How the Ukraine war has one crane company at the mercy of Russian aggression
April 21, 2022 By Don Horne
Konecranes condemns the war in Ukraine – and for that company, it is a very personal thing.
“We are saddened and upset by the war and deeply concerned for our over 400 Ukrainian employees and their families,” reads a statement from the company. “Their safety and well-being are number one priority for Konecranes as a company, and the Konecranes community is supporting them and their compatriots through local and global efforts.”
Konecranes operates a crane and component factory in Zaporizhzhia, in the south-eastern part of Ukraine. The factory is one of the Industrial Equipment supply factories for crane components and a crane manufacturing unit for Eastern Europe deliveries.
It also offers extra capacity for Konecranes’ western crane deliveries specialized in large steel structures. In addition, Konecranes has employees working in crane service, port service, spare parts and industrial crane sales operations mainly in Odessa, Mariupol and Zaporizhzhia.
Konecranes has supported its employees and their families based in Ukraine throughout the war and continues to pay salaries and wages to its Ukrainian employees.
The production at the Ukrainian factory was stopped after the war started, with the planned production has been redirected to other Konecranes manufacturing sites. As the level of uncertainty regarding Konecranes’ operations in Ukraine remains high due to the ongoing war, Konecranes has impaired all Ukraine related assets, including inventories and receivables, in the first quarter. The impact of the impairments on operating profit is approximately EUR 8 million in the negative.
Konecranes condemns Russia’s aggression towards Ukraine and decided already in the early days of the invasion to not take any new business from Russia. The downscaling of the Russian business will be gradual and will be done in accordance with local laws and regulations, and the safety and wellbeing of our Russian employees will be prioritized. In 2021, Konecranes’ sales to Russia totaled EUR 55 million.
As a result of this decision, in the first quarter, Konecranes has written off EUR 79 million of orders from Russia and cancelled EUR 32 million of sales to Russia, as these projects have been discontinued. The orders had been booked and the project revenues recognized prior to 2022. The impact of the cancelled sales on Q1 operating profit is approximately EUR 39 million negative.
In total, in the first quarter, the negative impact of the cancelled sales to Russia and the impairments of assets in Ukraine is EUR 44 million on EBITA and EUR 47 million on operating profit. The full amount will be included in adjustments.
As the result impact of the sales cancellations and impairments is included in the adjustments, they do not impact Konecranes’ guidance for 2022 stated on February 3, 2022, as follows: Konecranes expects net sales to increase in full-year 2022 compared to 2021. Konecranes expects the full-year 2022 adjusted EBITA margin to improve from 2021.
Konecranes will report its January-March 2022 Interim Report on April 27, 2022.
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