AAK to exit Russia permanently

By Michelle Perrett

- Last updated on GMT

Johan Westman ceo: 'The war has also affected the global economy'
Johan Westman ceo: 'The war has also affected the global economy'

Related tags: Supply chain

AAK, the global fats and oils business, is the latest company to announce it is to exit from its operations and investments in Russia, following the Ukraine war.

In March, AAK communicated a temporary halt of deliveries to, and sales in, Russia. The company said that it has taken a careful evaluation which has resulted in a decision to permanently wind up the business in the country. 

AAK said it has initiated this 'sensitive and difficult process', focusing on executing it in a controlled manner to ensure both legal compliance and the safety of its employees. Russia makes up for some 3% of AAK’s volumes, as measured in metric tons.

Join venture exit

Part of the exit refers to leaving a local joint venture, in which AAK holds a 75% stake. The company said the aim is to reach an agreement to let the AAK stake revert to the partner from which it was originally acquired. The joint venture makes up for approximately half of AAK’s volumes in the country or 1.5% of the group’s total volumes, as measured in metric tons.  

The remaining half of the Russian volumes are imported to and sold via AAK’s Russian sales company, which will be closed. Most of these volumes are reported in business area Chocolate & Confectionery Fats. AAK is now working diligently to re-route as much as possible of this to customers in other geographies.

Income statement cost

The exit is estimated to lead to a cost of SEK 300–350m, affecting the income statement in the second quarter. 

As I write this, the war in Europe is still ongoing, directly impacting millions of people, including AAK colleagues and partners in the region. We stand with all of those impacted by this tragedy,”​ said Johan Westman, President and CEO. 

“The war has also affected the global economy, adding to already high inflationary pressures. In spite of this, we started the year on a strong note – with growth in volumes and, even more so, in operating profit, which reached an all-time high.” 

Russia makes up about 3% of AAK’s total volumes, as measured in metric tons. Approximately half relates to Chocolate & Confectionery Fats (CCF). The company said it expects to be able to gradually re-route some of the CCF volumes to other geographies, limiting the total impact on operating profit to approximately SEK 75–100 million this year.

 

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