If since the beginning of the Russian invasion of Ukraine, the percentage of companies that closed operations in Russia has risen sharply by mid-April 2022, in the last 13 months the ratio of those who leave or stay is virtually unchanged, although we still see a periodic increase in the share of those companies that remain in the Russian market (by adding new companies to the database, 86 were added in September 2023). However, if to operate with the total numbers in KSE database, about 35.1% of foreign companies have already announced their withdrawal from the Russian market or suspended their activity, but another 41.5% are still remaining in the country, 15.3% are waiting and only 8.1% made a complete exit³.

If since the beginning of the Russian invasion of Ukraine, the percentage of companies that closed operations in Russia has risen sharply by mid-April 2022, in the last 13 months the ratio of those who leave or stay is virtually unchanged, although we still see a periodic increase in the share of those companies that remain in the Russian market (by adding new companies to the database, 86 were added in September 2023). However, if to operate with the total numbers in KSE database, about 35.1% of foreign companies have already announced their withdrawal from the Russian market or suspended their activity, but another 41.5% are still remaining in the country, 15.3% are waiting and only 8.1% made a complete exit

As it is visible on the charts based on data for 2021 above, roughly similar % of exited is obtained based on number of companies (19%) and on share of revenue withdrawn (23.4%). At the same time, a totally different picture is for those who are still staying – 44% of companies represent 30.6% of revenue and 15% of waiting companies represent 18.5% of revenue generated in Russia. The conclusion could be that smaller companies with lower revenue prefer to stay and those who have higher revenue are more eager to wait, limiting their investments as an excuse (at the same time they continue to earn and reinvest their local profit).

KSE Institute has already collected and analyzed data on revenue, capital, assets and net income (profit or loss) in 2022 for ~1410 companies (about 90 companies the data of which we have collected previously have not provided their reporting) and provides below the detailed analysis, more details will be provided further, once we have complete information.

As you can see from the charts above, companies which fully exited Russia were able to generate 2.2% less of revenue in 2022 (21.2% from total volume) than in 2021 (23.4% from total volume, which is clear as most of them left the country before the year-end). Leaving companies also generated much less (-7.1%) revenue in 2022 (20.4% from total volume) than in 2021 (27.5% from total volume). At the same time, staying companies were able to generate much (+11.0%) more revenue in 2022 (41.6% from total volume) than in 2021 (30.6% from total volume). Companies with status “wait”⁴ gained almost the same share (-1.6%) of revenue in 2022 (16.9% from total volume) vs 18.5% from total volume in 2021. So the key conclusion is that money matters for those companies who are still tied with its local business in Russia.

Summarizing the results of new data received for 2022 and comparing it with 2021 we can see the positive trends in terms of significant revenue and capital decline. Only assets have almost not changed ($323.4bn⁵ in 2022 vs $328.5bn in 2021) and will probably even increase once we receive remaining reporting for ~90-100 companies (until companies decide not to disclose it). KSE Institute has published before a large-scale study “How the income of foreign businesses in the Russian Federation has changed in 2022 and why so many companies still do not leave“. You can familiarize yourself with the English version by downloading the report at the following link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4453963.

In July 2023, the KSE Institute jointly with the B4Ukraine coalition partners published a new research entitled “The Business of Staying: a closer look at multinational revenues and taxes in Russia in 2022”, you can download its full text in English using the following links: https://kse.ua/wp-content/uploads/2023/07/The-Business-of-Staying-1.pdf and https://b4ukraine.org/pdf/BusinessOfStaying.pdf. Also, in September 2023, the KSE Institute jointly with the B4Ukraine coalition partners published another research entitled “The Business of Leaving: How Multinationals Can Responsibly Exit Russia”, you can download its full text in English here: https://b4ukraine.org/pdf/B4Ukraine_Business_of_Leaving_report.pdf 

More infographics and analytics see in the special section of our website at the link https://leave-russia.org/bi-analytics

Key updates from the latest Russian news:

