Mumbai, April 30: The Adidas group today said it might have to restate its prior year consolidated financial statements after uncovering commercial irregularities at its Reebok India operations, which were not immediately quantified.
The German sporting giant said the "estimated maximum negative impact (arising from these irregularities) could be up to a pre-tax amount of 125 million euros (roughly Rs 870 crore)".
"Because of the sensitivity of the ongoing investigation, specific details will be disclosed as appropriate in due course," the Adidas group said in a statement that accompanied its preliminary first-quarter results.
"As these irregularities have been deemed to have occurred prior to the 2012 financial year, the Adidas group might have to restate prior-year consolidated financial statements."
Late last month, Adidas had replaced its top officials at the Indian subsidiary with a new slate of executives headed by Claus Heckerott.
The company said the new leadership team had drawn up plans for an accelerated restructuring of its business activities in India, which could lead to an additional one-time charge of 70 million euros that would be spread over the remaining quarters of 2012.
"The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific under-performing part of our business," CEO Herbert Hainer said.
Adidas had acquired Reebok in August 2005 in a $3.8-billion deal to take the battle to Nike.
The troubles at Reebok India led to the sudden exit of Adidas India managing director Subhinder Singh Prem on March 26 for which no explanations were given. Prem was appointed as the MD of the company last year. Before that, he was the Reebok India managing director and had been associated with that brand for over 15 years. Vishnu Bhagat also resigned from the position of chief operating officer at Adidas India.
While Heckerott was appointed as Prem's replacement, the company also named Frederic Serrant as the sales director with effect from April 1.
Adidas said its group revenues in the first quarter rose 14 per cent on a currency-neutral basis, or 17 per cent in euro terms, to 3.8 billion euros.
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