Russia bleeds revenues as Gazprom, Alrosa reveal bad news

As earnings season gets ready to begin in the States and other countries, it’s got some of us market watchers wondering how Russia is faring currently, almost two years on from its invasion of Ukraine.

There’s been notable silence from almost all Russian companies (the ones that stayed in Russia, at any rate, as many didn’t) who stopped reporting full financial results as the war with Ukraine gathered steam. Some are now no longer reporting results at all.

So, there’s not a lot to go on except partials and deductions – but it doesn’t take a genius to figure out that Russia is likely not doing too well.

Diamonds aren’t forever

There are two reasons that stick out, currently. One is that, on January 3^rd, the European Council of the European Union announced a new entry to its sanctions list, in light of the ongoing Ukraine war.

That entry was PJSC Alrosa – the biggest diamond company in the world and by far one of Russia’s biggest corporations overall – as well as Alrosa’s CEO.

On the decision to impose the new sanction, the EU said that:

The ban on Russian diamonds is part of a G7 effort to develop an internationally coordinated diamond ban that aims at depriving Russia of this important revenue source.

Those designated [for sanctions] are subject to an asset freeze and EU citizens and companies are forbidden from making funds available to them. Natural persons are additionally subject to a travel ban, which prevents them from entering or transiting through EU territories.”

Read more: signs are pointing toward a 2024 diamond rebound

This comes less than a month after the EU had already imposed its twelfth round of large-scale sanctions against Russia, which placed 86 companies and 61 individuals on its ever-growing list of Russian sanctions.

Not such a gas

Then there is the fact that, less than a week before this, there was also bad news from natural gas producing company Gazprom.

Gazprom is widely considered to still be Russia’s largest company by market cap, and also likely its biggest corporate producer of revenue for the country.

According to Reuters, Gazprom sent out a letter on December 19^th regarding its ‘earnings’. While no full results were released by the company, it did say that it predicted its EBITDA would soon fall by almost 40 percent for the FY 2023 as compared with 2022.

This is serious, as most investors know – EBITDA figures (which stands for ‘earnings before interest, taxes, depreciation and amortisation’) is often considered the only truly accurate metric for the health of a company’s cash flow and, therefore, its sustainability.