Diversified industrial multinational Barloworld says it has sufficient funding facilities to run its Russian operations, despite payments from customers affected via the Russian central bank system that’s been harmed by crushing sanctions by the West over the invasion of Ukraine.
Russia has been hit with severe disruptions to its exports of all commodities, from oil to grains, after Western nations imposed stiff sanctions on Moscow that have sent the rouble tumbling to record lows in previous days.
On Tuesday, Barloworld said its Equipment Eurasia operations, which include the combined UK, Russian and Mongolian Caterpillar operations that generated R10.7bn ($718m) in revenue in 2021, were ongoing.
“We are continuing to work in Russia,” the group told Business day.
The share price fell 6.61% to R114.73 on Tuesday following the announcement. It is now down nearly 24% so far this year.
The region is a key market for Barloworld, with a diverse customer base including large mining houses, junior and contract miners, infrastructure, forestry and oil and gas. Its resources portfolio covers a range of commodities including gold, copper, nickel, diamonds and thermal coal, among others.
Russia contributes 78% of Equipment Eurasia’s revenue and 20% of the group’s revenue from continuing operations.
In a statement on Tuesday, the company with operations in Russia, Mongolia and Siberia, assured investors that it did not use banks that had now been barred from the Swift system, nor did it have excess cash in Russia.
It said it was equipped with sufficient funding facilities to run its Vostochnaya Technica (VT) operations, which has been present in Western and Eastern Siberia, Yakutia, as well as the Russian Far East since 1998, with 27 branches and its head office in Novosibirsk.
The centenarian company noted that most of VT’s customer contracts were executed with reference to dollars and settled in rouble equivalent.
On Monday, the Russian central bank more than doubled interest rates to 20%, and the Moscow stock exchange was shuttered for the day as Western nations unleashed sanctions on Russia over its invasion of Ukraine.
Barloworld said it would only be able to determine and estimate the effect and adjust its response plans accordingly, once the hoard of sanctions that had been communicated through the news feeds were legislated.
“Barloworld will continue to draw on the group’s experience from the historic events that created financial uncertainty in Russia in 2014 and previously in Angola, and adapt to the current environment as circumstances dictate,” the group said in the statement, adding it was monitoring developments that might affect its suppliers, customers and the company.
A voluntary pre-close update is expected from the company on March 29.
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