Press Releases / 24.04.2015
Press Release as of 24.04.2015
CJSC AK&M Rating Agency affirmed the national scale credit rating of Open Joint Stock Company KuibyshevAzot at 'A++'. The outlook is stable.
The 'A++' rating indicates that OJSC KuibyshevAzot qualifies as a highly creditworthy borrower, with the lowest risk of a delay in meeting obligations imaginable.
OJSC KuibyshevAzot is one of the dozen biggest caprolactam and polyamide manufacturers worldwide, the market leader in the CIS and Eastern Europe. At the end of 2014, KuibyshevAzot accounted for 59% of Russia's total caprolactam output, 99% of polyamide-6 output, 61% of all the cord tissue, 100% of cord thread and polyamide textile thread manufactured in Russia. Today, KuibyshevAzot is the leading producer of polyamide-6 in the CIS and Eastern Europe and the only enterprise in the Russian Federation producing the whole range of products based on this polymer.
OJSC KuibyshevAzot is among the top 10 largest producers in the domestic nitrogen and nitrogen compound making industry (5.1% of the nitrogen fertilizers produced in Russia at the end of 2014).
The credit rating reflects the Company's growing assets, the well-structured and continuously growing equity capital, profitable operations and favorable structure of borrowings.
Assets of KuibyshevAzot increased by 33% in 2014 and reached ca. RUB 40.8 billion at the end of the year, mainly owing to the fixed asset appreciation. In 2014, the management team of KuibyshevAzot was committed to projects aimed to ensure long-term growth and to protect the Company's market position amidst growing competition. The investment program included projects to expand the current production capacities and the construction of new facilities using advanced resource saving technologies.
OJSC KuibyshevAzot kept its equity capital high and well-structured. In 2014, the company's retained earnings (93.3% of capital) increased by 5.9% with the result that equity capital reached RUB 19.7 billion. It should be noted that the amount of retained earnings accrued by January 1, 2015 alone was more than 6 times above the aggregate debt servicing payments across the next 18-month period ending on July 1, 2016.
OJSC KuibyshevAzot has been successful in keeping its operation profitable. In 2014, the Company's sales revenue grew by 10% to RUB 30.9 billion, while net profit decreased by 28% from RUB 2.6 billion to RUB 1.9 billion due to the growing cost of production (more expensive primary products). While looking down in 2014, the return ratios (except for return on sales) remained relatively high. At the end of 2014, KuibyshevAzot's net debt to annual profit ratio before interest, taxes, depreciation and amortization (EBITDA) was 3.9, which is acceptable for a company of this scale, even though it narrows short-term opportunities to further invest in the company.
Long-term obligations account for the bulk (99.3%) of the Company's debt, average loan maturity period being 4.6 years, which, according to generally accepted assessment standards, is a positive rating driver. 2014 saw a different currency breakdown of KuibyshevAzot's debt, the share of US dollar and euro denominated loans in the total amount of loan debt decreasing from 45.2% to 32.5%. Given that the Company's revenues mostly come from exports and are denominated in foreign currencies, its debt servicing risks can be regarded as insignificant even with Russia's current economic challenges at play.
At the same time, KuibyshevAzot's dependence on gas prices, electricity and rail freight rates as well as the substantially higher debt burden are putting pressure on the Company's rating.
One of the key rating constraints for KuibyshevAzot is its persistent dependence on gas prices, electricity and rail freight rates. Given that these components contribute a lot to the Company's product cost, their further growth could undermine KuibyshevAzot's competitive edge
Another negative signal for the Company's rating is the substantially higher pile of debt. In 2014, loan debt of KuibyshevAzot grew 2.4 times to RUB 15.8 billion, resulting in worse debt load parameters: the Company's debt / equity ratio (based on aggregate liabilities) was 1.07, while equity to total assets ratio fell to 0.48.
OJSC KuibyshevAzot is the largest Russian chemical enterprise specializing in the production of ammonia, nitrogen fertilizers, caprolactam and caprolactam-based deeper conversion products. KuibyshevAzot exports more than half of its goods.
This press release is based on the Statement of assignment of a credit rating to OJSC KuibyshevAzot and the applicable Corporate Rating Methodology.
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 AK&M Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone no.: (495 916-70-30,
Fax: (499 132-69-18