Skip to main content

As the list of international companies pulling out of Russia grows longer by the day, Canadian corporations doing business there are grappling with difficult decisions on whether to cut ties with the country outright or stick it out and bear the reputational and operational risk that could follow.

While Canadian companies such as Kinross Gold Corp. K-T, McCain Foods Ltd. and Canada Goose GOOS-T are distancing themselves from business in Russia or suspending operations outright in the country, other corporate pillars appear to be pushing on for now, including auto-parts maker Magna International Inc. and convenience store giant Alimentation Couche-Tard Inc. ATD-T Several smaller companies also sell into the country, including Ski-Doo maker BRP Inc. and label manufacturer CCL Industries Inc.

For all of them, the world has changed with Russia’s invasion of Ukraine. Canada and its Group of Seven allies have condemned what they call an unprovoked attack and slapped Russia with sanctions, including prohibiting transactions with Russia’s central bank. Western leaders have also moved to cut several of Russia’s largest banks off from the international financial system by excluding them from SWIFT, the messaging network that facilitates most global money transfers.

Foreign-based multinationals are increasingly shunning the country. Energy giant Exxon Mobil Corp. said it would exit Russia, while aircraft maker Boeing Co. suspended maintenance and technical support for Russian airlines. Rival Airbus SE stopped sending spare parts.

Auto maker Ford Motor Co. suspended operations in Russia, and Apple Inc. halted sales of iPhones and other products while condemning Russia’s invasion of Ukraine. International shippers, such as Maersk, Hapag-Lloyd and MSC, have suspended bookings to and from Russia, as the country becomes increasingly shut out of world commerce.

All of that is forcing Canadian companies into a quick rethink of their commitment to Russia. If they stay, they risk being on the wrong side of the moral line their own government has drawn in this conflict. They might also have trouble supporting their Russian operations given the bank controls or difficulties finding supplies to feed operations. But pulling out also comes with cost.

“Truthfully, it’s hard to make the case for staying in Russia right now,” said Yan Cimon, a specialist in international business and strategy at Laval University’s department of management. “Those companies who want to stay in Russia, or could benefit from staying, will find it really hard to take a break and assess the situation and try to put the decision off.”

The world’s biggest companies are pulling out of Russia. A look inside the global corporate shunning

Russian businessman resigns from board of Winnipeg-based Buhler Industries

Kinross Gold suspending Russian mining operations amid Ukraine invasion

Perhaps no Canadian company has more at stake in the current conflict than Magna. The Aurora, Ont.-based car-parts maker has six manufacturing facilities and roughly 2,500 employees in Russia. The company’s 2020 annual report said it had $120-million in fixed assets in Russia and $345-million in sales from the country, about 1 per cent of the company’s global total.

Magna said the Russian plants make body, chassis, seating and exterior sections of vehicles, but did not specify which car company the parts are for. Magna spokeswoman Louise Colledge said Tuesday the plants are still running and Magna is monitoring the “very dynamic” situation.

“We are liaising with our customers and suppliers on a daily basis in order to review individual programs – our focus is to maintain business continuity,” Ms. Colledge said in an e-mail.

Joseph McCabe, president of AutoForecast Solutions LLC, said all foreign manufacturers with a Russian presence will be affected by this conflict. He said he has no firm confirmation on how severely Magna’s operations will be affected, but expected them to be evaluating temporary and permanent changes to their supply chains. “This action by Russia has put them under a global lens with companies now forced to consider if a full extraction from the jurisdiction is warranted,” he said.

At one time, Russia was seen as a breakthrough market for Magna. Russian oligarch Oleg Deripaska bought US$1.54-billion in shares of the company in 2007 and planned to run it with founder Frank Stronach. Mr. Stronach told shareholders at the time that before the investment, he sought and received a meeting with Russian President Vladimir Putin to get his endorsement of the deal. Mr. Deripaska later sold his shares during the financial crisis in 2008.

Mr. Deripaska was placed on a U.S. sanctions list in 2018 for his ties to the Kremlin. However, he is one of the few oligarchs to publicly break ranks with Mr. Putin over the invasion of Ukraine. On Sunday, Mr. Deripaska released a statement on the Telegram messaging app urging an end to the bloodshed.

Earlier this week, Russia’s central bank introduced new capital controls that required companies operating in the country to exchange 80 per cent of their foreign earnings into rubles, to help prop up the Russian currency. Magna did not respond to questions about whether they were affected by the orders.

Some companies have already pressed pause on their Russian business.

Toronto-based miner Kinross Gold Corp., which has operated in Russia for more than 25 years, said late Wednesday it is suspending operations at its Kupol mine as well as all activities at its Udinsk development project. Kupol, located in a remote area of Russia’s far east, is the gold miner’s most profitable operation, bringing in US$442-million in operating earnings in 2021. The mine is also a big boost to the region: Kinross’s 2020 sustainability disclosure notes the company made $190-million in payments to local governments and the mine contributed between 15 per cent and 20 per cent of the area’s gross domestic product.

Kinross said in a statement it is “deeply concerned about the tragic situation and the extent of casualties and destruction in Ukraine and wishes to express its sympathy and support for the people who are suffering because of the conflict.” It said it is hoping for a peaceful and diplomatic solution.

McCain Foods Ltd., the Canadian frozen French fry giant, began constructing a potato processing plant in 2020 in Russia’s Tula oblast. The company said it paused construction last week and was re-evaluating the future of the project. “A final decision will be taken in the coming days,” Charlie Angelakos, vice-president of global external affairs and sustainability, said in a statement. The company also donated $200,000 for relief efforts in Ukraine.

