This week has seen a spate of businesses issuing warnings over potential losses in Russia. The WSJ has a good round up here, but the key ones are:
- Société Générale, one of the largest French banks, announced that it took a €525m write-down on its business in Russia. The loss reduced its first quarter profits by 13% and saw its stock price dip by a couple of percent (since recovered). As we noted, the exposure of French banks to Russia at $51bn is quite sizeable and could certainly cause problems if sanctions were expanded. The FT reports that the bank could face a €5.2bn loss if it was forced to write off its Russian investments.
- Danish brewer Carlsberg has also prepared for the impact as it cut its profit and sales forecast due to uncertainty in Russia, a market which accounts for 40% of its sales and profits. It also posted a 14% decline in first quarter net revenue in Eastern Europe because of the crisis.
- Even though issues for the financial services sector are conspicuously absent (consistent with our findings), other UK businesses were feeling the pinch, with UK based Imperial Tobacco saying that its sales in Russia have declined by 7% in the past six months and that it expects the figure for the entire year to be around 10%.
- More generally plenty of businesses are facing declining sales and preparing for potential losses on investments in Russia, from the world’s largest brewer Anheuser-Busch InBev and Unilever PLC to smaller tech companies hit by the US arms embargo.
One way or another Russia seems unlikely to be the growth market in the next few years that it was before the financial crisis.
4 comments:
Think there will be a split in how severe countermessures will be:
-group US
-group Europe.
UK hanging in between as one of the countries that was involved in the whole set up of the Kiev protest/coupe.
Possibly just before the EP election some surprises.
Anyway Europe seems not really a credible/trustworthy partner. So likely medium term a move to Asia (as new no1, and Europe new no2, always better to spread).
Also for China a good deal. They have no alternatives with easy and secure transport, either over sea with the 2 main trouble spots (Gulf and Straight) plus no free ocean exit/entrance (combined with Obama's new Pacific strategy and China being no2 on the Wolfowitz list).
Unlikely that Putin will not go first for the most reliable partner after this experience.
Longer term depend on what will happen also likely further spread to India. India has to spread its supply risk (now mainly ME) simply way too risky to depend nearly copmpletely on that unstable area.
Europe banking on the US is imho doubtful. Infrastructure is simply not ready there. Goes about as fast as a high speed rail link in the UK. Just check when the last refinery was built (or the current pipeline project).
Plus you can tell your climate targets goodbye. Up say 30% for LNG compared to pipeline.
Re the UK. Unsufficient infra structure. If there would be a gas boycott. The Norwegian stuff has to go for 30-40% to Germany (if I am not mistaken). The present LNG facilities are roughly of that size. Transport possibly/likely a problem. Where to charter the tankers from asap?
Anyway the infrastructure in Europe towards Russia started to look promising. Much better than the ME stuff. No way to run an energy policy for a continent highly depending on import.
What this will do is simply move the streams. China gets a cheaper/better connection so pays likely less.
EU will have to buy partly somewhere else and get the extra costs thereof. Energy will be used it is a sellers market. On top on likely politically unstable suppliers.
Moronic to get in one club with the likes of Poland/Lituenia. These are some of the ones that have actively been messing things up. Likely will use an energy union to create more troubles with Europe's largest neighbour.
The monkeys have simply run the zoo for a large part.
Huge conflict of interest between the US and EU. If the US continues and the EU keeps largely following them it likely will create at some point a big mess.
Nobody has taken the sanctions really serious. However increasingly people get nervous about it.
So the expansion of the EU's empire takes priority over the hopeless economic outlook and demand for jobs.
Europe needs growth NOT empire. EU - not in my name EVER.
SC
Doesn't the chart show that western companies are suffering because Russian growth has markedly slowed. The turndown predated sanctions and the SocGens and Carlsbergs have used sanctions as an excellent excuse to clean up their balance sheets and explain poor earnings performance. What has happened is that capital outflows have accelerated and the GDP forecasts have been reduced further. The outlook shown for 2014, 2015, 2016 is decidedly optimistic. 1% would be a more likly figure.
Ukraine will fall apart. Just do the maths.
Independence means sov debt share gone with interest thereon. Which is peak crisis Greek level.
People can probably lower their tax burden with several 10s% by just leaving the country.
The more leave especially from nett paying zones (aka the East) like now the more the rest would have to pay.
Add the fact that the fewer culturally Russians are there the more they will be overruled by people they donot like (or more lately often hate).
Add rapidly rising energy prices and it becomes a no brainer.
Every region that leaves makes it simply considerably more likely that others will follow.
Probably with increasing violence on top of it, which makes this scenario even more likely.
By far most likely scenario at least.
Hard to see Putin has much influence on that btw. Simply starting for your own is by far the better deal of the 2 main options.
Anyway it is impossible to see that Putin (or better Russia and its population) would allow a Yugoslav scenario to develop.
That is why the analysis of that Breedlove fellow is simply crap. Afraid for an invasion when it is unlikely to develop. And saying the the risk thereof has gone when in fact it has substantially increased (because of the 'anti-terrorist actions').
As said the most likely scenario. However it means that the country will be in a considerable bigger mess than it already is now.
Hard to see the present or something similar (preferably without some braindead including Fascist) government can survive financially.
Most tax revenue comes from the East add costs of war, higher energy prices, IMF loans, likely a collapse of the Kiev economy (it is basically largely a parasite on the economy of the country (less country especially the making money part thereof, means less to parasite upon).
Kiev is no London that is pulling the UK, more like Moskau (nothing without the rest of the country).
Looks like the follow up mess could be even bigger than the separation one.
The country will go bust unless you nice folks will pick up the bill of course.
The EU basically needs a stable Ukraine above all and it will get the exact opposite. Buying it was beyond moronic to start with. Buying only the crap parts as it looks now is even worse.
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