FT: Billions of dollars of foreign company profits are stuck in Russia

18.09.2023 | The Financial Time (FT) newspaper reported that companies from unfriendly countries that continue to operate in Russia received more than $18 billion in profits in 2022. However, these funds were frozen in Russia.

https://www.kommersant.ru/doc/6223374 

The Ministry of Finance allowed the restoration of foreign exchange controls

20.09.2023 | Deputy Minister of Finance of Russia Alexey Moiseev said that the government is now considering the option of partially restoring foreign exchange controls. These measures, he said, are needed to curb the outflow of capital to friendly countries. The Bank of Russia opposes this idea.

https://www.kommersant.ru/doc/6225076 

Exports of medical products from Japan to Russia increased by 577%

20.09.2023 | Japan increased its exports of medical products to Russia by 577.7% in August 2023 compared to the same period in 2022, according to data from the country’s Ministry of Finance.

https://www.rbc.ru/rbcfreenews/650a4c339a79475579ead514 

Banks and brokers from 31 countries will be allowed to trade in foreign exchange in Russia

21.09.2023 | The Russian government has approved a list of countries whose banks are allowed to trade on the Russian foreign exchange market. The corresponding order was signed by Prime Minister Mikhail Mishustin. Now banks and brokers from friendly and neutral countries are allowed to trade on the Russian foreign exchange market, as well as on the derivatives market. These countries include: Azerbaijan, Armenia, Belarus, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Algeria, Bangladesh, Bahrain, Brazil, Venezuela, Vietnam, Egypt, India, Indonesia, Iran, Qatar, China, Cuba, Malaysia, Morocco, Mongolia , UAE, Oman, Pakistan, Saudi Arabia, Serbia, Thailand, Turkey, South Africa – 31 countries in total.

http://government.ru/news/49557/ ; https://www.kommersant.ru/doc/6225436 

The Central Bank extended the ban for non-residents on transfers abroad from broker accounts

26.09.2023 | The Bank of Russia has extended restrictions on transfers abroad of funds of non-residents of unfriendly countries from broker accounts for six months. Restrictions apply to transfers from accounts of both individuals and legal entities opened with Russian brokers and trustees.

https://www.kommersant.ru/doc/6238229 

Experts estimate the number of foreign brands that have left Russia since 2022

26.09.2023 | According to analysts at the consulting company Nikoliers, about 140 international brands that were present in Russian shopping centers at the beginning of 2022 have changed their work status. Among them, 32 (approximately 23%) ceased operations completely, and another 52 brands (approximately 37%) resumed operations after selling or transferring the business to Russian management. At the same time, over the past year and a half, the Russian market has been replenished with 27 new brands from other countries. Most of the newcomers come from Turkey, Lebanon and Belarus.

https://realty.rbc.ru/news/65129f609a79470b5a85784f 

The government will force companies leaving Russia to pay more than 100 billion rubles to the budget

27.09.2023 | In 2023, the federal budget should receive 114.5 billion rubles. in the form of gratuitous proceeds from non-governmental organizations and foreign companies selling assets in Russia. This assessment is contained in the explanatory note to the draft federal budget for 2024 and the planning period 2025–2026.

The authorities planned to receive ₽114 billion of gratuitous fees from business. Revenues “from other gratuitous income from non-state organizations to the federal budget, including those related to the sale of assets by foreign companies”, in 2023 will amount to 114.5 billion rubles. Such an assessment is contained in the explanatory note to the federal budget project for 2024 and the planning period 2025–2026. This article will amount to about a quarter of all free revenues in 2023.

https://www.moscowtimes.ru/2023/09/27/pravitelstvo-zastavit-uhodyaschie-iz-rossii-kompanii-zaplatit-v-byudzhet-bolee-100-mlrd-rublei-a108092 ; https://www.rbc.ru/economics/27/09/2023/6512c9419a79477313495b96 

Merrill Lynch Securities up for sale

27.09.2023 | One of the last remaining brokers in the Russian Federation with foreign shareholders, Merrill Lynch Securities, which was among the top ten on the market before the outbreak of hostilities in Ukraine, may be sold. The company has no customer base left, and the infrastructure is outdated and requires investment, experts warn. Therefore, the buyer is an investor unrelated to the main business, which does not exclude the resale of the company under a new name.

