Prolonged Ukraine War Increases Corporate Losses...Estimated Impact Expected in Earnings Reports

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As the war in Ukraine approaches two months, the scale of damage to global companies operating in Russia is increasing.

On the 14th (local time), citing Yale University data, the Wall Street Journal (WSJ) reported that more than 600 global companies have withdrawn from Russia since Russia's invasion of Ukraine on February 24. As the first quarter earnings announcement period approaches, companies are tallying the impact of the Ukraine war, WSJ said.

Some companies have already announced estimated damages. John McNees, a professor at the University of Texas, said, "Whether a company suffers losses related to Russia depends on whether it has assets in Russia that need to be disposed of or simply suspends sales." This means that the scale of damage can vary depending on whether business suspension means selling all local assets or just temporarily halting operations.

The company expected to suffer the greatest damage is the British energy company BP. BP announced it would dispose of a large stake in the Russian oil and gas company Rosneft, projecting a provisional loss of about $25 billion (approximately 30.8 trillion KRW). Swedish telecommunications company Ericsson also announced an indefinite suspension of its Russian operations, estimating damages of about $95 million. French bank Soci?t? G?n?rale, by selling stakes in Rosbank and others, is expected to see a revenue decrease exceeding $3 billion.

American oil company ExxonMobil decided to withdraw its 30% stake from a project on Sakhalin Island in Russia's Far East, recording an accounting cost of $4 billion. British energy company Shell expects accounting costs of $4 to $5 billion from suspending its Russian operations, including its joint venture with Russian energy company Gazprom. Citigroup projected nearly $5 billion in losses in Russia through a stress scenario last month.

Larry Crumbley, a professor at Texas A&M University, said, "Companies will try to reflect as much financial damage related to Russia as possible," adding that reflecting negative financial news all at once allows future earnings to improve when it is confirmed that subsequent losses are less severe.

This content was produced with the assistance of AI translation services.