Global companies have incurred more than $59 billion in losses from their Russian operations, with more financial pain to come as the economy is hit by sanctions and sell-offs and shutdowns continue, according to a review of public data and stock filings.
Nearly 1,000 Western companies have pledged to exit or reduce their operations in Russia, then Invasion of UkraineAccording to Yale University researchers.
Many are reassessing the reported value of those Russian companies, as the weak local economy and lack of willing buyers render once valuable assets worthless. Companies under US and international reporting standards are required to incur impairment charges, or writedowns, when the value of assets declines.
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The cuts so far span a range of industries, from banks and breweries to manufacturers, retailers, restaurants and shipping companies — even a wind turbine maker and a forestry company. fast food giant
It expects to record accounting burdens from $1.2 billion to $1.4 billion after the agreement to sell their Russian restaurants to the local licensee;
$3.4 billion took charge after operations ceased in oil and gas project in the Far East of Russia; Budweiser brewer
She received $1.1 billion after she decided to sell her stake in a Russian joint venture.
“This round of dips is not the end of it,” said Carla Nunes, managing director at risk advisory firm Kroll LLC. “As the crisis continues, we may see more financial fallout, including the spillover effect of the conflict.”
The financial ramifications of the conflict are not significant for most multinationals, due in part to the relatively small size of the Russian economy. Less than 50 companies account for most of the $59 billion total. Even for these, Russian losses are usually a relatively small part of their total finances. For example, McDonald’s said its Russia and Ukraine business represented less than 3% of its operating income last year.
Some companies write off assets stranded in Russia. Irish aircraft charter company
Last month, NV incurred an accounting fee of $2.7 billion, which included writing off the value of more than 100 of its planes stranded in the country. The planes were leased to Russian airlines. Other rental companies are taking similar hits.
Other companies assume they won’t realize any money from their Russia operations, even before exit plans are finalised. Great British Oil Company
PLC’s $25.5 billion in accounting fees Its Russian holdings last month included writing off $13.5 billion of shares in the oil-producing company
The company did not say how and when it plans to liquidate its Russian assets.
Even some companies that maintain a presence in Russia write down their assets. French energy giant
SE . took $4.1 billion in fees in April On the value of its natural gas reserves, citing the impact of Western sanctions targeting Russia.
The Securities and Exchange Commission last month told companies that they should clearly disclose Russia-related losses, and that they should not adjust revenue to add estimated income lost due to Russia.
Bank of New York Mellon corp.
, which said in March that it had halted new banking in Russia, appears to have violated that guidance when it announced its results for the first three months of this year. Conservation Bank of New York in April reported $4 billion in revenue under a single measure that included an added $88 million to reflect income lost due to Russia.
A BNY Mellon spokesman declined to comment.
Academic research indicates that investor reactions to the cuts are mixed, in part because most multinationals have relatively small Russian exposure.
A recent study by the Yale School of Management found that financial markets “reward companies for leaving Russia”. The researchers concluded that the stock price gains for the withdrawing companies “far exceeded the cost of one-time asset depreciation for companies that devalued their Russian assets.”
Research using a different methodology found a more accurate investor reaction. An analysis by Indiana University professor Vivek Estvanche and colleagues on the short-term market impact of more than 200 company announcements revealed a clear split across the Atlantic. The analysis found that investors penalized US companies for withdrawing from Russia and non-US companies for not withdrawing.
More write-offs and other accounting fees related to Russia are expected in the coming months, as companies complete their planned departures from the country.
PLC, whose brands include Rothmans and Lucky Strike, said March 11 that it had “quickly begun the process of moving our Russian business.” A BAT spokeswoman said the transfer was still in progress. BAT was not harmed in connection with the work.
Accounting specialist Jack Sisselsky said companies may delay announcing the cuts until they have dealt with the scale of the loss well.
Mr. Ciesielski, owner of investment research firm RG Associates Inc.
Many companies provide investors with rough estimates of what to expect about losses related to Russia.
ITT a company ,
Which has suspended operations in Russia, said last month that it expected revenue to reach $60 million to $85 million this year due to a “significant drop in sales” in the country. That’s a small slice of the $2.8 billion total revenue for the maker of specialty components for the automotive, aerospace and energy industries.
With sanctions weakening the Russian economy, companies operating there are still reassessing their future profits and locking in losses. ride-sharing giant
Uber technologies a company
In May, it was subjected to a $182 million writedown in the value of its stake in a Russian taxi joint venture due to expectations of a prolonged recession in the Russian economy. Uber said in February it was looking at opportunities to speed up the planned stake sale.
– Thomas Greta and Nick Kostof contributed to this article.
write to Jane Eaglesham at [email protected]
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