NSRGY - Who's next? Western companies on alert after asset seizures by Russia
2023-07-21 09:35:28 ET
As the war between Russia and Ukraine continues to trudge onward, Vladimir Putin took aim at Western businesses earlier this week after signing a decree that seized the assets of the French yogurt maker Danone ( OTCQX:DANOY ) and operations owned by Carlsberg ( OTCPK:CABGY ).
Following the initial invasion by Russia into Ukraine, many multinational businesses that operate within the borders of Russia decided to flee the country. However, not all those companies have left and some of their promises have not yet materialized. Many organizations that have large stakes inside of Russia have been running a tightrope act as they've been balancing Moscow from obstructing their operations, while at the same time expressing to Western investors that the only reason they are still operating within Russia is to sell essential products.
Putin's latest move in seizing assets from Danone and Carlsberg demonstrates that no Western assets are safe . So who's next? This becomes the biggest question that many investors have about companies that still operate within the walls of Russia.
Western brands that have large operations in the country include the likes of soft drink giant PepsiCo ( NASDAQ: PEP ), along with Mondelez ( NASDAQ: MDLZ ), and Mars, which each observed sales and profit growth within Russia in 2022. Other Western companies that find themselves in a precarious position include Nestle ( OTCPK:NSRGY ), which currently runs six Russian factories and employs roughly 7,000 individuals, along with operations from Unilever ( NYSE: UL ), Procter & Gamble ( NYSE: PG ), Philip Morris International ( PM ) and Colgate Palmolive ( CL ).
Moreover, Coca-Cola HBC ( OTCPK:CCHBF ), a subset of Coca-Cola ( KO ), which is the world's third-largest Coca-Cola bottler - in terms of volume with sales of more than $2B unit cases - is said to have the largest revenue exposure to Russia among European consumer staple businesses. It's believed that the Coca-Cola Hellenic Bottling Company receives approximately 12% of its sales from the Russian market.
While Putin and Russia have not yet seized assets outside of Dannon ( OTCQX:DANOY ) and Carlsberg ( OTCPK:CABGY ), it places pressure on Western businesses that operate within Russia that have so far been unscathed. Some of these companies will now have to make further decisions to either double down and continue their operations, or look to completely withdraw from the region. Other firms, like GlaxoSmithKline ( GSK ), have said they would continue to supply essential goods, but promised that their Russian sales proceeds would go to humanitarian aid.
With many companies uncertain about their fate, Ukraine is trying to offer itself as an alternative for foreign investment. "We identified about 200 global companies that ceased investment activities in Russia and we are in touch with them in order to provide the possibility to build manufacturing facilities in Ukraine instead of Russia," according to Sergiy Tsivkach, CEO of UkraineInvest, a government agency responsible for attracting foreign direct investment.
Year-to-date price action of the above-mentioned stocks: DANOY +18.7% , CABGY +13.8% , PEP +5.5% , MDLZ +11.5% , NSRGY +3.1% , UL +3.4% , PG -0.7% , CL -2.7% , PM -3.1% , KO -0.9% , CCHBF +32.2% and GSK +1.2% .
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- Danone, Carlsberg might be in for the long haul after Russian takeover
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Who's next? Western companies on alert after asset seizures by Russia