Russia impairment loss impacts Bekaert rubber reinforcement earnings

Zwevegem, Belgium – Steel wire supplier Bekaert has seen its earnings (EBITDA) in the rubber reinforcement segment drop in 2022, due mainly to a significant impairment loss in Russia.

Earnings were down nearly 22% year-on-year at €270 million, on 7% higher sales of €2.2 billion, said Bekaert 1 March.

The Belgian group linked the decline to one-off elements, which increased bv €68 million, not least “the full impairment of the fixed assets of the Lipetsk facility in Russia.”

Furthermore, restructuring costs in the US and Europe, Middle East and Africa (EMEA) contributed to the decline, the group added.

Explaining the Russian loss, Bekaert said it had “significantly scaled back business activities in and with Russia” since the outbreak of conflict in Ukraine in February last year.

Bekaert said in 2022, it performed “an impairment test at year-end under value in use” in Russia and based on that, it decided to fully impair the fixed assets.

“We are, therefore, taking in 2022 a non-cash exceptional charge of €55 million in the result,” the group stated.

As of 31 Dec 2022, Bekaert said it had consolidated current assets of €26 million and consolidated liabilities of €3 million in relation to activities in Lipetsk.

Elsewhere, Bekaert said sales growth was achieved due to positive price-mix effects, including the impact from passed-on raw material prices and other cost inflation.

These, however, were offset by 13% lower volumes with currency adding 5.8% to the top line.

Sales remained robust in EMEA, with a good pricing response to rising cost inflation.

North America, meanwhile, was “not yet back to pre-Covid levels” though India continued to show very strong demand.

In China, Bekaert said demand remained weak despite the easing of lockdown regulations in the second half, putting pressure on both volumes and prices.

Looking ahead, the group anticipated China to remain subdued at the start of the year, improving through the second half of 2023.

India is expected to continue to grow strongly, while in Europe and North America the market “remains cautious” given the weak economic outlook and risk of further tire imports as freight costs decrease, Bekaert added.