Press Releases / 24.03.2014

Press Release as of 24.03.2014

Kemerovo Joint Stock Company Azot (KJSC Azot)

AK&M Rating Agency affirmed the national scale credit rating of Kemerovo JSC Azot at 'A+', tier 2. The outlook is stable.

The 'A+' rating indicates that Kemerovo JSC Azot (Kemerovo Joint-Stock Company Azot) qualifies as a highly reliable borrower. Risk of a delay in meeting liabilities is insignificant.

We regard the continuing growth of the Company's assets, the high and well-structured equity capital, its profitable operation, and a reasonable, well-balanced borrowing policy as the main positive rating drivers for the Company.

Over the period under review, the Company's assets kept growing steadily. Since 2008, Kemerovo JSC Azot's assets have increased more than six times. In 2013 alone, the Company's assets went up more than 80% exceeding RUB 50 billion.

Also, the high, still growing and well-structured equity capital is appreciable as a positive rating signal. Since 2008, Kemerovo JSC Azot has increased its equity capital almost six times. In 2013 alone, the Company's equity capital increased by almost 8% topping the RUB 15 billion mark; also, Kemerovo JSC Azot's retained earnings reached almost RUB 8.5 billion accounting for 56% of its equity capital.

Kemerovo JSC Azot has been successful in keeping its operation profitable. In 2013, the company's revenue grew to RUB 27.8 billion, net profit exceeded RUB 1 billion. In 2013, net profit margin of Kemerovo JSC Azot was 3.8%, return on sales reached 12.7%, return on equity (ROE) was 7.4%, gross margin ratio being 31%.

Our review shows that the management team of Kemerovo JSC Azot pursues a reasonable and well-balanced borrowing policy, As a whole, the Company has a perfect credit history, our review did not reveal a single default of the Company on its financial liabilities or any arrears. Today, long-term liabilities account for more than 95% of the Company's loan debt, interest coverage ratio is 2.1, while its available financial resources (as of January 1, 2014) ensure a robust loan debt servicing and repayment coverage across the next 18 months.

At the same time, the heavy debt, the dependence on gas prices, electricity and rail freight rates, the influence of the global market environment and the currency risks are exerting pressure on the Company's rating.

As of January 1, 2014, loan debt of Kemerovo JSC Azot reached almost RUB 32.7 billion, which is more than 65% of the Company's total assets.

The continuing dependence of Kemerovo JSC Azot on gas prices, electricity and rail freight rates is a major risk factor, which we regard as a rating sensitivity. The share of these expenses in the Company's product cost being fairly high, a further growth of the rail freight rates, prices of gas, electricity and other power resources may undermine Kemerovo JSC Azot's competitive edge.

Additional pressure on the Company's rating comes from its dependence on the global market environment. The company exports a large part of its goods, and its financial soundness in many respects depends on the general economic trends influencing the demand and pricing in the markets of nitrogen fertilizers and caprolactam.

As long as most of the Company's debt liabilities are denominated in US dollars, the currency risks are working against the Company's rating. This circumstance certainly calls for attention, even though a large part of Kemerovo JSC Azot's revenue comes from exports (and is therefore denominated in foreign currencies).

Kemerovo JSC Azot was established resulting from the Novokemerovo Chemical Complex's reincorporation as an open joint-stock company in 1993. Today, Kemerovo JSC Azot is a vertically integrated complex of production units and a number of marketing, financial and transport entities to assist them. The Company is a major enterprise of the Russian chemical complex principally engaged in the production of ammonia, nitrogen fertilizers, and caprolactam. Kemerovo JSC Azot is among the Top 10 largest producers in the domestic nitrogen and nitrogen compound making industry and is firmly placed as the second largest producer of caprolactam in Russia (in particular, it accounts for more than 33% of the caprolactam and over 9.6% of the nitrogen fertilizers produced in Russia).

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Company name: Kemerovo Joint-Stock Company Azot (Kemerovo JSC Azot).

This press release is based on the statement of assigning a credit rating to Kemerovo JSC Azot.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's reliability and shall not be construed as advice on the purchase and sale of securities or the provision of loan facilities to the Company.

CJSC AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

CJSC AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.

CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).


CJSC AK&M Rating Agency
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Moscow, Russia
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18