Multinational companies halt operations in Ukraine amid Russian invasion, sanctions

NEW YORK (NYTIMES, BLOOMBERG) - Multinational corporations, including Singapore-listed Wilmar International, began closing their operations in Ukraine and moving employees to safety on Thursday (Feb 24) as executives grappled with the implications of a full-scale invasion by Russia and Western sanctions.

As recently as last week, foreign companies in Ukraine had contingency plans in place but, for the most part, did not believe that Russia would actually invade, Ms Anna Derevyanko, deputy director of the European Business Association, said at the time.

That shifted rapidly in the early hours of Thursday as Russian air strikes hit critical Ukrainian cities.

In response to queries from The Straits Times, Wilmar said on Thursday that its joint venture in Ukraine, cooking oil processor Delta Wilmar, has suspended operations in both its processing plants in Odessa, Ukraine, to ensure employees’ safety.

The company noted that Delta Wilmar’s contribution to group profits is “not significant” and that it does not “expect a material impact on the Wilmar International group’s overall business”.

UPS and FedEx have suspended services in and out of the country.

Carlsberg, one of the world's largest brewers, said it had suspended operations at two factories near heavy Russian assaults, in eastern Ukraine and in capital Kyiv, to protect workers. The Denmark-based conglomerate, which employs 1,300 people in the country, mostly Ukrainian nationals, also temporarily closed a third brewery in Lviv after natural gas supplies that powered the operation were disrupted.

The swiftness of Russia's multipronged assault sent shudders through international boardrooms and raised questions for businesses about how to confront the rapidly shifting geopolitical landscape.

"Today is a dark day for all of us. The attack on Ukraine represents a turning point in Europe; a war was simply unthinkable for many people," Mr Christian Bruch, chief executive officer of Germany-based Siemens Energy, said at the company's general meeting on Thursday. "We as a company now have to analyse exactly what this situation means for our business."

At Hamburger Hafen und Logistik, which provides transport and logistics services, the last of 480 employees at its terminal in the port of Odessa, Ukraine, evacuated early on Thursday morning.

In a sign that the conflict may not be short-lived, the company said it would pay employees one month's salary in advance to allow them to "stock up on essential goods".

ArcelorMittal, which operates one of Europe's biggest steel mills in central Ukraine, said it would slow production to "a technical minimum" and was stopping work at its underground mines. The company employs 29,000 workers and contractors in the country.

Japanese auto supplier Sumitomo Electric Industries, which employs some 6,000 people in Ukraine to make wire harnesses, said it suspended operations at its factories there starting from Friday.

Global shipping giant Maersk halted port calls in Ukraine until the end of February and closed its main office in Odessa, while Danish freight forwarder DSV said it had shut its operations in the country.

Many companies with exposure to Russia are waiting for more clarity on Western sanctions and assessing the impact of those already announced.

Washington on Thursday announced measures that impede Russia's ability to do business in major currencies, along with sanctions against banks and state-owned enterprises. It earlier imposed sanctions on the company behind the Nord Stream 2 gas pipeline, while European Commission chief Ursula von der Leyen said Brussels would block Russian access to key technologies and markets.

Jet engine makers Rolls-Royce and Safran said on Thursday that they had been ramping up supplies of titanium.

The use of titanium, much of it supplied by Russia, has soared in recent years as planemakers try to make jets lighter.

“We have been watching this situation for several weeks and have decided since the start of the year to increase our stocks of titanium, especially through distributors in Germany,” said Safran chief executive Olivier Andries.

The French company is also looking to diversify its sources of the metal, as is Britain's Rolls-Royce, which said 20 per cent of its titanium came from Russia.

Large chip companies said they expect limited supply chain disruption from the conflict for now, thanks to stockpiling and diversified procurement, but some industry sources said there could be an impact in the longer term.

Ukraine supplies more than 90 per cent of American semiconductor-grade neon, critical for lasers used in chipmaking.