Associated British Foods (ABF) has taken a GBP98 million (US$148 million) writedown on its investment in bioethanol producer Vivergo Fuels, blaming depressed oil prices and the falling euro.
Vivergo is a GBP350 million U.K.-based joint venture between ABF, BP and DuPont. ABF had originally attributed a value of GBP160 million to its stake, according to reports.
“In light of the continuing fall in crude oil and bioethanol prices, and the further weakening of the euro against sterling,” it has taken the decision to impair its investment, ABF said in a statement.
Ethanol prices have fallen by 5 percent this year, and has been exaggerated in the U.K. market due to the decline in the euro, which has fallen 3 percent against sterling.
“We currently face an extremely challenging market caused by a decline in bioethanol prices, a devaluation of the Euro and falling oil prices,” Vivergo Fuels said.
Vivergo added that its “shareholders remain fully supportive” to the business, and “believe in the importance of bioethanol as a renewable transport fuel that delivers both economic and environmental benefits.”
Credit Suisse said the “backdrop for Vivergo has deteriorated markedly”, but kept its rating on the shares at “outperform,” saying its forecast for ABF’s earnings per share remained unchanged.
“The fall in Vivergo’s cash profits are offset by the lower depreciation charge post the impairment,” Credit Suisse said in a report.
