In a preliminary statement, Adidas Group said commercial irregularities discovered at its Reebok India Company unit are likely to cost it an estimated 125 million euros in pre-tax charge.
The company said the group might have to restate its financial statements from last year.
"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 in line with the requirements of IAS 8," Adidas said.
"... Commercial irregularities discovered at Reebok India Company, in India, will likely affect the consolidated financial statements of the Adidas Group. The currently estimated maximum negative impact could be up to a pre-tax amount of 125 million euros," Germany-based Adidas said in a statement.
The company, however, did not give any further detail of irregularities at Reebok India Company.
"Management assures its stakeholders that it has, and will continue to, vigorously pursue a course of action to protect the group's interests, which has already resulted in the appointment of a new local leadership team in India at the end of March," Adidas said.
Under the new leadership team, Adidas is planning an accelerated restructuring of its business activities in India, including significant changes to its commercial business practices. This could lead to additional one-time charges in the remaining quarters of 2012 in an estimated amount of up to 70 million euros.
In its preliminary report for first quarter, Adidas Group said it profit rose to 38 per cent to 289 million euros on account of robust sales in China and Japan.
The company said its revenues surged by 17 per cent to 3.8 billion euros in the January-March period of the year.
For the full year 2012, Adidas expects its sales to climb by nearly 10 per cent, up from a previous forecast of 5-9 per cent, while net earnings would grow in the range of 12 and 17 per cent, compared to previous guidance of 10-15 per cent.
The sportswear maker said that due to the sensitivity of the ongoing investigation in India specific details will be disclosed as appropriate in due course.
The company would release its final earning report on Thursday. PTI SSM SP RAH
