Risks
Risks can arise both due to forecasted and unforecasted situations. They all endanger the reputation and sustainable development of the corporation. During the reporting period Obolon faced a range of economic and social risks which impacted the staff and other stakeholders of the corporation.
Forecasted risks
Export limitations to CIS markets
Belarus
- Licensing
On 1 May 2014 the Belarusian government introduced licensing for beer supplies from countries outside the Customs Union. The trade partner of Ukraine violated the Agreement on Free Trade Zone between the countries.
| Impact Obolon beer import to the Belarusian market decreased by 41,7% |
Belarusian background
- 2010 «Anti-dumping» case against Ukrainian beer
- 2011 licensing and minimal cost process for Ukrainian beer
Obolon beer supply trends to the Republic of Belarus, thousand dal
Russian Federation
- The export ban
On 15 September 2014 Obolon beer export was banned. This political decision was unreasonable. Russia violated the WTO regulation being a member country.
| Impact Obolon lost 65% of imported beer market in Russia |
Russian background
- Obolon has been exporting beer to Russia since 1999
- For 15 years of cooperation the Russian party raised no official claims.
Fiscal policy
- Повышение ставки акциза
Increase of excise rate for beer by 42,5% – from UAH 0.87 to UAH 1.24 in 2014
- Налог на хмелярство
1,5% – tax levy for hop production
- Акцизный сбор с реализации
Excise rate of 5% for beer sales in retail networks
| Impact
- In 2014, the beer market in Ukraine decreased by 9,3%
- Annual average of production capacities in the industry amounted to 42%
- Beer consumption decrease totalled %
- Lack of transparency in distribution of tax revenue
|
Unforeseeable risks
Финансовый кризис
- Depreciation of hryvnia
На конец 2014 года курс гривни к долласу США вырос до 1500грн за $100 по сравнению с курсом 800грн за $100 на начало 2014 года.
| Impact
- Beer cost index in 2014 was at the same level with the general depreciation rates
- Increase of raw material, energy resources and logistics services cost
|
Currency depreciation against USD, %
Падение потребительского спроса населения
- Buying capacity decrease
Consumer confidence index (CCI) is a trend indicator of changes of consumer demand among the population.
| Impact
Beer is not an essential product. A drop in income of the population = a drop in beer consumption.
|
Начало антитеррористической операции (АТО)
- Hostilities in the east
On 14 April 2014 the anti-terrorist operation (ATO) was started. Decree of the President of Ukraine No. 405/2014.
| Impact
- Loss of 7% sales territories in the occupied Donetsk and Luhansk regions
- Warehouses robbed in Donetsk and Luhansk
- Loss of jobs of the company's sales teams in the zone of the ATO
- More than 100 company employees were mobilized
|
Year of the ATO. Results
- Ьore than 6 thousand people have died
- 16 thousand people were injured
- 1,5 million citizens lost their homes
- 1,198 million people became internally displaced
- Over 12 thousand properties were destroyed
- 33 bridges were blown up
- 1560 km of motorways were destroyed
Loss of traditional sales regions
Autonomous Republic of Crimea
- Аннексия Крыма Россией
On 16 March 2014 the Crimean Peninsula was annexed by Russia
- Особый экономический режим
In July 2014 the Verkhovna Rada of Ukraine introduced a range of trade and financial restrictions for Crimean manufacturers
| Impact
- Loss of 8% of sales markets by beer manufacturers
- Cessation of product supplies to the peninsula
- Indefinite status of the soft drink plant of the corporation in Sevastopil/li>
|
Potential risk of a deficit of glass containers
- Остановка грузового сообщения между Украиной и АРК
On 26 December 2014 Ukrzaliznytsia railway network suspended freight traffic movement from Ukraine to the Autonomous Republic of Crimea. 20% of sodium bicarbonate is included into the production cost of a glassware item. 90% of sodium bicarbonate was supplied by the Crimean Sodium Bicarbonate Plant.
- Импорт соды
Import duty for sodium bicarbonate totals 5,5%.
| Impact
- Lack of the Crimean sodium carbonate for glass container production
- Increase of the price of glass containers due to sodium carbonate imports
|
