By Peter Evans
LONDON--The dramatic fall in the ruble is starting to hurt
Western multinationals, adding to their list of problems in Russia
after a year of turmoil.
For most of 2014, U.S. and European businesses with operations
in Russia have battled against a slowing economy and escalating
political tensions with the West following the crisis in
Ukraine.
The ruble has fallen steadily through the year, but its sharp
decline in recent weeks has exacerbated an already-fragile
situation, according to company executives and analysts. The ruble
dropped to a fresh record low of 57.9860 against the dollar in
early trade on the Moscow exchange despite Russian central-bank
intervention and a Thursday rate hike, taking its year-to-date
decline to more than 44%.
"Western multinationals in Russia will be feeling very nervous,"
said Timothy Ash, an economist at Standard Bank.
The pain is sharpest for companies in Europe, where exposure to
Russia is far higher than in the U.S. Carlsberg A/S, the world's
fifth-largest beer company by volume, has lowered its profit
forecasts twice already this year and seen its shares drop more
than 18%. Many analysts expect the company's growth in Russia next
year will be canceled out by the weakening ruble.
"It is hard to see a solution just around the corner," Carlsberg
Chief Executive Officer Jørgen Buhl Rasmussen said on Thursday,
referring to the ruble's slump.
Carlsberg is Russia's biggest brewer and generates around 40% of
its earnings before interest and tax in Eastern Europe. A spokesman
for the company said: "Despite current challenging macro
conditions, we remain committed to the Russian market in the long
term."
Carlsberg isn't alone in feeling the heat in Russia. The
combination of political tension, the impact of falling oil prices
and the plunging value of the ruble mean an economy many global
companies once looked to for growth has now become a drag.
Last month, Imperial Tobacco Group PLC singled out weakness in
Russia as it posted a 7% decline in sales by volume across the
company. Imperial's rival British American Tobacco PLC has also
highlighted concerns over the Russian economy.
U.S. and European companies have also had to cope with increased
scrutiny of their operations from the Russian government, a
strategy seen by experts as a response to Western sanctions against
Russia following the conflict in eastern Ukraine.
Russian authorities have inspected a number of McDonald's Corp.
outlets for alleged sanitary violations, resulting in the closure
of several restaurants. PepsiCo Inc. and Danone SA have both
recently been accused by Russian politicians of using cheap and
unhealthy ingredients in their products.
But the ruble is a major concern for many top executives.
Unilever PLC, the world's second-largest maker of consumer products
after Procter & Gamble Co., has said the falling currency in
Russia has been part of its recent problems in emerging markets
overall. The company recently surpassed EUR1 billion ($1.25
billion) in sales in Russia, having entered the country in 1992,
but has seen many of its gains in the past year wiped out by the
ruble's slide.
"The ruble is down, the Ukrainian currency is down. It is not
helping," Chief Executive Officer Paul Polman said earlier this
year.
The ruble's slide has been especially painful for smaller
companies that rely on Russia for large chunks of their business,
particularly those in Central Europe and Eastern Europe.
German glassmaker Saint-Gobain Oberland AG on Friday issued a
profit warning and said it would be unlikely to pay a dividend this
year, blaming the macroeconomic situation in Russia and
Ukraine.
Many Finnish companies have expanded into Russia during the past
decade, including paint maker Tikkurila Oyj and premium tire maker
Nokian Tyres PLC. Both have seen their share price fall sharply
this year after the ruble's weakness forced them to cut their
profit guidance for 2014.
Finnish bakery chain Leipurin Oyj called off its initial public
offering on Dec. 3, citing uncertainty caused by the ruble's
collapse.
Jens Hansegard in Stockholm and Juhana Rossi in Helsinki
contributed to this article.
Write to Peter Evans at peter.evans@wsj.com
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