RUSSIA–UK multinational consumer goods giant Unilever has announced that it may have to stop doing business in Russia, which may lead to it taking a loss or having to write down its assets in the country.

Unilever stopped the importation and exportation of goods in and out of Russia in March last year, becoming the first major European food company to do so on account of the war between Russia and Ukraine.

The company had also said it would stop all investments in the Russian business as well as stop all media and advertising expenses, saying that its Ukrainian operations had also stopped.

However, it continued to supply its products made in Russia, saying it would not take any profit from those sales.

Unilever operates in four factories in Russia, one in St. Petersburg, and others in Tula, Omsk and Yekaterinburg.

These sites together produce the company’s famous ice cream brands, mayonnaise, cleaning products, tea, cooking sauces, deodorants and soaps.

A US$968M business

The Russian business makes up assets worth about EUR900 million (US$968.58M) which contributed about 1.4% of the company’s total turnover and 2% of its net profit.

Unilever condemned Russia for invading Ukraine but insisted on continuing to supply what it termed “everyday essential food and hygiene products” to the Russian people.

The Ukrainian government accuses firms that continue to operate in Russia by taking “blood money”.

“I don’t agree,” said Alan Jope, Unilever CEO. “Our primary responsibility is to our 3,000 people whom we have on the ground”

In the most recent development, the company announced that it will “continue to review and disclose the financial implications from the conflict.”

The CEO communicated that the company had not started writing down the business but flagged the risk on Thursday because it wanted to be transparent with shareholders and regulators.

Simple abandonment benefits Russia

“I hope we can protect the people we have on the ground for quite some time. The war has triggered inflation in Russia, which is the scourge of an economy. And the volumes in our Russian business are down significantly, by double digits,” Alan Jope said on a media call.

“The option that we’re following right now is the one that contributes the least to the Russian economy (in terms of taxes). Simple abandonment would definitely result in more contribution to the Russian economy,” he added.

According to an analysis by the Yale Management School, more than 1,200 global companies have exited Russia entirely since February last year.

“Exiting is not straightforward. And just to be clear, we are not trying to protect the commercial value of our business in Russia,” said Alan Jope.

Yale’s research found that a series of other firms have also not stopped their business in Russia. These include Nestlé, Proctor and Gamble, Hilton, Subway, Kraft Heinz, Mondelez, and Accor among others.

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