Russia’s supply chain is bleeding, with Western sanctions to blame for one of Russia’s largest forestry and paper companies urgently raising funds through the Moscow Stock Exchange— causing its share price to plunge more than 20% in a single day’s trade.
Yesterday, Segezha Group, Russia’s largest pulp and paper producer, reported a 24% loss for the first half of 2024. It comes amid mounting losses, now at RUB 9.5 billion (or US $103 million), and total debt ballooning to RUB 144.2 billion (US $1.56 billion) by June 2024.
“Segezha’s financial difficulties are largely driven by ongoing sanctions,” according to Russian news wire services: “The company has struggled since losing access to its key European market due to the European Union’s embargo on Russian products, including plywood, lumber, and pellets, which took effect in July 2022.”
Wood Central has reported extensively on Russia’s acute crisis – with high logistics costs, slowing Chinese demand, and increased competition from India, Brazil, and Argentina, forcing mills to cut production volumes.
“To counter this downturn, some mills have attempted to boost domestic sales by lowering pulp prices and shifting to manufacturing pulp in corrugated cardboard production instead of recycled paper,” Wood Central revealed in July 2023, with Segezha redirecting huge volumes of kraft paper to the domestic market to cater to local needs.
Segezha’s current financial troubles come just three years after the (then) world’s second-biggest producer of multiwall sack paper and industrial paper sacks pledged to list on the European Stock Exchange in either 2022 or 2023 before Russia invaded Ukrainian territory.
The Moscow-listed Segezha, which has forestry assets in Russia and (had) paper packaging plants in Europe and Turkey, was targeting core annual earnings of 100 billion roubles ($1.4 billion) by 2025, up from 17.5 billion roubles last year, according to Rovshan Aliyev, the company’s then vice-president for finance and investment.
“As we grow, we will consider a dual listing of our shares … We may return to this question by the end of 2022 or early 2023,” Mr Aliyev told Reuters in September 2021, just months before the war. “Most likely, this would be Europe, not the United States, given European companies account for the bulk of the pulp and paper industry.”
- To learn more about the Ukraine war and its impact on the Russian supply chains for timber and paper-based products, click here for Wood Central’s special feature.
