Business Losses From Russia Top $59 Billion as Sanctions Hit
Global companies have racked up more than $59 billion in losses from their Russian operations, with more financial pain to come as sanctions hit the economy and sales and shutdowns continue, according to a review of public statements and securities filings.
Almost 1,000 Western businesses have pledged to exit or cut back operations in Russia, following its invasion of Ukraine, according to Yale researchers.
Many are reassessing the reported value of those Russian businesses, as a weakening local economy and a lack of willing buyers render once-valuable assets worthless. Companies under U.S. and international reporting standards have to take impairment charges, or write-downs, when the value of an asset declines.
SHARE YOUR THOUGHTS
When or how do you expect companies to recover from their losses in Russia? Join the conversation below.
The write-downs to date span a range of industries, from banks and brewers to manufacturers, retailers, restaurants and shipping companies—even a wind-turbine maker and a forestry firm. The fast-food giant
McDonald’s Corp.
expects to record an accounting charge of $1.2 billion to $1.4 billion after agreeing to sell its Russian restaurants to a local licensee;
Exxon Mobil Corp.
took a $3.4 billion charge after halting operations at an oil and gas project in Russia’s Far East; Budweiser brewer
took a $1.1 billion charge after deciding to sell its stake in a Russian joint venture.
“This round of impairments is not the end of it,” said Carla Nunes, a managing director at the risk-consulting firm Kroll LLC. “As the crisis continues, we could see more financial fallout, including indirect impact from the conflict.”
The financial fallout of the conflict isn’t significant for most multinationals, in part because of the relatively small size of the Russian economy. Fewer than 50 companies account for most of the $59 billion tally. Even for those, the Russian losses are typically a relatively small part of their overall finances. McDonald’s, for example, said its Russia and Ukraine businesses represented less than 3% of its operating income last year.
Some companies are writing off assets stranded in Russia. The Irish aircraft leasing company
NV last month took an accounting charge of $2.7 billion, which included writing off the value of more than 100 of its planes that are stuck in the country. The aircraft were leased to Russian airlines. Other leasing companies are taking similar hits.
Other businesses are assuming that they will realize no money from their Russian operations, even before they have finalized exit plans. The British oil major
PLC’s $25.5 billion accounting charge on its…
Read More: Business Losses From Russia Top $59 Billion as Sanctions Hit