Ferronordic and Volvo CE have agreed to terminate the dealer agreement for Russia. As part of the agreement, Volvo CE will pay SEK 321m to Ferronordic as compensation for incurred and potential costs and losses related to the termination.
Ferronordic has been the official dealer of Volvo CE in Russia since the company’s foundation in 2010. As a result of the military conflict in Ukraine, Volvo CE has suspended sales to Russia. Ferronordic thus no longer receives any deliveries of machines or parts from Volvo CE to Russia. As all payables for delivered machines and parts have now been settled and the parties have no claims against each other, Ferronordic and Volvo CE have agreed that it is in their mutual best interest to terminate the dealer agreement for Russia, effective as of today.
Given that Volvo CE already does not deliver machines and parts to Ferronordic, Ferronordic does not expect the termination of the dealer agreement per se to materially change the outlook for Ferronordic in Russia.
Ferronordic takes all measures to ensure that its business complies with applicable sanctions laws. Subject to these restrictions, however, and to the extent possible given the current supply situation, Ferronordic continues to service and repair the existing fleet of Volvo CE machines in Russia to live up to its commitments to its customers.
Volvo CE will pay compensation to Ferronordic AB in the amount of SEK 321m to cover incurred and potential costs related to the termination. For the Group, the compensation will imply an increase in cash flow and result in Q3 2022. Ferronordic however expects that further provisions and potential impairments, in addition to the ones made in Q1 and Q2 of 2022, will be needed to reflect future costs related to the termination. Such additional costs and provisions will reduce the positive effect on the Group’s result in Q3 2022, and possibly in future periods.
As outlined in its report for the second quarter of 2022, Ferronordic is evaluating strategic options for its Russian business, including a potential divestment of all or part of its Russian operations, or downsizing the operations and continuing on a limited scale.
The cooperation between Ferronordic and Volvo CE in Kazakhstan continues as before. Ferronordic is also looking for opportunities for further cooperation with Volvo CE and other parts of the Volvo Group in other markets.