The consequences of the embargo and the crisis of 2014-2015 are pressing on the Finnish business. And the new sanctions and the weakening of the ruble only add uncertainty. At the same time the economy of native Suomi grows 2.5 times faster than Russian. Seeing the prospects of the home market, other companies are ready to part with the assets, but it is not yet possible to find a buyer.
The biggest loss was the departure of the Finnish corporation Kesko. The company, which in 2017 ranked second in the ranking of "Fontanka" "The Most Influential Finnish Companies in Russia," in 2018 sold French Leroy Merlin its last asset - a network of stores for home and repair "K-Rauta." Prior to this, the retailer parted company with the sale of sports goods Intersport and the product network "K-Ruoka".
As explained by President Kesko Mikko Helander, Russian business could not reach the planned indicators. Thus, according to SPARK, the revenue of K-Rauta was almost unchanged from 2014, remaining at 13 billion rubles, while the loss only grew, reaching a maximum of 817 million rubles in 2016. Thanks to the optimization program in 2017, it managed to cut threefold - to 267 million rubles. But further development in Russia would require from the company too significant investments, to which it was not ready, stressed Mikko Helander. In just 12 years of its presence on the Russian market, Kesko, according to Fontanka estimates, has invested 465 million euros.
The construction concern Lemminkainen, which was one of the 30 largest Finnish companies on the Russian market, also ceased to exist independently (revenue in 2016 was 4 billion rubles). In recent years, the company has not felt very confident in Russia - it did not create its own projects, but specialized in contract construction and management of an industrial park in Kaluga. In early 2018, Lemminkainen's business became part of the YIT group and began to work under this brand. The deal affected not only Russia, but all the countries of the concern's presence. So the only asset Lemminkainen remained in Finnish hands.
Two more Finnish players sold their business to the Russians. Thus, 18 clinics "AVA-Peter" and "Scandinavia" in late 2017 moved from the structures of the Finnish doctor and entrepreneur Ralf Ashorn and his partners to OOO "Severgrup", which manages investments in the interests of the owner of Severstal Alexei Mordashov. The revenue of OOO AVA-Peter in 2017 amounted to 3.2 billion rubles, profit - 352 million rubles. Both indicators decreased compared to 2016. The company also had problems with financing. As reported by the portal "Doctor Peter", foreign banks and investment companies with which "AVA-Peter" agreed to build the second stage of the "Northern Clinic" in St. Petersburg, could not participate in financing this project. After the arrival of Russian investors, the work resumed, but the time had to be shifted anyway.
The Russian business of the Ruukki steel fabricator manufacturer should be transferred to the ownership of Salavatneftemash LLC by the end of 2018. The owner of the Finnish company, the Swedish holding company SSAB, has agreed on a deal with the Russian company and is awaiting the approval of the Federal Antimonopoly Service. "Our business in Russia is shrinking, and the prospects are not yet clear," said Sami Aronen, president of Ruukki Construction. According to SPARK, following the results of 2017, the revenue of Ruuky Rus LLC fell by almost one and a half times, to 4.2 billion rubles. The company continued to work in negative territory, although the loss fell by half, to 176 million rubles. As explained in "Fontanka" in the company, the transaction will include the company's factories in Obninsk and Balabanovo, as well as the rights to the Ruukki brand in Russia. The retail chain Ruuki Express will be closed. At the same time, Ruukki Construction itself will supply its products to Russia as an exporter.
But the sale of part of the business of the Finnish company Kiilto Teknos, the painter of Russia, did not affect Russia. As explained to Fontanka in the Russian division of Kiilto, coatings for parquet, which entered the deal, were not produced in our country, they were exported here. Thus, the three enterprises of Kiilto-Clay in Kaluga, Ramenskoye and Leningrad Oblast continue to belong to Kiilto.
who is next
About plans to sell business in Russia, in full or in part, several more players reported. So, the Finnish Stockmann from the end of 2016 is looking for a buyer for its last asset - TC "Nevsky Center", but has not yet succeeded. In early August, it became known that the Morgan Stanley Foundation stopped negotiations. Other contenders lost interest in the asset even earlier. At the same time, the Finnish concern does not abandon its intention and continues to seek a buyer, as the company reported in the report for the first half of the year. Real estate management is not a priority area for a Finnish retailer. But there is still no special hurry: according to SPARK, in 2017 Stockmann SPb Center LLC increased its revenue by 1%, to 1.6 billion rubles. The profit grew by 5%, to 650 million rubles.
