SAP operating profit down 410 mln euro due to Russia, Belarus exit

MOSCOW. March 7. (Interfax) - The negative impact of the termination of business by Germany's SAP, a global manufacturer of enterprise management software, in Russia and Belarus, was about 410 million euros in 2022, according to the company's annual report.

The report clarifies that the negative impact mainly affected the applications, technologies and services segments.

Of this amount, approximately 120 million euros was due to business restructuring costs in Russia and Belarus. Total costs for SAP restructuring worldwide in 2022 was 138 million euros. However, the report indicates that these expenses consisted primarily of termination benefits for employees, impairment of assets in the form of the right to use office buildings, impairment of data center equipment and write-offs of sales commissions.

The company allocated 85 million euros for personnel compensation, with the majority going to Russia and Belarus.

The expected credit loss in Russia and Belarus in 2022 was 62 million euros, compared to 5 million euros in 2021.

SAP CIS revenue alone was over 35 billion rubles a year from 2018-2020 according to SPARK-Interfax. In 2021, revenue increased to 36.6 billion rubles. Net profit increased from 796 million rubles in 2018 to 3.1 billion rubles in 2021. In addition, the SAP Labs subsidiary earned the company about 2.5 billion rubles annually.

Germany's SAP, American Oracle and Microsoft were the main suppliers to the Russian market of software solutions for automating the activities of companies, especially the largest ones. The information systems of the vast majority of the largest Russian commercial and state companies are built around their products.

Foreign suppliers, including SAP, received a significant part of their revenue from providing of technical support services. At the same time, most customer service requests were fulfilled by foreign companies' Russian partners. Last year, due to the departure of foreign suppliers and the termination of support for their Russian customers, the cost of service contracts in Russia decreased by 30-40% due to the disappearance of the fees once taken by the suppliers.

As a result, by the end of last year, demand from Russian customers for support services had increased significantly. According to the Croc IT services company, by November 2022 the number of requests for software support had increased more than 10 times, and for equipment maintenance services, twice.

Russian corporate customers will launch IT import substitution projects en masse in 2023, IT market participants told Interfax earlier. In 2022, about 60% of Russian customers wanted to decide for themselves with whom they could replace foreign suppliers. They planned to launch search projects in 2023. At the same time, some customers whose situations were critical, e.g. licenses for critical solutions have expired or are about to expire, launched pilot projects last year. A minority of Russian customers, for whom the use of foreign products and solutions in their IT infrastructure is not critical, intend to wait and see how the situation on the Russian market develops.