Dental and personal care products group Braun Oral B wrote off €176.52 million from the books of its main Irish unit in the weeks after its parent, Gillette, merged in 2005 with Procter & Gamble (P&G), the US consumer products giant.
Recent filings by Braun Oral B Ireland Ltd show that the writedown contributed to a loss of €134.56 million on the bottom line in 2005 of a business which then employed 890 in Carlow and Newbridge, Co Kildare.
This followed P&G's $57 billion (€44.12 billion) merger with Gillette, which brought the owner of the eponymous razor-blade brand and Duracell batteries into the same stable as Head & Shoulders and Pringles.
New accounts for Braun Oral B's Irish unit indicate that its business and intergroup pricing models were changed immediately after the two groups were combined. "As a result, an impairment review of goodwill was carried out in order to assess the impact of this change, resulting in a writedown of the goodwill balance of €176,520,280," the accounts say.
Company finance director Brian Rice declined to comment when questioned yesterday about the writedown. But the accounts show that the process led to a €28.13 million deficit in shareholders' funds at the start of last year. This was rectified by a €112.2 million capital contribution last September from Braun Oral B's immediate parent, Gillette Group (Europe) Holdings.
Such money was used to restore the balance sheet to a positive net asset position and repay existing loans to group companies, the accounts indicate.
Around the same time, Braun Oral B declared that it planned to make 157 staff redundant from its Carlow plant this year due to the the transfer of a dental floss production line to Mexico.
Braun Oral B once employed almost 1,500 staff at its Irish manufacturing business, which was established in 1974. Excluding the redundancies, the directors say in a note with the accounts that they expect the general level of activity in the business to continue for the foreseeable future.
"The key risks facing Braun Oral B Ireland Ltd concern the cost of inputs and the fact that manufacturing options are available in countries with increasing technical capabilities and much lower cost base. The company also needs to maintain focus on reducing fixed overhead cost base," the directors' note says.
Turnover at the Irish unit rose to €161.2 million in 2005 from €144.12 million a year earlier. With gross profit rising to €102.56 million from €94.2 million, the goodwill writedown was the prime factor in the firm's losses.
P&G said in the last update that the operating environment for its global business was better than it had been in the past two years. "For fiscal year 2007, we continue to expect raw material and energy costs to be up versus fiscal year 2006. At current levels, the amount of the increase should be smaller than what we have been seeing over the past two years," it said in October.
