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Adidas' shares plunge 11% after profit warning

German sportswear and equipment maker Adidas issued a profit warning for 2014 on Thursday due to geopolitical tensions and troubles in its golf division, sending its shares tumbling more than 11 percent. 

FRANKFURT: German sportswear and equipment maker Adidas issued a profit warning for 2014 on Thursday (July 31) due to geopolitical tensions and troubles in its golf division, sending its shares tumbling more than 11 percent.

The company said net profit for the year would only reach about 650 million euros (US$870 million, S$1.085 billion), much lower than the 830-930 million euros originally forecast. Sales are expected to climb between five and 10 percent adjusted for currency effects.

Adidas warned that the crisis in Ukraine and Western tensions with Russia, one of the company's key markets, would weigh on its business. In another cause for concern, sales for the group's golf division sank 18 percent in the second quarter, wiping out strong turnover for the Adidas and Reebok brands.

Group sales only grew two percent between April and June, to 3.46 billion euros, despite the boost offered by the World Cup in Brazil. Adidas is a major FIFA sponsor.

Shares in the company plunged 11.4 percent to 62.18 euros in mid-morning trade on the Frankfurt stock exchange on the news. The Dax index was down 0.45 percent.

Chief executive Herbert Hainer said in a statement that despite a few highlights on the balance sheet, "we also accept that we have not executed to our high standards at all times or provided enough flexibility to react in adverse market conditions". He said Adidas would now tackle the weaknesses "head on".

"By cleaning up markets, investing with more conviction in our growth opportunities and driving more agility through our new organisational set-up, we will return the group to a higher and more consistent level of earnings growth in the mid to long term," he said.

The company is to release its detailed earnings data for the second quarter on August 7.

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