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03 Sep 2024
Fiber laser giant had been winding down operations near Moscow since shortly after the invasion of Ukraine.
IPG Photonics says that it has now sold its Russian subsidiary, known as IRE-Polus, marking its exit from all activity in the country.
According to earlier filings with the US Securities & Exchange Commission (SEC), the assets included a near-500,000 square-foot facility in Fryazino, near Moscow, carrying out work on optical fiber and components, final assembly, complete device manufacturing, and some research and development.
IPG announced that a group led by Softline Projects LLC and the current management of IRE-Polus had acquired the operation, which sold finished lasers to customers in Russia and IPG’s Chinese subsidiary.
“The sale marks the finalization of IPG’s exit from all facilities in Russia, following imposed sanctions on trade after the start of the war with Ukraine,” stated the firm. “The proceeds from the transaction are $51 million before advisory and other fees.”
Production shift
Having been founded by fiber laser pioneer Valentin Gapontsev in 1991, IPG has always had strong connections with Russia, and maintained significant operations in both Fryazino - where it had employed around 2000 people - and in Minsk, Belarus, until the February 2022 invasion of Ukraine.
Shortly after that, the company said it would end new investment in those facilities, and announced plans to wind down the operations while ramping up activity in Germany, Poland, Italy, and the US instead.
IPG’s current CEO Mark Gitin, who took over from Eugene Scherbakov earlier this year, said in a company statement:
“Our team executed flawlessly to transition our manufacturing operations after the war’s outbreak without any impact to our customers.
“Our ability to respond to adverse events out of our control highlights the resilience of the company as we were able to lean on our global manufacturing capabilities to increase production in Germany, the United States and Italy, and start production in Poland.
“Today, with the sale of our Russian operations now behind us, we are focusing on optimizing our operations to drive improved productivity.”
Minsk activity
The statement did not mention the firm’s Minsk, Belarus activity, which according to IPG’s most recent annual report filing includes a near-400,000 square-foot facility used to make cabinets and mechanical sub-components.
The same document stated that, as of the end of 2023, IPG had $76.4 million in cash and cash equivalents in Russia, and a further $5.5 million in Belarus. The net asset value of the Russian subsidiary was quoted as $103.9 million.
In IPG's most recently quarterly filing, the company said that additional sanctions imposed by the European Union in late June would allow shipments related to existing contracts to continue until October 2 this year.
"We are currently evaluating the effect these new sanctions will have on our business," it reported. "Our preliminary assessment is that our ability to continue supply of certain components from our factory in Belarus will be affected. We have also qualified and begun purchasing components from third-party vendors to reduce reliance on sub-assemblies currently made in Belarus."
As regards the impact of the IRE-Polus divestment on IPG’s future business, the company said the move would likely reduce its third quarter sales revenue by around $5 million, approximately equivalent to a 2 per cent reduction.
“IRE-Polus revenue accounts for less than 5 per cent of IPG’s full-year revenue,” IPG stated, adding that it expected to record total estimated charges of between $195 million and $210 million related to the sale.
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