EU sanctions obstruct Hempel’s long-running attempt to hand off a Russian factory with 124 employees. The company now hopes for a legal breakthrough.
Photo: Hempel
Hempel aimed to be out of Russia by the turn of the year, but the sale of a large factory remains stuck for the ninth month running.
The major manufacturer of marine coating finds itself on uncertain legal ground, having difficulties interpreting sanctions targeting Russia following the country’s invasion of Ukraine.
It is still our plan to divest our Russian activities as soon as possible
Hempel
”A project team here at Hempel has diligently been working on the legal aspects of the sale and, as also experienced by other Danish companies, we have had some challenges due to interpretation of the EU sanctions,” writes Hempel’s press division in an email.
The fund-owned Danish coating produer has been operating in Russia since 1996, currently managing a factory in Ulyanovsk, east of Moscow, with 124 employees.
When Russia invaded Ukraine on Feb. 24, 2022, Hempel quickly decided to terminate all Russia-related business affairs, meaning a halt of new orders along with deliveries to, from and within Russia.
A month later, Hempel chose to pull out of Russia altogether, with CEO Michael Hansen pointing to both ethical and practical reasons in an interview with WPO.
The aim was to sell the Russian factory before the end of 2022.
Staff sent home
But Hempel has not yet managed to sell the factory, made non-operational in the meantime.
Staff have been sent home except some administrative personnel, with the 124 employees still on the payroll at the Danish group, headquartered in Lyngby near Copenhagen.
Hempel
According to Hempel, the problem is that the EU’s sanctions on Russia, Russian individuals, companies and banks have been difficult to interpret.
The coating manufacturer has been concerned that a sale of the Russian factory could lead to unintended violation of EU sanctions.
Hempel is not alone among Danish companies in having had trouble with handing off Russian assets due to sanctions. Maersk, for instance, has faced similar problems.
Although Maersk succeeded in selling its stake in a major port company last summer, the shipping giant still sits on a number of smaller investments, namely two storage facilities along with four tugboats owned by subsidiary Svitzer.
”To paint the whole picture, we also have a tanker lying in a Russian port. We came to own the ship in relation to a previous company transaction, and it’s not part of our commercial business,” writes Maersk in a reply to WPO.
”We are working on getting it out of Russia in compliance with current sanctions,” the company adds.
Hopes for Q1 sale
However, with the EU’s ninth sanctions package from December 2022, the stage could be set for a sale, as it’s ”now possible for companies to apply for a special permit to divest Russian assets without breaking the sanctions. A sale will be subject to regulatory approvals in Russia as well,” writes Hempel to WPO.
”It is still our plan to divest our Russian activities as soon as possible, but it is difficult to give a concrete timeline for when we expect the process to be concluded. Hopefully, it will be in the first quarter of 2023,” the company adds.
Hempel does not deny a sale to the Russian factory’s local management but waives making any further comments.
Whether Hempel has been forced to make an impairment of the Russian assets will become clear in the 2022 financial report, the company says.
English edit: Kristoffer Grønbæk
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