The developer SRV in the spring of 2018 announced the desire to part with the shopping center "Pearl Plaza". As the regional director of SRV in Russia, Anders Lilenstolpe, commented, the company plans to completely abandon shopping centers in Russia, "when the situation in the market is suitable, all areas will be commissioned and rental income will reach a stable level." But, according to experts, if Pearl Plaza is a sought-after asset, then it will be problematic to find willing to buy "Ohta-Mall", which is not even fully filled with tenants yet.
The desire to part with not the worst assets can be connected with the prospects in the home market. Thus, the economy of Finland in the first quarter showed an increase of 3.1% compared to the previous year, which was the highest in the last seven years. The driver of GDP growth was an increase in consumer spending, activity in industry and construction. In the first half of the year, growth was 2.8%. The Russian economy, for comparison, grew by 1.3% in the first quarter, by 1.7% over the six months. But next year its rates have all chances to slow down, and in case of a significant drop in oil prices and tightening of anti-Russian sanctions - and "go to the negative area", warns the Central Bank.
According to the head of the Finnish-Russian Chamber of Commerce Jaana Rekolaynen, the uncertainties in the future for players from Suomi are added exactly new sanctions and possible reaction to them from Russia. Since the law on retaliatory measures passed in April allows for very broad interpretations, the risks for investments and foreign companies have grown significantly. "New American sanctions in connection with the case of the Violins threaten state banks, trade with Russia, the energy sector," she commented.
Business in the risk zone
In the negative zone, at least seven other Finnish companies were at the end of last year. For example, the retailer Prisma slightly reduced revenue (by 2%, to 9.9 billion rubles), but significantly increased the loss (more than 1.5 times, up to 883.7 million rubles) compared to last year. The company was forced to resort to rigid optimization, closing four stores in 2018. "At the moment, we see that the changes made positively affect the financial performance of the company," commented Prisma. But it is not yet clear whether the company will be able to find sources of growth - the development of a new format, stores near the house, while stalling.
Three more companies, which in 2016 brought revenue to shareholders, 2017 finished with losses. Among them, the manufacturer of concrete LujaBetoni (loss of 31 million rubles against the profit of 4.9 million rubles a year earlier), the network "University Pharmacy" (a loss of 6.1 million rubles against 9.2 million rubles in profit), as well as the supplier and manufacturer of electrical equipment Ensto loss of 17.9 million rubles against profit of 1.9 million rubles).
Roman Bespalov, the head of the Russian subsidiary LujaBetoni, Luyabetomiks, explained the worsening of the indicators by completing work on the construction of Okhta Center. "Now we are making less high-quality concrete," he said. Ensto's losses can be associated with significant investments in the transfer of production lines from Finland to Russia. As Tatiana Novatskaya, the head of the Russian division, emphasized, the company's strategy for the next three years is to expand the range and volume of output. "University Pharmacy" explained the departure to the negative zone of increased competition and dumping by Russian players. But while the company does not intend to turn off the business. "Our founders believe that there is potential for growth, although, most likely, this is not the prospect of the next half-year," commented the general director of the University Pharmacy, Olga Lipina.
The three players, on the contrary, managed to reduce losses. For example, the Russian division of the manufacturer of dairy products Valio has reduced the loss seven times, to 16.5 billion rubles. The company helped to expand the range and increase localization. But the exit to the positive zone is hampered by pressure on prices from competitors, according to Valio. "Daughter" meat producer Atria "Pit-Product" also worked in a minus, but the amount of losses was 1.5 times less than in 2016, - 276 million rubles. Earlier, the manufacturer also complained about the pressure of Russian competitors and the increase in prices for raw materials. By 23%, to 147.9 million rubles, the loss of the Russian "daughter" Paroc, which specializes in the production of insulating materials, has reduced the loss. But the company declined to comment on the results due to the change of shareholders: at the beginning of the year, it announced the sale of the entire business to the US concern Owens Corning.
"Fontanka" is preparing the third study "The most influential Finnish companies in Russia - 2018". Find out who entered the TOP-30 largest players from Suomi on the Russian market, you can at the end of November. You can get acquainted with the preliminary results in the thematic heading "Leaders of the Finnish business", and with the conditions of participation in the project - in the presentation.