By Noémie Bisserbe, William Mauldin, Clemens Bomsdorf and Peter Evans
European and U.S. businesses, from banks to brewers, are blaming
hits to their bottom lines on the political uncertainty surrounding
Moscow's actions in Ukraine and Russia's worsening economy.
In Europe, where exposure to Russia is far higher, French bank
Société Générale SA said Wednesday that its first-quarter net
profit fell 13% after it took a EUR525 million ($731.3 million)
write-down on its Russian business. Carlsberg A/S and Imperial
Tobacco Group PLC both said that falling sales in Russia and a weak
ruble had cut profit and would weigh on revenue for the remainder
of the year.
In the U.S., multinational companies that sell to consumers say
they're getting hit by the steep drop in the ruble, which has cut
sales of imported goods ranging from makeup to pharmaceuticals.
Others, ranging from satellite operators to financial firms, are
directly feeling the pinch of punitive sanctions and other measures
that Washington has rolled out to pressure Russian President
Vladimir Putin.
European companies have in recent years relied on Russia as a
rare engine of growth amid the continent's economic crisis and
fitful recovery, making them more vulnerable to Russia's recent
economic woes than many U.S. peers.
Those troubles are now being significantly worsened by the
political standoff with the West. Many of the specific pressures--a
generally softening economy, a weakening currency and tighter
regulations of imports like alcohol--were already in play before
the crisis. But the standoff, and threat of further economic
sanctions against Russia, is now clouding longer-term revenue and
earnings forecasts for many big multinationals from both Europe and
the U.S.
Maxwell Technologies Inc., which makes chips for satellites that
can withstand solar flares, says it has been hit by the U.S.
government's decision to withhold export licenses for shipments
that have military uses to Russia. The San Diego-based company
projected it could lose $2 million in revenue this year without the
U.S. export licenses.
Satellite operator Iridium Communications Inc., based in the
outskirts of Washington D.C., told investors it hopes to ensure its
Russian launches aren't caught up in sanctions. "There is support
for a realization that satellites being shipped to Russia to launch
from a Russian launch pad is really not export into Russia, but
really, frankly just an export through Russia into space," Iridium
Chief Executive Matt Desch said.
A spike in political uncertainty and the imposition of targeted
sanctions has put further pressure on the ruble and pushed the
Russian economy toward recession. More evidence of the decline came
on Wednesday, as the HSBC Purchasing Managers' Index, which tracks
output of Russia's service providers and manufacturers, contracted
in April at its swiftest pace since May 2009.
Société Générale, France's third-largest listed bank by assets,
blamed its profit declines on growing political uncertainty,
Russia's sluggish economy and weakness of the ruble for the fall.
The bank owns one of Russia's largest private lenders, Rosbank.
Jitters in the U.S. have been particularly high in the
financial-services sector since the U.S. Treasury Department
imposed sanctions in March on Bank Rossiya, which it linked to Mr.
Putin and his inner circle.
Visa and MasterCard stopped processing purchases made with cards
from Bank Rossiya and its subsidiaries, and Mr. Putin responded by
accelerating plans to develop Russia's own national card-payment
system. Under new legislation, foreign card processors would have
to handle all Russian payments domestically, use a settlement
center owned by the central bank, post significant collateral and
face potentially large fines.
"I don't think this is a saber-rattling situation any longer, I
think this is going to be tough to work for almost everybody,
governments and companies, over the next few months or periods of
time--it might last longer than that," MasterCard Chief Executive
Ajay Banga told investors on a recent conference call.
The big Danish brewer Carlsberg A/S, which generates about a
fifth of its revenue in Russia, cited the weak ruble and
uncertainty in the country as reasons it swung to an adjusted net
loss during the first quarter and forecast a bleaker outlook for
the remainder of 2014.
Carlsberg CEO Jorgen Buhl Rasmussen said Wednesday that the
company now assumes Russian gross domestic product will be flat for
the year on average, "where going into the year we assumed a GDP
growth of 1% or 1.5%."
Even before the current crisis in Ukraine, brewers were
struggling because of regulatory changes and other factors that
pulled the overall Russian beer market down. Anheuser-Busch InBev
NV, the world's biggest brewer, said Wednesday that Russian sales
in terms of volume fell 10% in the most recent quarter, compared
with a 4.5% increase for the group as a whole. Last month, Dutch
brewer Heineken NV reported a 37% dip in first-quarter net profit,
citing "challenging beer-market conditions in Russia," among other
factors.
U.K.-based cigarette giant Imperial Tobacco said Wednesday that
Russia--usually one of its fastest-growing markets, where around
40% of the population are smokers--had dragged down first-half
earnings. In the past year, the Russian government has banned
smoking in many public places, prohibited cigarette sales from
street kiosks and raised excise on tobacco products by up to
40%.
"Things are progressing very rapidly in Russia," said Alison
Cooper, Imperial's chief executive. Imperial's cigarette volume in
Russia declined 7% in the six months ended March 31, and Ms. Cooper
said she expects volume to be down around 10% over the full
year.
Unilever PLC, the world's second-largest consumer-goods maker,
is among the corporate players blaming the ruble's weakness for
recent struggles. The company recently surpassed EUR1 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.
Global sales in Unilever's most recent quarter fell 6.3%.
Veronika, Gulyas,
Jens Hansegard
, Ruth Bender and Christina Passariello contributed to this
article.
Write to Noémie Bisserbe at noemie.bisserbe@wsj.com, Clemens
Bomsdorf at clemens.bomsdorf@wsj.com and Peter Evans at
peter.evans@wsj.com
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