Heineken announces exodus from Russia at cost of over 400 million euros

Carlsberg (CARLb.CO) and Heineken (HEIN.AS), two of the world’s largest breweries, said on Monday that they will leave Russia, joining an exodus of Western corporations as pressure mounts on Moscow following its invasion of Ukraine.

Following the commencement last month of what Moscow described as a “special military operation” against Ukraine, Ukraine’s President Volodymyr Zelenskiy has advised multinational corporations to abandon the Russian market.

The pullout would result in a “significant non-cash impairment charge” this year for Carlsberg, the Western brewer most exposed to Russia, according to the company, which did not provide any information.

Through its ownership of Baltika, the country’s largest brewer, the business has a 27 percent share of the local market.

“In the current situation, we believe it is the correct thing to do to pursue a full disposal of our business in Russia,” Carlsberg stated. “When the project is finished, we will have no presence in Russia.”

The company’s shares, which have lost over a quarter of their value since the invasion began, were up 4.2 percent on Monday, on track for their highest day since November 2020.

Heineken, Russia’s third-largest brewer, has previously stated that it aimed for a “orderly transfer” of its local company, which accounts for only 2% of total sales, and that it would reduce its operations during the transition period to reduce the possibility of nationalisation.

The Dutch brewer expects to incur corresponding costs of roughly 400 million euros ($438 million) and has stated that its 1,800 employees in Russia will be paid until the end of the year.

“We have come to the conclusion that Heineken’s ownership of the business in Russia is no longer sustainable or feasible,” the company said in a statement, adding that any transfer of ownership would not benefit the company.

By 1423 GMT, the stock had gained 0.3 percent.

Carlsberg’s revenue and operating profit in Russia, where it has eight breweries and 8,400 people, accounted for 10% of overall revenue and 6% of operating profit last year. It assumed full ownership of Baltika in 2008, but sales have been slow due to the economy’s sanctions and rules aimed at reducing alcohol misuse.

In a research note, Jefferies analysts stated, “The announcement that Carlsberg will exit Russia should assist to clear the air and remove the overhang risk.”

According to the Danish brewer’s annual report, non-current assets in Russia were 19.2 billion Danish crowns ($2.83 billion) at the end of 2021, accounting for about 15% of total assets and 44% of total equity.

The joint venture between Turkey’s Anadolu Efes (AEFES.IS) and Belgium’s InBev is Russia’s second largest brewer (ABI.BR).

InBev announced in March that it would stop selling Bud beer in Russia and forego income from the joint company, which employs 3,500 people and has 11 breweries.

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