JT’s share price plunged after the Russian government began temporary administration of JT’s local subsidiaries. The impact could extend to the businesses of Mitsui & Co. and Mitsubishi Corporation, which face similar Russia-related risks, with the scale of impairment losses and possible revisions to earnings and dividends likely to be the focus going forward.
Japan Tobacco Inc. (JT) saw its share price plunge amid developments in Russia. After reaching a year-to-date high of ¥7,769 on the 5th, the stock failed to open at the limit-down level on the 6th and closed at ¥5,269, down approximately 32% over 2 trading days. On the 9th, it again closed at ¥5,269, bringing the decline from the 5th to approximately 32%. In a timely disclosure on the morning of the 6th, JT confirmed that 4 local manufacturing companies were affected. On the morning of the 9th, it formally announced that all 7 companies, including 3 additional companies, were affected.
Russia-related risks are spreading beyond JT to Japanese companies as a whole. In the market on the 6th, Mitsui & Co. fell further in the afternoon session, trading approximately 10% lower at ¥4,536 before closing at ¥4,620. Mitsubishi Corporation also ended trading approximately 6% lower at ¥4,958. Both companies hold interests related to Sakhalin and face risks in their Russian businesses, making the impact of their ownership stakes and asset valuations a focus of attention.
The 2 key points for assessing the risks surrounding Russian businesses are whether assets remain in Russia and how much the value of those assets and the related profit account for on a consolidated basis. Mitsui & Co. holds a 12.5% interest in Sakhalin-2, while Mitsubishi Corporation holds a 10% interest, and information disclosed on their Russian operations is included in their financial results materials. Accordingly, even businesses categorized as “Russia-related” may carry different types of risk.