Canadian Manufacturing

Clorox Co. shutters Venezuela operations

The chemical company says a combination of government meddling and rampant inflation made the operations no longer viable



OAKLAND, Calif.:—The Clorox Co. is closing its subsidiary in Venezuela after years of operating losses.

The company said in a release that its affiliate Corporación Clorox de Venezuela S.A. (Clorox Venezuela) is no longer viable and will be discontinuing its operations, effective immediately. The company is seeking to sell its assets.

Clorox Venezuela was required to sell more than two-thirds of its products at prices frozen by the Venezuelan government. This coincided with triple-digit inflation resulting in massive increases in Clorox Venezuela’s input costs, including packaging, raw materials, transportation and wages.

After meeting with government authorities to help them understand the rapidly declining state of the business, Clorox Venezuela had expected approval for significant price increases. The company said price increases subsequently approved by the government were nowhere near sufficient and would have caused Clorox Venezuela to continue operating at a significant loss.

“…given the operating restrictions imposed by the Venezuelan government, considerable economic uncertainty, continual supply disruptions, and without significant and ongoing price increases as well as other remedial actions, Clorox Venezuela anticipated considerable operating losses would continue into the foreseeable future. As a result, the business is no longer viable and, therefore, Clorox Venezuela has been forced to discontinue its operations,” the company said.

In the fiscal year ending June 30, 2014, net sales from Clorox Venezuela represented about 1.4 per cent (US$77 million) of The Clorox Co.’s total sales, and the Clorox Venezuela business generated losses before interest and taxes of about $23 million.

Discontinuing operation in Venezuela could cost up to US$90 million over the next three years.

This announcement relates only to the Clorox Venezuela business; The Clorox Company’s other international businesses are not impacted.

Related Posts from the network