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All business value will remain: how Leroy Merlin’s departure from Russia could affect the country’s building materials market

Photo by Glenn Carstens-Peters on Unsplash

French company Leroy Merlin will refuse to manage the business of selling building materials in Russia and will transfer all its assets to local entrepreneurs. It is said in the statement of Adeo Group, which owns the brand, published on Friday, March 24.

“After more than 18 years of operating in Russia, the transfer of control of Leroy Merlin to local management should save jobs for 45,000 employees… The deal must be approved by the relevant authorities in Russia,” the statement said.

After the transfer of business under the control of the new owner Leroy Merlin will continue operating, retaining all the staff and opening new stores. This is how the company’s decision was commented by the Ministry of Industry and Trade of Russia.

“We are aware of the situation with Leroy Merlin, we are in touch with the company. We note that the owner (French group Adeo) has made a civilized and reasonable decision to transfer assets in Russia to local management. We will follow the events and help the Russian managers to resolve all issues that arise,” TASS quoted Deputy Minister of Industry and Trade Viktor Yevtukhov as saying.

Thus, the departure of the company should not seriously affect the Russian market of building materials, as only the owner will change, but the business itself will remain. Alexander Kalinin, president of the All-Russian public organization of small and medium business “Opora Rossii”, expressed confidence in this.

“In fact the whole value of the business – the technology of production, logistics and sales – will remain in Russia. Most likely, they will take their brand with them and it will be done by the example of the former McDonald’s, which was transformed in our network “Tasty – and point”, – suggested the companion .

According to him, Leroy Merlin has not only been working in Russia for a long time, but also invested a lot of money in the country’s economy and had good revenues. Against this background, the main reason for the departure of the firm from Russia could be external political pressure, the expert said.

“I do not think that the company would have left our market voluntarily if it was not under strong pressure from the French authorities. She had plans to develop and lease new space here. This business was profitable for her,” Kalinin added.

Recall that international companies began to announce their withdrawal from Russia en masse in the spring of 2022. This began after Western states imposed large-scale sanctions against Moscow because of the events in Ukraine.

Meanwhile, only a negligible percentage of foreign firms have completely ceased operations in Russia, while most of the organizations that announced their departure have only limited their activities or sold their assets to new owners. Anatoly Aksakov, head of the State Duma Committee on Financial Market, told this in an interview with .

“About 40-50% of companies announced their withdrawal, but, in fact, almost all of them remain. Either they change signboards or formally transfer ownership of the business to someone else, but they continue their activities. Moreover, almost all declare a return to Russia after some time”, – said the deputy.

The decision of many international companies to leave Russia resulted in considerable financial losses for them, as President Vladimir Putin stated earlier. The head of state also explained the actions of Western organizations political motives.

“Under pressure from their governments, (foreign entrepreneurs. – ) are leaving our market – all right. But because of the loss of our market they incur huge losses – it’s their choice, it’s their decision. Many of them – I know this personally, I know some of them personally – do this without any pleasure,” Putin noted.

According to him, foreign companies do not want to lose the established business in which they “invested their soul” and money, but at the will of the authorities of their countries they are forced to wind up. However, the departing brands leave behind “a good legacy” in the form of industrial infrastructure and well-trained staff, the Russian leader said.

“Probably, someone thought that it will collapse and fall apart at us at once. Nothing of the sort is happening… Our companies, our entrepreneurs pick up these enterprises or even areas and continue this work, and quite successfully. It is important for us that our domestic manufacturer has received unique opportunities for development, and, of course, it is necessary to take full advantage of it,” the president stressed.

As Russian Finance Minister Anton Siluanov previously noted in an interview with , Western governments have put their own businesses at risk with their sanctions against Moscow. As a result, companies that have completely stopped cooperating with Russia now have to cut production.

“A simple thesis follows from this: when you impose restrictions, it is impossible not to feel them on yourself too. We, in turn, are not discouraged at all. Russia is learning and working under new conditions. Moreover, responding to new challenges, we began to actively invest in our own competencies that we used to acquire abroad,” the head of the Ministry of Finance added.

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