Companies close operations in Ukraine, assess impact of sanctions on Russia By Reuters

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© Reuters. FILE PHOTO: Carlsberg beer cans on display at a pub in Mumbai, India, Oct. 20, 2018. Photo taken Oct. 20, 2018. REUTERS/Danish Siddiqui

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By Jacob Gronholt-Pedersen and Yadarisa Shabong

(Reuters) -Brouwer Carlsberg (OTC:), Japanese tobacco (OTC:) and a Coca-Cola (NYSE:) bottler were among the companies that closed factories in Ukraine on Thursday after the invasion of Russia, while UPS and FedEx Corp (NYSE:) suspended services in and out of the country.

Ukraine closed its airspace when Russian forces attacked in the early hours, prompting budget airline Wizz Air to try to evacuate the Ukrainian crew, their families and four planes trapped in Kiev and Lviv.

Many companies with exposure to Russia are waiting for more clarity on Western sanctions and assessing the impact of the sanctions already announced.

Washington on Thursday announced a wave of measures hampering Russia’s ability to conduct business in major currencies, along with sanctions against banks and state-owned companies. It has imposed sanctions on the company behind the Nord Stream 2 gas pipeline, while European Commission head Ursula von der Leyen said Brussels would block Russian access to key technologies and markets.

Denmark’s Carlsberg, which has a 31% share of the Ukrainian beer market, has halted production at all three breweries in the country, while Coca-Cola HBC said it had provoked contingency plans, including closing the bottling plant.

Japan Tobacco closed a cigarette factory in Kremenchuck, central Ukraine.

Japanese car supplier Sumitomo Electric Industries, which employs some 6,000 people in Ukraine to make wire harnesses, said it will shut down operations at its factories there from Friday. A spokesperson told Reuters the company was in talks with customers about potentially replacing supplies from other places.

Global shipping giant Maersk halted port calls in Ukraine until the end of February and closed its headquarters in Odessa on the Black Sea coast, while Danish freight forwarder DSV said it had halted operations in the country.

The European aviation regulator expanded a safety warning triggered by the attack and advised airlines to “use caution” when flying through parts of Russian airspace controlled by regional centers in Moscow and Rostov.

TITANIUM AND NEON

Shares in German utility Uniper, which has significant stakes in Russia and a $1 billion exposure to the recently-suspended Nord Stream 2 project, collapsed on Thursday and its controlling shareholder, Finland’s Fortum, was also dealt a blow.

Fortum said the two companies together owned 12 power plants in Russia and employed 7,000 people there, but because energy production was not sanctioned, their operations were not directly affected.

Another Nord Stream 2 funder, Wintershall Dea, said the fact that the project’s suspension was on political grounds meant the operator could claim compensation.

Shares in German chemical company BASF, which co-owns Wintershall with Russian billionaire Mikhail Fridman’s LetterOne investor group LetterOne, and other Nord Stream 2 financiers OMV and Engie were also hit.

Britain’s largest domestic bank, Lloyds (LON:), warned it was extra vigilant about cyber-attacks from Russia, while some companies said supplies of key commodities could suffer.

Jet engine manufacturers Rolls-Royce (OTC:) and safra (PA:) said Thursday they had ramped up supplies of titanium. The use of titanium, much of it supplied by Russia, has skyrocketed in recent years as aircraft manufacturers try to make jets lighter.

“We have been monitoring this situation for several weeks and have decided since the beginning of the year to increase our stocks of titanium, especially through distributors in Germany,” Safran chief executive Olivier Andries told reporters.

The French company also wants to diversify its sources of the metal, as does Britain’s Rolls-Royce, which said 20% of its titanium came from Russia.

Major chip companies said they expect limited supply chain disruption from the conflict for now thanks to stockpiling and diversified sourcing, but some industry sources said there could be a longer-term impact.

Ukraine supplies more than 90% of U.S. semiconductor-grade neon, essential for lasers used in chip-making.