Japan Tobacco Will Keep Its Russia Business
According to the Financial Times, Japan Tobacco CEO Masamichi Terabatake said the company will keep its Russia business after reshaping its supply chain to comply with sanctions, in response to investor demand. According to the paper, Japan Tobacco is con
According to the Financial Times, Japan Tobacco CEO Masamichi Terabatake said the company will retain its Russia business to meet investor expectations after reshaping its supply chain to comply with sanctions.
According to the newspaper, Japan Tobacco is conducting part of its business through Turkey and has relocated key personnel to Hong Kong. JT initially said it would consider selling its Russia business after Russia’s invasion of Ukraine in 2022. Terabatake said the Russia business accounts for 20% of Japan Tobacco’s total profit.
“For example, if I say we are going to exit the business, investors may face the risk of losses,” Terabatake said. “If the worst happens, if we terminate a business that we are able to continue, we could even face the risk of shareholder lawsuits.”
Japan Tobacco has more than 4,000 employees and four factories in Russia, making it one of the largest remaining foreign companies in the country. In 2023, JT’s overall profit was 482 billion yen ($3 billion).
“There are many things we need to be careful about under the sanctions—what kind of people can or cannot be involved in decision-making, excluding people from countries unfriendly to Russian management... and placing people unrelated to sanctions in places such as Hong Kong,” he said, referring to Japan Tobacco’s new structure after broad sanctions were imposed on Russia. “But beyond that, it is business as usual.”
He said: “We are making every effort to ensure a certain degree of separation by shipping goods from Turkey, because some countries cannot trade with Russia.”
After the sanctions, many companies and investors left Russia. However, some companies chose to remain, including Philip Morris International.
Japan has also imposed sanctions on Russia.
“It is true that initially there were reputational concerns about continuing our business, but recently that is no longer an issue,” Terabatake said. “Fewer and fewer people are asking why JT continues to operate in Russia.”
Japan Tobacco has not yet answered investors’ questions about how profits will be transferred out of Russia and returned to shareholders; so far, the Russian entity has not paid dividends from its 2022 and 2023 financial results.
Terabatake said he remains prepared to divest or sell the Russian unit “in the worst-case scenario,” but believes there is no need to do so under the current sanctions regime.
