CINCINNATI — The Russian ruble tumbled to record lows against the U.S. dollar Monday, as western allies imposed tougher economic sanctions aimed at ending the violence in Ukraine.
The last time Russia’s currency took such a plunge, Cincinnati -based Procter & Gamble Co. ended up with $1.5 billion in losses due to currency fluctuations.
“This is the most significant fiscal year currency impact we have ever incurred,” Jon Moeller told Wall Street analysts in January 2015, six years before he was promoted to CEO.
That was then. This is now.
“It’s very likely that Procter & Gamble’s management saw this coming and took the right steps to mitigate or minimize the impact,” said James Russell, principal and portfolio manager for Bahl & Gaynor Investment Counsel downtown. "This is not their first rodeo. They have seen geopolitical conflict in the past. They’ve had to deal with currency fluctuations in the past. And we think they’re absolutely up to the task to handle this one correctly.”
P&G declined to comment on the impact of the Ukraine conflict on its operations. But it told Wall Street analysts last week that Russia and Ukraine account for less than 2% of global sales and less than 1% of global profits.
P&G has about 500 employees in Ukraine, with a headquarters in Kyiv and production plans in Boryspil and Ordzhonikidze (Pokrov), according to www.pgcareers.com. Those plants supply products to more than 30 countries in Europe, the Middle East and Africa.
Russell says P&G is in much better shape financially than it was in 2015, with a host of premium products that can increase prices without losing market share.
The company has also invested billions of dollars since 2015 to localize its supply chain so the products it sells all over the world can be manufactured closer to where it’s sold. In addition, the 2015 problem was caused by the strength of the dollar against multiple currencies, not just the ruble.
Still, the ratcheting up of Western sanctions will make it difficult for any company to do business in Russia, leading to inflation and economic slowdowns beyond its borders.
“Europe is 18.5 percent of Procter’s top-line revenue,” Russell said. “So, to the extent that Europe slows down or is negatively impacted by this ongoing situation, that could be very meaningful to many multi-nationals including Procter & Gamble.”
The Frost Brown Todd law firm is advising its clients to “immediately suspend all non-critical shipments and payments to Russia” and “avoid entering into any new business arrangements with Russian individuals or entities without the advice of Trade Counsel.”
Attorney Joe Dehner said the Biden administration is expanding the list of people and companies that U.S. companies cannot engage in business transactions.
“Although our region does not have substantial trade with Russia, the intended impact is to sever what existing commercial relations exist with Russian customers and suppliers,” he said. “The U.S. State Department is advising all American citizens to get out of Russia. Now, that doesn’t mean you have to abandon your subsidiary, but it may mean you can’t pay the people that work there.”