War in Ukraine proves very costly for Metro

German food wholesaler Metro sees its losses piling up because of the Russian invasion in Ukraine. The war forced the German group to write off 200 million euros. Fortunately, the hospitality industry in Western Europe is booming again.

Western Europeans are having a drink again

The German Metro Group, including chains like Makro, thought it could breathe a sigh of relief when the coronavirus measures were lifted and the hotel and catering industry could start up again. Indeed, turnover rose again by 21.6 % to 13.8 billion euros. Physical sales increased by 13.7 %, deliveries even grew by 68.2 %. Online, meanwhile, accounts for 31 million euros, 164 % more than last year.

The strong inflation and the revival of the hospitality industry in Western Europe gave Metro the wind in its sails. In the second quarter: sales in the region rose by 47.6 %, outperforming pre-Covid levels. Double-digit growth was seen in all Western European countries, with France, Italy and Portugal topping the + 50 % mark.

… while the war rages in the East

However, the war in Ukraine is a huge cause for concern for the German group, crushing Metro’s already red profit figures. The loss in the first half of the year was 89 million euros, compared to 32 million euros in the red a year earlier. The group is active in both Ukraine and Russia and says it will remain so, but is feeling the consequences.

In Ukraine, the company mainly had to write off inventories and is – euphemistically said – facing “operational decline”, while in Russia the ruble plummeted and there are supply problems due to Western sanctions. Metro already booked more than 200 million euros in war-related costs.

For the rest of the year, Metro now expects 9 % to 15 % sales growth and a slight increase in operating profit. At least, if the war situation does not escalate further. In Russia, Metro mainly fears the consequences of the sanctions: in the second half of this year, Russian consumers may continue to keep their fingers crossed and product availability will become an increasing problem.