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Schneider Electric to sell Russian ops to local management
UPS giant finds a more permanent solution to a Putin shaped problem, writes off $315m book value
Schneider Electric has signed a letter of intent to offload its Russian division to local management, writing off up to $315 million (€300 million) in net book value as a result.
Jean Pascal Tricoire, CEO at the France-based UPS manufacturer, said it suspended all new investments in Russia after the invasion of Ukraine on February 24 and had concluded the best option was to sell country operations.
He said Schneider Electric decided "from the beginning that the best owners of our business would be the local leadership team."
"At this stage, we signed the LOI defining the specs on the main conditions of that transfer, we still have to go to a closing and that will go through the regulatory approvals in Russia."
Schneider Electric has 3,500 employees in Russia and its puppet state Belarus, and the countries accounted for 2 percent of the €28.9 billion in sales turned over in 2021. Three factories and two distribution centres are run in Russia as well, Tricoire confirmed.
"There is close to no export or supply chain sourcing from Russia, and certainly no critical components coming from Russia," the CEO said.
CFO Hilary Maxson, also on the same conference call to discuss Schneider's calendar Q1 financial results, said the target is to get the sale done by June but said that with local approval required by authorities predictions are difficult.
"This is a 100 percent sale of our Russian entities. As would be typical through any disposal process, we would expect to have a number of transition services agreements, in this case, also covering some of the legally binding projects that aren't subject to sanctions that we have there today."
Within 12 to 18 months Schneider said it would expect to "have no longer any contractual relationships" with entities in Russia.
The financial impact in terms of earnings before income tax, depreciation and amortization and is modeled to be $315 million in net book value and $126 million (€120 million) non-cash reversal of currency translation reserve.
Multitude tech brands in the West have take action in Russia following sanctions imposed on the country by the US, EU and UK. Many have at least halted sales, and some have suspended operations. Ericsson, which had an R&D centre in Russia, has pulled out "indefinitely."
Inside Russia, tech companies are dealing with the aftershocks caused by these economic penalties: Yandex, which last week shredded financial guidance for 2022, this week confirmed net losses of $111 million (8.1 billion roubles) for Q1. In the whole of 2021 it made $109 million (8 billion roubles).
Yandex said everything in its business was "stable" until soldiers marched into Ukraine. "In the last five weeks of the first quarter, our operations in certain businesses were adversely affected by the impact of geopolitical developments, which is reflected in our results for the first quarter." ®