Federica Mileo, Diana Mandia

(Reuters] -French caterer and food services firm Sodexo (PA 🙂 lowered its annual growth forecast on Friday citing the Ukraine conflict, pandemic and closure of COVID-19 testing facilities it managed in the United Kingdom.

According to Compass, the world’s second largest food caterers services company behind Britain’s Compass, organic revenue growth is expected to be around 15%-18% below its prior forecasts for 2022’s financial year ending Aug. 31, according to Compass.

Sodexo said that its investment in Russia had been halted following the Ukraine war and that any contracts it won in last year, which would have allowed for the start of the second half 2022, will no longer be awarded.

Sodexo stated that the revenue loss from terminated contracts was approximately 40 million Euros ($44 million).

Sodexo’s shares were down 8.5% at 67.56 Euros by 0936 GMT.

Marc Rolland, chief financial officer of Russia told analysts during a conference call that “our business is small but it was growing rapidly.”

Sodexo’s Russian operations account for less than 1% in its revenues. Last week, Sodexo stated that it is “closely watching the situation” and was looking at various alternatives.

Compass Group LON: announced last week that it has completed disposal of Russian operations. This follows an announcement in March about its intention to permanently leave Russia and move on from any Russian suppliers.

NEGATIVE NEGOTIATIONS w/ FOOD SUPPLIERS

Russia’s conflict with Ukraine is now a major factor in the rise of food and energy costs. It was once the breadbasket Europe and has impacted the future outlook of the global economy.

Rolland stated that the Ukraine situation is creating volatility in commodities and that he was very aware of it.

Sodexo claims it is negotiating with suppliers in order to cope with increasing food prices.

He said, “We are in negotiations. He said that they are switching suppliers. The relationship that we have with our suppliers has been built over many years. “We don’t buy only the best product on the marketplace.

The company stated that it was confident that it can manage inflationary pressures on its margins. Its business model allows price increases to be transferred to clients gradually.

Sodexo stated that the contracts for operating COVID-19 testing facilities in UK ended March 31 much earlier than was expected.

Analysts expected 538 million euros in underlying operating profits for the half-year. The company also said that it had seen an increase since February.

($1 = 0.9048 euros)