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DIA’s business indicators in 2021 continue to fall under Milkhail Fridman’s leadership

DIA’s business indicators in 2021 continue to fall under Milkhail Fridman’s leadership

This month there have been new historical lows in the price of DIA shares , at 0.0138 euros. A price that contrasts with the other figures shown by this Spanish company whose main shareholder is a Russian oligarch Mikhail Fridman. 

As of December 31, 2020, the company had 6,169 stores around the world (Spain, Argentina, Portugal and Brazil). Of these, the majority are in Spain: 3,918 stores. However, in the last presentation of results on June 30, DIA informed the CNMV that the figure was already below 6,000 after 107 stores were closed in the last three months only.

That figure is also much lower than that of 2018, when DIA had 4,684 stores in Spain. Yet even less than 6,000 venues continue to position DIA amongst the largest companies within the distribution sector in Spain. 

According to the company’s inner data, its network of own stores accounts for 65% of its net income, compared to 32% brought in by its franchises, and 2.5% that it obtains through internet sales.

As for the business geography, Spain is the most important market for DIA with 2,089.7 million euros in turnover ahead of Argentina with 426 million;  Brazil with 381.7 million; and Portugal with 296.3 million.

And according to the latest reports, in all these countries the turnover has dropped compared to the first half of 2020. Specifically in Spain the drop has been 7.7%.

Meanwhile, Mikhail Fridman completes DIA’s second capital increase which leaves him in control of 77.7% of DIA's capital. DIA’s net debt at the end of the first semester stood at 1,370.4 million euros, and thanks to the recapitalization it has subsequently decreased to 342.6 million, yet this is exactly what has brought the share price to its absolute minimum

Up to 1,082 million euros (most of it destined to cancel debt) is the amount raised in the completed capital increase and that has brought the share price to the current level.

Right now, DIA has 58,000 million shares at a nominal value of € 0.01 each. None of its shareholders is making money, and most are losing a lot. There is no short-term hope of a turnaround, the very low price of the stock leads to many adopting the wait-and-see position, rather than selling for a very small fraction of their initial investment.

In the first half of this year, the company lost 104 million euros . After the last public report on finances, DIA's own management acknowledged that the losses would continue. 

Mikhail Fridman started investing in DIA back in July 2017, when he acquired 10%, for which he paid 320 million euro – the share price at that point was up to six euros. Over 4 years he increased his share in the company almost eight times, while the share price plummeted dramatically to almost zero.

Since he arrived at DIA Supermarkets, he has been very dissatisfied with the management of the company, substituted its officers with members of his own team, and has since been trying to emulate the success of his Russian business, X5 Retail Group.

Thus, Dia, copying the Russian chain, has proximity formats such as DIA & Go. The chain also wants to maintain the quota that means that at least one DIA store must be within a 15-minute walk of 65% of the population.  

Unfortunately for Fridman, things that work well for the very specific Russian market do not seem to yield any positive results in the West. Remarkably, before investing in DIA, he was the second richest man in Russia, but he is no longer in the top ten of the latest Forbes ranking of April this year. 

There is a moderate hope that Fridman's team, which has the experience and capital behind it, will succeed in bringing the company back to life. However, the shareholders lack trust in the management, while franchisees raise their voices to oppose the new franchising business model.

Mikhail Fridman’s ongoing problem with Spanish prosecution does not help either.

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