Carlsberg in the dark over what will become of Russian business

Denmark | Carlsberg was “shocked” by Russia’s seizure of its Baltika unit in July and the brewer is no closer to knowing what might happen next, its departing CEO Cees ‘t Hart said on 16 August.

Russia took control of the Danish group’s eight breweries and 8,400 employees, shortly after Carlsberg had agreed to sell the unit to an undisclosed buyer.

“We have known from the beginning, since announcing the intention to leave Russia in March of last year, that there was a huge interest in the business from people inside Russia. But still, this is an unprecedented development,” its CEO said on a media call.

Last year, the group took a DKK 9.9 billion (USD 1.45 billion) write-down on its Baltika unit. According to Mr Putin’s decree in July, Carlsberg retains the ownership of the unit. However, it no longer has any control or influence over it. Russia has since appointed Baltika’s former top honcho, Taimuraz Bolleyev, to lead the brewer.

Carlsberg said that Baltika was deconsolidated in July. This will result in non-cash reclassification adjustments to the income statement of accumulated currency translation losses of DKK 41.9 billion (USD 6.2 billion) and hedge losses of DKK 0.5 billion in the second half of 2023. This will have no impact on the Carlsberg Group’s total equity. The losses will be included in the net result from the Russian operations held for sale.

“Technically, this is not a nationalisation, but how it will unfold is unclear for us at this point in time,” Mr Hart commented. “This latest development will make it even more painful to leave Russia.”

Carlsberg was not in contact with any of its employees in Russia but remained in limited contact with Russian authorities, Mr Hart said.

Many multinational companies announced they would leave Russia after the West imposed sanctions on Moscow following its invasion of Ukraine in February 2022. The Kremlin has retaliated by seizing some assets, including Danone’s and Carlsberg’s.