Packaging giant Smurfit Kappa says it has completed its planned exit from the Russian market, crystallising a €128 million financial hit as a result. The cardboard box maker said it had sold its operations in Russia to local management.
The Iseq-listed company signalled last April that it was exiting the Russian market, joining other multinationals in a mass corporate boycott of Russia over its invasion of Ukraine.
The €128 million hit related to the impairment of assets in Russia, Smurfit Kappa confirmed last month as it reported better-than-expected full-year earnings. The charge reduced the value of its Russia assets to zero.
“Following the approval of the Russian authorities and the completion of all necessary administrative processes, the group’s operations in Russia have now been sold to local management,” the company said on Monday.
The paper and packaging group owns three plants in and around St Petersburg and it also bought a large corrugated packaging plant in Moscow in 2017. The group’s Russian business, which employs about 800 people, continues to operate.
It had been targeting significant growth in Russia before the invasion which sparked a wave of sanctions by western allies. The company had previously described Russia “as an attractive growth market for us with exciting potential”.
In its recently published full-year results, the company said the operations in Russia represented less than 2 per cent of any of the group’s key performance indicators.
The assets and associated liabilities of the company’s Russian business were presented “as held for sale” in the consolidated accounts for last year.
“In advance of classifying the Russian disposal group as held for sale, the recoverable value was reassessed based on the terms of the sales agreement entered into, applying the fair value less costs to sell method,” it said.
“As a result the group has recorded an exceptional impairment charge of €128 million in relation to its Russian operations. The Russian operations form part of the Europe segment,” it said.
[ Smurfit leads Iseq multinationals when counting costs of retreat from Russia ]
Smurfit Kappa posted a 38 per cent jump in earnings last year, as product price increases offset a dip in demand for boxes and a surge in energy and raw material costs.
Earnings before interest, tax, depreciation and amortisation (ebitda) rose to €2.36 billion from €1.7 billion for the previous year, with the result topping the consensus forecast among analysts of €2.29 billion.
The company’s chief executive, Tony Smurfit, told analysts on a call that European box volumes have improved so far this year.