AK&M Rating Agency assigned the ‘A+’ credit rating (stable outlook) as per the national scale to Kemerovo Joint Stock Company Azot (KJSC Azot).
The ‘A+’ rating indicates that KJSC Azot (Kemerovo Joint Stock Company Azot, tax number: 4205000908) qualifies as a highly reliable borrower. Risk of a delay in meeting liabilities is insignificant.
The rating of KJSC Azot is essentially supported by the continuing growth of the Company’s assets, the high profitability and strong revenue position, the favorable equity capital structure, the reasonable, well-balanced borrowing policy and the almost complete absence of loan debts.
Over the period under review, the Company’s assets were steadily on the rise. Since 2008, KJSC Azot has almost tripled its assets. For 9 months 2012 alone, the Company’s assets increased by over 25% exceeding RUB 21 billion.
KJSC Azot achieved high profitability and a strong revenue position. Over the last twelve months, the Company’s sales revenue was RUB 27.9 billion, GP amounted to RUB 12.5 billion, while net profit totaled RUB 4.7 billion.
Gross margin ratio for this period was 44.8%, return on sales was 22%, net return on cost was 19.2%, net profit margin was 16.5%.
In 2012, KJSC Azot’s total annual sales revenue exceeded its current assets.
The Company’s positive equity capital structure may also be regarded as a positive signal for the rating. Since 2008, equity capital of KJSC Azot increased more than 6-fold. For 9 months 2012 alone, it rose by 24% and topped RUB 17 billion. Also, the Company’s retained earnings exceeded RUB 10 billion, which is about 60% of its equity capital.
Our survey shows that the management team of KJSC Azot pursues a reasonable and well-balanced borrowing policy, with almost complete absence of loan debts. As a whole, the Company has a perfect credit history, our survey did not reveal a single instance of the Company's default on its financial liabilities or any arrears. There are no overdue payments in the liability profile of KJSC Azot. The Company’s total loan obligations amount to a mere RUB 20 thousand (0.001% of the Company’s net profit for nine months 2012).
At the same time, the decision made in 2012 by OJSC SDS Azot’s Board of Directors obliging KJSC Azot to pay dividends, the dependence on gas prices, electricity and rail freight rates, as well as the dependence on the global market environment and the protectionist policy of importing countries exert pressure on the Company’s rating.
Subject to a decision of the Board of Directors of OJSC SDS Azot in December 2012, KJSC Azot will pay dividends to its sole shareholder, OJSC SDS Azot, amounting to RUB 684.59 per share for 2011 and 9 months 2012. The total amount of dividends will be about RUB 10.139 billion, actually absorbing the Company’s whole retained earnings.
Another risk factor for the Company’s rating is the ongoing dependence of KJSC Azot’s operations on gas prices, electricity and rail freight rates accounting for a large share of the Company’s product costs.
The Company is also dependent on the global market environment, which is another negative signal for the rating. Since KJSC exports a large part of its goods, 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. One of the risk factors incidental to the Company’s foreign economic activities is the protectionist policy of importing countries, primarily meant to support their respective domestic production capacities (especially for nitrogen fertilizers). A tougher protectionist policy spells higher protecting duties and quotas, hence higher ultimate product prices and a drop in sales.
It will also be noted that we will have to downgrade KJSC Azot’s credit rating in the near future, should the dividend payout scheme referred to above be implemented.
KJSC Azot was established as the Novokemerovo Chemical Complex was reincorporated as an open joint-stock company in 1993. KJSC Azot is a major enterprise of the Russian chemical complex principally engaged in the production of ammonia, nitrogen fertilizers and caprolactam. KJSC Azot is among the Top 10 largest domestic manufacturers of ammonia and nitrogen fertilizers. The Company accounts for up to 8% of the nitrogen fertilizer output in the Russian Federation. At the end of the third quarter 2012, assets of KJSC Azot as per RAS totaled RUB 21.4 billion.
This press release is based on the statement of assigning a credit rating to KJSC 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 considered 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).
AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), and the MICEX (as a prerequisite for including bonds in the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation base and for listing bonds). By a resolution of Russia’s Government AK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.
CJSC AK&M Rating Agency
ul. Gubkina 3
Press release by: A.G. Chumachenko
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18