The maker of Winston and Davidoff cigarettes has begun talks to transfer its Russian business to a local third party in a move that will hit its financial results this year.
Last week Imperial Brands stopped sales and marketing activity in Russia and halted production at its factory in Volgograd, citing “severe disruption” from international sanctions on Moscow after the invasion of Ukraine.
The Bristol-based FTSE 100 group is the latest multinational to suspend operations or to pull out of Russia amid growing western sanctions and calls from the government for UK companies to isolate Moscow. Russia has responded with moves to nationalise the assets of companies that leave the country.
Imperial, one of the world’s biggest tobacco companies, employs about 1,000 people in Russia.
“We have begun negotiations with a local third party about a transfer of our Russian assets and operations,” it said yesterday. “We believe that, in the current circumstances, an orderly transfer of our business as a going concern would be in the best interests of our Russian colleagues.”
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A spokesman declined to comment on the name of the third party. Imperial said that it would continue to pay salaries until any transfer had been concluded.
Imperial, whose operations in Russia and Ukraine accounted for about 2 per cent of its £7.6 billion of revenue last year and 0.5 per cent of its £3.6 billion adjusted operating profit, said that the exit would weaken its financial results this year. It expects revenue growth this year to be between zero and 1 per cent, compared with a forecast in November of growth of about 1.4 per cent. It expected the move to have a “relatively small impact” on its currency-adjusted operating profit.
Imperial follows British American Tobacco, which said on Friday that it had concluded that ownership of its business in Russia was “no longer sustainable in the current environment” and that it had begun a process to “rapidly transfer” the operation. BAT has said that exiting its business or stopping sales or manufacturing would be regarded as a criminal bankruptcy by Russia and that Moscow might take legal action against local managers. Both Imperial and BAT have suspended operations in Ukraine.
Russia is the fourth largest cigarette market in the world.
Shares in Imperial, which is valued at about £14.8 billion, rose by 7½p, or 0.5 per cent, to £15.58.
