Companies count the cost of ditching Russia -Breaking
© Reuters. FILEPHOTO: Adidas logo pictured in celebration of Adidas’ 70th Anniversary at its headquarters in Herzogenaurach. Germany on 8/9/2019. REUTERS/Andreas Gbert
(Reuters] – Multinationals have reported losses associated with their withdrawal from Russia and/or suspension of activity in Russia after Moscow invaded Ukraine on February 24th.
This list includes companies that, according to their sector, have given cost estimates for a Russia-based temporary or permanent halt.
German sportswear manufacturer, Adidas, warned that Russia would close its stores in March. It did not provide an estimate. The country has 500 of the company’s total stores.
According to it, Ukraine might pose a danger to its sales up to 250million euros ($264million), about 1% in the total for 2021.
LPP, Poland’s most popular fashion retailer, was hit by a writedown in the fourth quarter of 2007. This amount covers closing its shops in Russia.
Russia, which accounted 19.2% for LPP’s total sales revenue over the full year, was LPP’s second largest market in 2021/2022. LPP believes that the closing of Russian stores and suspending business operations in Ukraine will result in a loss of 25% in revenue.
TJX, an American fashion retailer, said that its 25% stake at Familia, the Russian low-cost clothing shop chain Familia would be sold. TJX bought the stake for $225 million in 2019, but the stake now stands at $186million.
TJX stated that it may need to report impairments due to divestiture in the event of Familia’s fair value falling below the carrying value.
Renault (EPA:) In March, the EPA stated that it had begun to consider a 2.2 Billion Euro non-cash writedown in order to cover potential Russian operations being suspended.
In the first quarter of 2018, revenue lost to sales was 166 million euro, but Russia remains the company’s largest market.
After suspending Russian activities that were equivalent to 3% of its group sales, the Swedish truckmaker stated on April 8 that it had put aside $423 million.
In its quarterly report, the U.S. Bank stated that Russia’s exposures could cause a significant loss.
Citi claimed that its Russian exposure has been reduced by $2.0 billion and $7.8 billion since December 2021.
To prepare for potential losses due to direct Russian exposures and economic impacts of the Ukraine crisis, the largest U.S. bank added $1.9Billion to its reserves during the first quarter.
Credit Agricole, (OTC:), announced that more than 500 millions euros have been provisioned for Russia exposure in its quarterly results.
On April 20, the Swiss Bank estimated that Russia’s invasion of Ukraine would cost them 200 million Swiss Francs (or $203.1 million) during the first quarter 2022.
French banks announced that they would leave Russia, and will write off the 3.1 billion euro earned from its Rosbank sale to Interros Capital.
Rosbank will receive a 2 Billion Euro hit on its book value. Rest of the proceeds will be tied to the reversal in rouble conversion reserve.
Italy’s UniCredit, one of Europe’s banks most exposed to Russia, said it has booked 1.3 billion euros in loan loss provision related to Russia, as it released its first quarter results. UniCredit manages Russia’s largest lender.
According to the Swiss bank, Russia’s incursion into Ukraine cost about $100 million. UBS’ exposure to Russia was also reduced by $400 million, or $600 million, at the end March.
UTILITIES & CONSUMABLES
Following the March shutdown of all Russian sales and production, the Swedish Hygiene Products Group announced it would report a write down of 1.4 billion Swedish Crowns ($141.5m).
About 2% of the total country’s sales were generated by this company last year. That amounts to approximately 2.8 billion crowns.
Fortum in Finland stated that the Russian operations would cause a loss of pre-tax income of 2.1 billion euro.
This includes Fortum’s Russia segment at 0.3 billion euro, Unipro (a Russian company owned and controlled by Fortum’s affiliate Uniper), and Fortum’s ownership of TGC-1 in Russia and renewables joint ventures in Russia, which totals 0.2 billion.
According to the quarterly report of German chemicals and consumer goods companies, 1 billion Euros will be impacted on their full-year sales by current geopolitical circumstances.
Persil detergents and Pritt glue were announced by the maker in April. On Friday, it added that it was also leaving Belarus.
After discontinuing the sale of several Marlboro and Parliament cigarettes products in Russia, the tobacco giant paid 3 cents per share for the Ukraine crisis.
