of raw materials, to manufacture confectionery products, which have been always of high quality, to proceed with the construction of new production facilities, pay taxes, having been the largest tax payer in the Lipetsk Oblast, Russia. Just for the previous 2013 year and the first two months of 2014 ROSHEN Russian enterprises paid taxes exceeding 1 billion Russian rubles.   
 Besides the seize of funds, on March 19th, 2014 Russian riot police officers blocked ROSHEN enterprises in Lipetsk and the Lipetsk Oblast, and representatives of Moscow Department of  the Russian Ministry of  Interior made demonstrational search at the enterprises along with the forcible withdrawal of documentation.  
At the same time a number of inspections have started at ROSHEN enterprises: inspections of Federal Tax Service, Federal Customs Service, State Labor Inspection, Federal Service for Environmental, Technological and Nuclear Supervision, also a suit has been commenced by Lipetsk Office of the Federal Antimonopoly Service.      
Having occurred in such a situation and having received no explanations, currently ROSHEN Corporation could draw the conclusion that a forcible takeover is being held at the ROSHEN enterprises, as the amount on the controversy within the civil action, does not conform with logics of Law and Economy.    
ROSHEN Corporation will use its best endeavors to unfreeze the blocked funds in order to fulfil its obligations in front of raw materials suppliers, production machinery suppliers, and also salary payment by due date to the employees of its Russian enterprises. Though, certainty in the successful reach of the objective is doubtful for the company.
By now we realize that construction of new production facilities is frozen for an indefinite term, as no one could be sure what are the next steps and what is a future of  ROSHEN Corporation Russian business entities.


 




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