Amcor to scale back operations in Russia

ASX-listed global packaging giant Amcor says it will begin scaling back operations in Russia in response to the Kremlin’s invasion of Ukraine.

An operator sets up a printing machine at an Amcor packaging plant. Picture: Bloomberg via Getty Images

ASX-listed global packaging giant Amcor says it will begin scaling back operations in Russia – suspending projects and investments in response to the Kremlin’s invasion of Ukraine.

Amcor has operated in Russia for more than two decades – rapidly expanding in the former Soviet Union and in 2004 founding a new company – Amcor Flexibles Novgorod – to serve the market.

In a letter to staff, Amcor chief executive Ron Delia said the scaling down of activities would mean the company would focus manufacturing on supporting “only existing multinational customers”.

Amcor would discontinue exports from the country as soon as possible, wrote Mr Delia.

The company operates a number of factories in Russia, and has a plant in Kharkiv, Ukraine.

“We are deeply concerned about the humanitarian crisis in Ukraine and are actively contributing to the relief efforts,” Mr Delia wrote.

“We will also continue to explore all strategic options for the business while assessing the rapidly evolving situation.

“We will take additional actions as needed.”

Amcor generates between 2 and 3 per cent of total sales from its Russian operations.

It becomes the latest company among a long list to begin moving away from Russia after Vladimir Putin’s invasion of Ukraine.

Earlier this week, Fonterra, the world’s biggest dairy exporter, became one of the first trans-Tasman companies to permanently sever its Russia operations over Moscow’s invasion of Ukraine.

Fonterra began its partnership with Foodline, which was the co-operative’s primary distributor of butter and cheese in Russia, in 2005. Thirteen years later the two companies formed the Unifood joint venture, which involved manufacturing Anchor-branded butter and cheese, using Russian-sourced and imported ingredients, among other products.

Meanwhile, rubber gloves and protective clothes maker Ansell has suspended all imports into Russia, where it employs 120 people and recently opened a factory.

In a brief note to clients, Macquarie analysts said Amcor’s operations in Russia would have contributed around $US350m ($473m) in sales.

“This includes one flexibles plant and two tobacco cartons plants. We note that cartons are typically higher margin than overall flexibles average,” the Macquarie note reads.

“No other financial detail provided … Hence for now, this is a scaling down of operations rather than a complete exit. An exit would likely see asset writedowns and a larger earnings impact.

“There is still risk around this as (Amcor) continues to explore all strategic options for the business while assessing the rapidly evolving situation and will take additional actions as needed.

“(Amcor) has done a good job of managing raw material and supply chain pressures over the last year and we expect this to continue,” the analysis reads, noting two customers – Pepsi and Philip Morris – had also scaled down their operations in Russia in recent weeks.