Philip Morris’ (NYSE:) first quarter earnings dropped 3.6% to $2.32 Billion, or $1.50 per Share, after accounting for the 3-cent fee. Russia generated more than $1.8 billion in revenue last year. That’s approximately 6% its worldwide sales.
BP (NYSE -:)
BP reported a Russian writedown of $24 Billion, which is slightly below its initial estimate at $25 billion. BP stated that the quarterly headline loss resulted from the $20.4 billion non-cash writedown on its Rosneft shares and in two other joint ventures.
Norway’s Equinor stopped trading in Russian oil in March, in addition to shutting down its operations in the country. In the first quarter, Equinor recognized net impairments in Russia of $1.08 Billion.
It is also in the process of leaving its joint ventures with Russia’s Rosneft.
EXXON MOBIL COMPANY
Chief financial officer stated that the decision of Russia’s largest oil company to quit Russia and stop oil and gas production will have a negative impact on earnings and oil production by up to 1% to 2.2%.
Exxon Mobil (NYSE) Russia’s oil and gas activities were valued at over $4 billion. After-tax losses of $3.4 billion on Russia Sakhalin-1 were part of the first quarter’s results.
According to Austria’s energy group, 2 billion euros would have been lost in the quarter because of Russia’s pullback. The hit will be divided equally between Russia’s connection with Nord Stream 2 and adjustment of the consolidation methods of the two Russian entities.
According to company statements, $5 billion will be written down by the largest liquefied trading firm in the world after it decides to leave Russia. That’s more than the $3.4 million previously disclosed. Additional potential effects such as credit loss, receivable writedowns, and contracts accounted for the increase.
ENGINEERING & CONSTRUCTION
Swedish engineering company has suspended all Russian orders. The firm stated on April 26th that 602,000,000 Swedish crowns worth of orders had been cancelled by sanctions.
It also booked 327million crowns worth of provisions in order to pay various costs related with existing Russian contractual obligations.
Finnish engineering firm said that it wrote down orders to Russia of 79 millions euros during the quarter. The company also cancelled 32million euros worth of Russian sales, which had a negative impact on the quarter’s operating profits by 39 million Euros.
Swedish company for heating technology decided to shut down its Russian operations. This has adversely impacted Q1’s operating profit.
Finnish construction company, Fennovoima said that on April 28, it had written most of Russia’s assets down and sold Fennovoima. This resulted in an impairment of 141.2 millions euros to its balance sheet.
The remaining Russian assets are worth 2.6 millions euros.
As the decrease in asset values will have a significant impact on SRV’s equity and equity ratio, the company said it would reorganize its financing, including a contemplated rights issue and conversion of its unsecured fixed-interest bond.
Siemens, Germany announced that it would be leaving Russia on May 12, after almost 170 years of operation in Russia. The losses have been estimated at 600 million Euros by Siemens, a Munich-based tech and engineering company. More costs will follow over the coming months.
Finnish engineering firm has declared that many of the Russian projects it had delivered do not fit the criteria for customer contracts. This resulted in a reverse of approximately 70 million euro to its backlog.
In its first quarter financial report, the Finnish engineering firm recorded a writedown totaling 200 million Euros as it decreased its Russia business.
It includes approximately 75m euros of impairment in Voyage-related goodswill and intangibles, 50m euros impairment in assets in Russia, and around 75m euros writedowns in trade-sanctioned project and receivables.
While the writedown doesn’t affect the comparable operating results of the company, the effects on Russia from the actions taken by the Russian business have an adverse effect on the operational financials.
Russia-related activity accounted for approximately 5% Wartsila’s net sales 2021. Service net sales were about 40 millions euros.
After identifying the Russian companies as being for sale, the Finnish construction firm recorded an impairment in the quarter.
YIT had announced that in April, it would be selling its operations in the country to Etalon Group.
According to the global streaming giant, the decision to stop services in Russia on April 19, resulted from the 700,000 member loss. This is the first time the company has lost subscribers in more than 10 years.
FOOD & BEVERAGES
On April 22, the Belgian brewer, InBev Efes, announced that it was selling its controlling stake in Russian joint venture AB InBev Efes. A $1.1 billion impairment charge will be taken in the first quarter following the divestiture. Joint venture includes 11 Russian breweries and three Ukrainian breweries.