https://www.kommersant.ru/doc/6238430 

Profit of the banking sector by the end of 2023 may exceed 3 trillion rubles

27.09.2023 | Forecasts for the performance of Russian banks in 2023 are becoming increasingly optimistic. Expert RA analysts expect the sector’s profit for the year to be more than 3 trillion rubles, which is a third higher than the record of two years ago.

https://www.kommersant.ru/doc/6238366 

Nabiullina spoke out against the Chinese model for the Russian financial market

27.09.2023 | On September 26, Chairman of the Bank of Russia Elvira Nabiullina gave a lecture for students of the Faculty of Economics of Moscow State University. M.V. Lomonosov. During the lecture, Ms. Nabiullina, among other things, spoke out against the “Chinese way” and stated that segmenting the domestic and external foreign exchange markets is a backward movement for Russia.

https://www.kommersant.ru/doc/6239016 ; https://www.moscowtimes.ru 

The Bank of Russia extended restrictions on transfers of funds abroad for six months

29.09.2023 | The restrictions will remain in effect until the end of March 2024. Citizens will be able to transfer no more than $1 million or the equivalent in foreign currency to foreign banks per month. Through money transfer systems, you can transfer no more than $10 thousand per month.

https://www.kommersant.ru/doc/6240094 

In 2022, the profits of Chinese companies in the Russian car market increased by 91%

29.09.2023 | In 2022, the revenue of Chinese companies in the Russian car market increased to 346 billion rubles. We are talking about the companies Chery Automobile, Great Wall Motor, Geely, JAC Motors, Changan Automobile, China FAW Group and Dongfeng Motor. According to Forbes, these companies now have virtually no competitors left in the Russian market.

https://www.kommersant.ru/doc/6240096

MONTHLY FOCUS: On leaving the Russian Federation. Results of September 2023

In this digest, we will summarize the results of September 2023 and provide year-to-date statistics on full exits since the beginning of the war.

In our project, we pay special attention to companies that have their own legal entities in Russia, pay taxes, hire staff, etc. 

We would like to remind you that we assign the status of “exited” exclusively based on the results of changes in the composition of company owners in the Russian Federation reflected in the official register, or when the closing of the transaction was notified in another official way (for example, in press releases or during the disclosure of information on the Stock Exchange by public companies) or based on company’s liquidation.

There are about 1’500 companies identified in the KSE database with revenue data available of more than $306 billion in 2021 and ~$217 billion in 2022. And at least 284 of them have already been sold by local companies or were liquidated and left the Russian market. In September 2023 KSE Institute identified +11 new exits⁶, total number of exits observed since the beginning of Russia’s invasion reached 284.

On the chart below, share of exited and other statuses based on revenue-2021 allocation is shown. It is worth mentioning when we analyze status “leave” it is also worth paying attention to sub-statuses (suspension could be treated as a temporary pause in operations while withdrawal – is a clear sign of the company’s intention to exit Russia in full).

% of exited is 23% based on revenue allocation, those who are leaving represent 28% of total revenue (with 36% share of suspensions and 64% of withdrawals sub-statuses), % of staying companies represent 31% of revenue and 18% are waiting companies based on revenue generated in Russia in 2021. So we observe the situation that % of leaving companies is greater than % of staying ones (which means that more than 50% of pre-invasion revenue is leaving Russia).

If we take a look at the same chart based on revenue-2022 distribution – the picture will be a bit different:

% of exited is 21% based on revenue allocation, those who are leaving represent only 21% of total revenue (with 28% share of suspensions and 72% of withdrawals sub-statuses), % of staying companies represent 41% of revenue and 17% are waiting companies based on revenue generated in Russia in 2022.

Key conclusion could be the following: on the general background of falling revenue in 2022 companies which made the decision to leave earned less than those who stayed and more companies migrated from the “suspension” sub-status to “withdrawal” showing their increased intention to cut ties with Russia.