Canada Goose, maker of luxury parkas, said Wednesday it would suspend all sales in Russia and donate $100,000 for humanitarian aid in Ukraine. “Canada Goose is deeply concerned by the conflict unfolding in Ukraine. We stand with all of those who are impacted by the violence,” the company said in a statement.

And 100 business leaders wrote an open letter to the federal government urging Ottawa to step up sanctions on Russia and pledging, as business leaders, to unwind commercial relationships with the country. The signatories included John Chen, executive chairman of BlackBerry Ltd., and Walied Soliman, chair of Norton Rose Fulbright Canada LLP.

CCL Industries Inc. is another Canadian company with operations in Russia. The Toronto-based label maker has five factories in Russia that employ 428 people and manufacture labels for consumer packaging, pharmaceutical and food and beverage companies, some for products within Russia. The company said it brings in $70-million in sales in the country, a small share of its $5.7-billion in annual global revenue.

“[These are] crazy times,” CCL chief executive officer Geoffrey Martin said on a call last week to discuss the company’s earnings. “On behalf of all those people, we know perfectly well that none of them had anything to do with the situation that’s unfolded in the Ukraine, and they have our continuing support.”

At Couche-Tard, a similar concern for its Russian-based employees is playing out as it weighs its next move. The Laval, Que.-based company, which controls the Circle K chain, has 38 stores and more than 320 employees in Russia, part of its global footprint of 14,200 outlets.

“As our people are our number one priority, we are following the situation closely and continue to support our team members inside and outside Russia,” said Couche-Tard spokeswoman Jennifer Vincent. “At this point, we have made no plans to change our operations.”

Restaurant Brands International Inc., a fast-food chain that owns properties that include Tim Hortons, said it has 800 Burger King locations in Russia, all of which are owned and operated by local franchisees. The company said it had watched the attack on Ukraine “with horror” and is insisting that its Russian franchisees abide by international sanctions, including those imposed by Canada. The parent company’s statement came after its master franchisee in the country told Russian state-owned news agency RIA Novosti that Burger King continues to operate in Russia and plans to expand this year by opening more locations. Burger King Russia’s communications director told RIA the company considers Russia a strategic market.

Oil giant BP PLC, Russia’s biggest foreign investor, led the Western-company exodus this past weekend with its announcement that it would abandon its stake in Russian oil giant Rosneft, a decision that could cost it as much as US$25-billion in writedowns. Rival Shell PLC followed, citing Russia’s “senseless act of military aggression” as it cut ties with state-controlled Gazprom.

Calfrac Well Services Ltd., which has yet to report full-year 2021 results, said in its third-quarter report that its revenue from its Russian operations in the first nine months in 2021 was $94.1-million – 28 per cent higher than in the first three quarters of 2020. The company had $745-million in total revenue during those nine months of 2021. The company told The Globe it had no comment on its Russian operations.

Meanwhile, a Russian businessman has stepped down from the board of Buhler Industries Inc., a Winnipeg-based farm equipment company. In a statement on Wednesday, Buhler said its board has accepted Konstantin Babkin’s resignation as a director. He is well-known for publicly supporting Mr. Putin.

Other Canadian companies doing business in Russia could face mounting pressure to explain their stance on the country in the days ahead, especially if they’re traded publicly.

“We expect companies to act prudently and diligently, as they have a fiduciary duty to do,” said Willie Gagnon, director of Quebec investor-rights group Médac. He also urged companies to “pay particular attention to their social responsibility, beyond their legal obligations, in these tragic circumstances.”

Some companies have seen their exposure to Russia shrink over the years. BRP Inc., the Canadian maker of snowmobiles and watercraft, has sold into Russia for almost 30 years. BRP CEO José Boisjoli has travelled frequently to Russia in the past to boost business, and delegations from Russia have also travelled to Quebec to study how to replicate the province’s 35,000-kilometre network of snowmobile trails.

With a solid snowpack and an enthusiastic base of customers for power sports vehicles, Russia was BRP’s third-largest market after the United States and Canada as of 2014. Russia’s importance to BRP declined in the years afterward, and now represents less than 5 per cent of total sales, according to the company. On Thursday, BRP said it was pausing exports to Russia.

Since the conflict in Crimea and the international sanctions that followed, BRP sales in Russia now represent less than 5 per cent of total sales, said company spokeswoman Biliana Necheva. National Bank analyst Cameron Doerksen pegs it more precisely at 1 per cent.

Gordon Johnston, CEO of Edmonton-based engineering firm Stantec Inc., told analysts asking about its exposure to the Russia region in recent days that it pulled out of Ukraine late last year as tensions increased. It had a project in Ukraine but wrapped it up last month after a meeting with its customers.

OpSens Inc., a Quebec City maker of fibre-optic sensors used in the medical and oil and gas industries, has sold some wares in Russia in the past and was eyeing the country as a market to develop until the war began. Now, it’s off the radar completely, CEO Louis Laflamme said.

“Even if the conflict disappeared tomorrow with a wave of a magic wand, there will be a long-term impact for any prospective business for companies like ours,” Mr. Laflamme said. “It’s just too risky and unpredictable. I’m not a political expert but it’s 2022. I would have naively thought the world was past a time when we sent tanks in to solve problems.”

With reports from David Milstead, Susan Krashinsky Robertson, Wendy Stueck, Brent Jang and Reuters

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Follow Nicolas Van Praet on Twitter: @NickVanPraetOpens in a new window
Follow Chris Hannay on Twitter: @channayOpens in a new window

Report an error

Editorial code of conduct

Tickers mentioned in this story

Your Globe

Build your personal news feed

Follow the authors of this article:

Follow topics related to this article:

Check Following for new articles