The ‘A++’ rating indicates that OJSC KuibyshevAzot qualifies as a highly reliable borrower, with the lowest risk of a delay in meeting liabilities imaginable.

The credit rating of OJSC KuibyshevAzot is essentially supported by its well-balanced and firm position, steadily growing assets and capital, moderate borrowing policy, and constantly improving balance sheet structure.

One of the main reasons for the high credit rating of OJSC KuibyshevAzot is its well-balanced and stable market position. The company is a powerful player in the market of chemicals, a leader in a number of segments / products. OJSC KuibyshevAzot is among the Top 10 global producers of caprolactam and polyamide, one of the ten largest domestic producers of ammonia and nitrogen fertilizers.

In recent years, assets and equity capital of OJSC KuibyshevAzot have been steadily growing. For the last seven years, the Company increased its assets more than twice, equity capital more than three times. As of the start of 2013, the Company’s equity capital exceeded RUB 17.3 billion.

Pursuing a moderate and reasonable borrowing policy, OJSC KuibyshevAzot has been steadily reducing its loan debt over the recent years, the debt-to-income ratio gradually decreasing to 20% at the start of 2013. Also, interest coverage ratio (employing EBIT as a more stringent method) was 8.8 at the start of 2013, Current liquidity ratio is also fairly high (4.23 at the start of 2013).

According to estimates available, net profit of OJSC KuibyshevAzot for 2012 alone exceeds total loan servicing costs to be incurred within the next twelve months more than twice, retained earnings from prior years accumulated at the end of 2012 exceed them more than 11-fold.

OJSC KuibyshevAzot is constantly improving its balance sheet structure. In recent years, the Company’s total liabilities are steadily declining, while its capital is continuously on the rise. As of the start of 2013, the Company’s equity capital exceeded its total liabilities almost 1.8-fold.

Owing to its reasonable borrowing policy, the Company improved its financial risk ratio (to 0.38), equity to total assets ratio (to 0.64), cash flow to liabilities ratio (to 2.88), financial stability ratio (to 0.88) and debt ratio (to 0.27).

At the same time, KuibyshevAzot’s dependence on gas prices, power and rail freight rates, vulnerability to the global market environment, importers’ protectionist policies and currency risks are working against OJSC KuibyshevAzot’s credit rating.

Operations of OJSC KuibyshevAzot are dependent on gas prices, power rates and rail freight rates, which implies higher risks. Given that the share of these expenses in the cost value is relatively high, further growth of freight rates, prices of gas, electric power and other power resources may undermine KuibyshevAzot’s competitive edge. At the same time, the Company’s policy of optimizing the gas purchase costs, developing logistics and water transportation operations, decreasing the power consumption of its production capacities and building up its own power generating capacities partially offsets these risks.

Additional financial risks come from the Company’s dependence on the global market conditions. 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, caprolactam and polyamide.

The protectionist policy of the countries importing the Company's products pursued, in particular, to stimulate their own production (especially for nitrogen fertilizers) is also a risk factor related to the foreign trade activities of OJSC KuibyshevAzot. A more stringent policy setting new protective duties and quotas would result in a rise of prices marketed by the Company and a drop in sales.

Besides, OJSC KuibyshevAzot’s export operations are rather vulnerable to currency risks. The share of exports in the company’s income is high enough, which, given the exchange rate fluctuations, means higher financial risks. The considerable share of loans and credits denominated in foreign currencies in KuibyshevAzot’s total liabilities adds to the Company’s dependence on the foreign exchange markets. It will however be noted that OJSC KuibyshevAzot has much of its total revenue denominated in foreign currencies, which partially offsets the Company’s currency risk arising from the considerable payables in foreign currencies.

OJSC KuibyshevAzot is a major 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. The Company’s assets as of the start of 2013 as per RAS amounted to RUB 27.2 billion, sales revenue for 2012 totaled RUB 28.4 billion.

Full name: Open Joint Stock Company KuibyshevAzot

Short name: OJSC KuibyshevAzot

This press release is based on the statement of assigning a credit rating to OJSC KuibyshevAzot.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's credit standing 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).

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CJSC Analysis, Consulting and Marketing Rating Agency
ul. Gubkina 3
Moscow, Russia
www.akmrating.ru
Press release by: A.G. Chumachenko
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.