Geography is the most important factor that explains companies’ decisions. Companies from “unfriendly countries” (a term coined by the Russian Federation to describe countries that joined the international sanctions policy against the Russian Federation in response to its invasion of Ukraine) are much more likely to exit.

Here are also the breakdowns by by countries and by industries of the companies which already exited:

So, as of the end of September 2023, companies from 35 countries and 40 industries have already exited showing their true reaction to the war started by Russia and its not provoked aggression against Ukraine. Most of the companies were headquartered in the USA, Germany, Finland, Great Britain and France and operated in the “Automotive”, “Consumer goods and closing”, “Electronics”, “Energy, oil and gas”, “Finance and payments” and “Food & Beverage” industries.

For a more accurate explanation of the behavior of companies, it is necessary to take into account several factors at the same time. According to our analysis, companies in the technological and communication sector are most prone to exit (as opposed to those who remain in the Russian Federation). Partially due to the fact that they have fewer physical assets in the Russian Federation than in the production sectors. Companies that produce products for the daily consumption of the population in the Russian Federation are less likely to leave (this is one of their key explanations why they do not leave). Pharmaceutical companies that explain their decisions by concern for public health tend to be the “staying” companies.

Companies with larger local revenue and public companies are also inclined to leave the market: presumably, large multinational corporations are more responsible for their reputation and respond to investors’ requests. In addition, it is likely that the exit of the largest multinationals from the Russian Federation is not as painful for them for global business as it is for smaller companies, for which the share of the Russian market can be significant.

Here is the list of “exiters” that we were able to identify recently: Bilfinger (Probably internal transfer as new owner became foreign private individual), British American Tobacco, Fletcher Hotels, IHI Corporation, Ingram Micro, Magna International, Mondi Group, National Investment Company, Ponsse PLC, PPG, Volvo Cars. Also, the following companies made partial exits selling part of their local assets: Philips, Softline International, Knorr-Bremse.

Most of these exits were identified before in their preparation phase. Also, we are not in a hurry to assign “exited” status to many companies that are literally on the verge of exit, although they have not yet finalized this process (even though some of them have already been nationalized, partly sold their business or initiated bankruptcy procedures).

Here are just some of them: Amedia (The Russian printing assets of the Norwegian holding Amedia (Prime-Print printing house network) were transferred to the management of the Federal Property Management Agency – by presidential decree), Baring Vostok Capital Partners (The fund of American investor Michael Calvey Baring Vostok sold a majority stake in the collection agency First Client Bureau (PKB) to the structure of Russian entrepreneur Roman Kovalev), Cargill (The US giant Cargill is selling a share of its grain business in Russia), Danone (The full name was changed from DANONE TRADE LLC to H&N TRADE LLC. 20.09.2023: The entry about the founder of JSC “DANONE RUSSIA” was deleted; JSC “H&N” becomes the new founder of the organization), Diageo (Moscow Brewing Company (MPK) decided to supply Irish Guinness and has already imported the first batch of the drink. IPC imported a batch of Guinness Draught, which includes kegs with a capacity of 30 liters. Guinness will be sold in Russia, Kremlin agency claims), Fraport (Fraport to sell out at Saint Petersburg Pulkovo: part one – sale could be possible this year), Glencore (Glencore stopped being Russneft’s shareholder in 2022. Sberbank tries to seize Glencore’s Russian assets over oil debt), Hyundai (Hyundai Motor may sell the Russian plant to the local firm. Previously Hyundai Motor was in talks to sell the Russia plant to Kazakhstan), IKEA and its owner Ingka (The owner of IKEA has found a buyer for the remains of his assets in Russia, 14 shopping centers), Intesa Sanpaolo (Putin allowed the largest Italian bank to leave Russia), Makrochem SA (On August 11, 2023, the MAKROchem Group closed its representative office in Russia. The Management Board of the MAKROchem Group has decided to sell all shares in the subsidiary in Russia by the end of 2023. Preparations are currently underway to conclude an appropriate agreement, and MAKROchem will inform about the final sale of shares in a special announcement).

The next review of deals for October 2023 will be available in a month.