Press Releases / 05.09.2014
Press Release as of 05.09.2014
PJSC «Russian Aquaculture»
CJSC AK&M Rating Agency assigned an 'A' tier 1 credit rating to OJSC Russian Sea Group on the national scale. The outlook is stable.
The 'A' rating indicates that OJSC Russian Sea Group qualifies as a highly reliable borrower. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.
OJSC Russian Sea Group is one of the leading fish and seafood suppliers in the Russian market specializing in sales of chilled and fresh-frozen fish and commercial salmon breeding (aquaculture). Operating as a holding company, OJSC Russian Sea Group owns equity stakes in subsidiaries engaged in salmon breeding and sales of chilled and fresh-frozen fish. In particular, Russian Sea Group comprises CJSC Russian Fish Company, Russian Sea – Aquaculture LLC and Segozerskoye Trout Farm LLC.
Fish products account for over 99% of OJSC Russian Sea Group's consolidated revenues; the Company's annual physical sales of fish products are estimated at 160,000 tonnes. Russian Sea Group's product portfolio comprises more than 60 kinds of fish in all market price segments including salmon, trout, cod, herring, Alaska pollack, plaice, shrimps and squids. Russian Sea Group's share in the Russian market of chilled salmon fish is estimated at 26.4%. The Company's consolidated assets at the beginning of 2013 totaled RUB 5,295.7 million.
We regard the revenue and profit improvements, the higher return on sales and return on invested capital ratios, the stronger equity capital, the growing debt to EBITDA ratio, the high and improving interest coverage ratio, and the comfortable debt profile in terms of maturity and currencies as the main positive rating drivers for OJSC Russian Sea Group.
The Company's consolidated sales revenue has been on a steady growth trend in recent years. In particular, it increased by 2.8% in 2012, by 12.7% in 2013. Consolidated gross profit went up 51.3% 2013, while sales profit soared 13 times. In 2013, OJSC Russian Sea Group earned RUB 452.8 million in consolidated net profit (against a negative profit in 2012).
Russian Sea Group had substantially improved its return ratios by early 2014. In particular, its return on sales increased from 0.42% to 4.81% in 2013, return on invested capital reached 67.22% at the end of the year, compared with a negative value in 2012.
In 2013, OJSC Russian Sea Group achieved a major positive change in the equity capital overcoming the negative trend of 2012. At the start of 2014, equity capital of OJSC Russian Sea Group was RUB 224 million.
OJSC Russian Sea Group also improved its capital turnover in 2013. The general capital turnover ratio increased from 2.79 to 3.41, the equity capital turnover ratio reached 80.4 (against a negative value in 2012).
A substantial improvement of OJSC Russian Sea Group's debt to EBITDA ratio is another strong argument for the credit rating. By early 2014, the ratio of loan debt to earnings before interest and depreciation had reached 3.7 (28.5 in 2012).
In 2013, the interest coverage ratio of OJSC Russian Sea Group increased almost 5 times reaching 2.44 at the beginning of 2014. The robust interest coverage reflects the Company's obvious ability to pay the current debt interest without much strain.
OJSC Russian Sea Group's debt is wholly denominated in Russian rubles, which minimizes currency risks. Most of the Company's debt is accounted for by loans ultimately maturing in 2017-2021, a fairly comfortable debt profile, which contributes to the Company's credit rating.
At the same time, the heavy debt burden, the weaker liquidity, the growing outstanding losses and the low share of net worth in the capital are putting pressure on the credit rating of OJSC Russian Sea Group.
As of early 2014, the loan debt of OJSC Russian Sea Group decreased by 23% to RUB 3,247.2 million but the Company had new credit lines with a total drawdown limit of more than RUB 5 billion opened in the third quarter. As the Company gradually draws down the loan facilities, its Company's debt is expected to grow slowly in the coming years and will reach RUB 4 to 5 billion in the forthcoming year, which we believe to be a heavy debt burden on OJSC Russian Sea Group in relation to the Company's current net profit.
In 2013, OJSC Russian Sea Group's liquidity position weakened. The current liquidity ratio decreased from 1.08 to 0.67, the absolute liquidity ratio from 0.16 to 0.08, the acid test ratio from 0.78 to 0.15.
The continuing growth of the Company's uncovered losses is also constraining the rating. In 2013, the outstanding loss of OJSC Russian Sea Group doubled to RUB 3,194.9 million.
Despite some improvements in the second half of 2013 compared with the two preceding 6-month periods, the share of net worth in the capital of OJSC Russian Sea Group remains low. In early 2014, it was a mere 4.2%.
According to CJSC AK&M Rating Agency, Russian Sea Group's current creditworthiness risks are related to its resilience and ability to adapt to the new economic environment (primarily, the stoppage of Norwegian salmon supplies in the wake of the economic sanctions). We believe that the forthcoming 6-month period will show if this adaptation has been successful.
Full Company name: Open Joint Stock Company Russian Sea Group.
Short name: OJSC Russian Sea Group.
This press release is based on the Statement of assignment of a credit rating to OJSC Russian Sea Group.
The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.
AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
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) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.
CJSC Analysis, Consulting and Marketing Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.