According to the Danish brewer, selling its Russian business would cause a writedown in excess of 9.5 billion Danish Crowns (71.1 million). It generated 10% of its total revenue in Russia and 6% in operating profit in Russia between 2021 and 2021.
The company also stated that it expects 300 million Ukrainian crowns to be impaired charges and goodwill writedowns totaling 700 million crowns in the Central and Eastern Europe region.
In late March, the Amsterdam-based brewery decided to move out of Russia. It concluded that any ownership in a business is not sustainable and viable in today’s environment.
Heineken (OTC-:) claimed it wouldn’t profit from any transfer in ownership, and that it expected impairments and other exceptional non-cash charges to total around 0.4 Billion Euros.
McDonald’s (NYSE) revealed its plans to leave Russia and sell its entire restaurant network. After its sale, McDonald’s (NYSE:) will incur a $1.4 million non-cash transaction.
In March, the U.S. firm stated that closing its Russian restaurants would incur a monthly cost of $50 million. Out of over 38,000 locations worldwide, the company has 847 Russian sites.
According to Brokerage Piper Sandler, the closing of Russian operations by the restaurant chain is expected to lead to earnings per share exceeding $1.19 in 2022.
American toys manufacturer Toys R Us warned that it could suffer a revenue loss of around $100 million due to the decision to suspend Russian toy exports.
Swedish equipment manufacturer for gardening said that April 21st, it booked writedowns amounting to 119M Swedish Crowns. These were due to Russia stopping any exports or investments. Russia was responsible for 1.5% group sales in 2021.
AP MOELLER MAERSK
A Danish shipping firm claimed that it suffered a $718 million negative impact on first-quarter earnings, before interest and taxes. That included $162 million in its Ocean segment, $53 million in Logistics & Services and $485 million in Terminals.
Maersk stated in March that all of Russia’s assets would be sold, which included its 30.75% share in Russian port operator Global Ports Investments.
The Japanese trading house halved its net exposure to Russia as of March 2022 to 12.3 billion yen ($94.4 million) due to a writedown of its stake in Russia’s Sakhalin-1 oil project.
Russia was less than 0.5% in the company’s total international exposure, which is 2.7 trillion yen. The company announced in April that it would block all new Russian transactions, even those not under sanctions.
Finnish mining technology provider, who stopped supplies to Russia in March said that its operative assets, approximately 100 million euro, related to Russian clients, could be at stake if the company is not able to control existing contracts.
Russian exports accounted for 10% of the company’s revenue in 2021. The company also had 269,000,000 euros worth of guarantees of payment tied to Russian deliveries at the end of March.
Swedish bearings-seal maker, Swedish Seal Maker stated on April 22 that Russia would be closed and it planned to sell its Russian operations.
In the second quarter, around 500 million Swedish Crowns were written down as a result of this decision. Russian exports accounted for approximately 2% of total Group sales in 2021.
According to the Swedish steelmaker, asset writedowns totalling 158 million Swedish Crowns were caused by concerns about Russia’s sales office.
Fennovoima’s prospects in Finland were also affected by the war and sanctions. The shares were reduced to zero value with 272 million crowns.
SSAB has ceased all direct sales of Belarus and Russia to Russia. It also stopped any new Russian purchases of iron ore and coal until further notice.
Finnish forestry firm has concluded its Russian exit by selling its forest operations, sawmills, and packing plants to the local management. In the first quarter of 2018, the company suffered an impairment of 130 millions euros. This includes 70 million for the sale and operation of sawmills, 35 million for the disposal of packaging businesses, and 35 million in relation to other activities. Additionally, the transaction will result in an additional loss of 60 to 55 million euros under IFRS accounting. The closing date for these transactions is set at 31 December. In 2021, its Russian revenues accounted for approximately 3% of the total revenue.
German software giant Siemens claimed it has stopped all activities in Russia, Belarus and anticipated a negative effect on its billings of about 1% due to the halting of its business in these two countries.
($1 = 0.9457 euros)
($1 = 4.4461 zlotys)
($1 = 0.9849 Swiss francs)
($1 = 9.8961 Swedish crowns
($1 = 7.0337 Danish crowns)
($1 = 130.3500 yen)