WASHINGTON, Aug 10 — Although the United States and Russia have imposed economic sanctions on each other since 2014, several large US corporations, including PepsiCo Inc and McDonald’s Corp, still count Russia as a growth market.
But new developments have raised the possibility of fresh challenges for US companies in Russia.
The United States on Wednesday announced it would impose fresh sanctions on Russia after Washington determined Moscow had used a nerve agent against a former Russian double agent, Sergei Skripal, and his daughter, Yulia, in Britain. Russia yesterday condemned the new round of sanctions as illegal and said it had begun working on retaliatory measures.
A senior US State Department official said yesterday the sanctions on Russia will target exports of national security-related goods including sectors such as specialized oil and gas technology and some electronics and sensors.
In April, the United States imposed sanctions on 24 Russian oligarchs and government officials and 12 Russian companies.
Russia imported US$12.5 billion (RM50.94 billion) worth of US products in 2017, according to official customs data. That included aircraft, machinery, pharmaceutical and chemical products.
Publicly listed US companies generated more than US$90 billion in revenue from Russia in 2017, according to the Thomson Reuters Country of Risk model, which estimates companies’ financial exposure to different countries. Among the industries with the greatest exposure to Russia are food and beverages, technology and pharmaceuticals.
Here are some of the US companies that maintain significant operations in Russia.
Apple Inc had double-digit revenue growth in Russia, the company’s chief financial officer said on an earnings conference call in May.
During Microsoft Corp’s earnings call last October, chief financial officer Amy Hood noted that market conditions had improved in “key markets like Brazil and Russia.”
But following US sanctions, two of Microsoft’s official distributors in Russia curbed sales of Microsoft software to more than 200 Russian companies, Reuters reported in January.
In Mondelez International Inc’s quarterly earnings call in January, chief executive Dirk Van de Put said the company had become the leading chocolate maker in Russia.
PepsiCo reported that in 2017, its Russian operations generated net revenue of US$3.23 billion, which made up 5.1 per cent of the company’s total net revenue.
McDonald’s categorizes Russia as a high-growth market and has opened new locations there in the past two years, according to its annual financial report.
Philip Morris International has been among foreign companies with exposure to Russia’s tobacco market. The company’s sales exposure to Russia is 7 per cent, according to a note from Goldman Sachs.
Johnson & Johnson has identified Russia as a strong market for regional consumer brands, and the company is seeking to extend its reach there through products such as contact lenses, executives have said.
Abbott Laboratories is among the top five companies for branded generic drugs in Russia, the company’s chief financial officer, Brian Yoor, said in January.
In the first quarter of 2018, weaker sales growth in Russia led to lower sales in Abbott’s established pharmaceuticals business than analysts expected.
Boeing Co named Russia as one of its largest growth markets at an industry conference in March. But in its annual report, the company noted pricing pressures from government-funded competitors in Russia, China and Japan and said it would defend itself from the “unfair subsidization of competitors.”
Russia may stop supplying titanium to Boeing as part of its response to US sanctions, a parliament member said, according to a report by RIA news agency.
Also in the industrials space, industrial manufacturing and engineering company Colfax Corp has an 8 per cent sales exposure to Russia, according to the Goldman Sachs note.
Ford Motor Co doubled down on Russia even as its big US rival, General Motors Co, pulled out in 2015. The automaker’s sales from its joint venture with Russia-based Sollers PAO grew in 2017.
Ford now has a 3.1 per cent market share in Russia, according to the company’s annual financial report. In October, the company said its Russian results “continued to improve, approaching breakeven.” — Reuters
Source: The Malay Mail Online