The ‘A’ rating indicates that OJSC Holding Company Yakutugol is qualified as a highly reliable borrower. Risk of a delay in meeting liabilities is relatively low, restructuring risk for a loan / part of the loan is minimal.
The rating score is supported by the comfortable and still increasing revenue and income of the company. In 2011, OJSC Holding Company Yakutugol's revenue reached RUB 34.6 billion increasing by RUB 10.4 billion or 1.4-fold year-on-year. In 2011, the company surpassed its hitherto decade-highest sales revenue result achieved in 2008 before the crisis came on. Furthermore, the company’s revenue for the first quarter 2012 exceeded the sales result achieved over the same period in the record year 2011 indicating an upward trend in the sales revenue. Therefore, the company’s debt load related ratios derived from its revenue have improved. In particular, debt to revenue ratio shrank steadily for the last three years reaching 1.56 on April 1, 2012.
Interest coverage ratio (the ratio of EBIT to interest payments) also improved growing steadily since 2009 and reaching 6.56 in 2011 against 1.82 in 2009.
One of the principal arguments for the high rating score is the pleasant, and still improving, operating efficiency. For the last year, OJSC Holding Company Yakutugol has been showing a steady increase in the KPIs and incomes. As of the end of the four quarters 2011, sales profit of OJSC Holding Company Yakutugol was almost RUB 20.88 billion, net profit almost RUB 13.11 billion. The company has achieved the highest sales profit and net profit results in three years, and there is an upward trend in these indicators in the first quarter 2012. Profitability has also reached its three-year high in 2011. Return on assets (ROA) as of the end of Q4 2011 reached 17.36%, return on invested capital (ROIC) was 22.31%, net profit margin 37.92%, return on capital (ROC) 57.34% and return on equity (ROE) 79.9%. The first quarter 2012 also showed a clear increase trend for these indicators. Over the last three years, the company’s capital turnover ratio and receivable turnover ratio have been growing steadily; this trend continues in the first quarter 2012. In 2011, total capital turnover ratio was 0.46, equity capital turnover ratio was 2.11 and receivable turnover ratio was 3.79.
The rating score is essentially supported by the downward trend in the company’s total liabilities and loan obligations shaping itself in 2012. For the first quarter 2012, total amount of obligations of OJSC Holding Company Yakutugol decreased by 10.4%, total loan obligations by 10.1%. Also, the cumulative principal debt coverage ratio and short-term debt coverage ratio have improved. As of the end of the first quarter 2012, cost of assets of OJSC Holding Company Yakutugol was 1.53 times above its combined loan obligations against 1.4 times in late 2011.
An appreciable positive signal for the rating score is the prevailing share of long-term loan obligations in the company’s debt profile.
The high rating score is also supported by the growing equity capital in 2012. As of April 1, 2012, equity capital was RUB 18 billion (against only RUB 13.2 billion at the end of the fourth quarter 2011).
At the same time, despite the recently appeared positive downward trend in the company’s total liabilities, the loan debt burden upon OJSC Holding Company Yakutugol is still significant, which exerts pressure on the holding company’s rating score. As of April 1, 2012, total loan obligations of OJSC Holding Company Yakutugol was over RUB 49.2 billion.
The rating score is also restricted by the low liquidity ratios, with a persisting downward trend.
Another negative signal for the company’s rating score comes from foreign exchange risks as OJSC Holding Company Yakutugol exports much of its goods and posts its export revenue in US dollars. For this reason, OJSC Holding Company Yakutugol's financial stability depends on the exchange rate of US dollar to Russian ruble and other currencies which has been lacking stability recently.
The price risks also restrict the rating score to a certain degree. The company’s export revenue directly depends on the global coking coal prices. Since the second half year 2011, the global coking coal prices are on the downward trend, which naturally affected the export efficiency of OJSC Holding Company Yakutugol. Today, however, the export coking coal prices have gained a footing and are even testing an upward trend.
OJSC Holding Company Yakutugol established in 2003 on the basis of the state unitary enterprise Yakutugol has been part of the holding Mechel-Mining since 2008. OJSC Mechel-Mining currently holds 100% of shares of OJSC Holding Company Yakutugol. Today, OJSC Holding Company Yakutugol is one of the largest Russian coal mining companies, one of the few Russian producers of hard coking coals. The company has all the necessary licenses for coal mining operations. If demand is sufficient, the company’s total annual coal mining output reaches 11.5 million tons. The collieries and coal strip mines of OJSC Holding Company Yakutugol account for about 80% of all the coal extracted in the Sakha Republic. The company exports a large part of the coal extracted and cleaned by it. OJSC Holding Company Yakutugol operates four mining enterprises: the Neryungrinsk open pit, the Kangalassk open pit, the Dzhebariki-Khaya underground mine and the Elga coal complex; the Neryungrinskaya washing plant as well as auxiliary enterprises and facilities supporting the primary activity (a motor depot for the company’s transport vehicles, a loading and transportation department, a repair office/shop, a commercial department etc.). As of April 1, 2012, OJSC Holding Company Yakutugol assets cost RUB 75.14 billion.
The auditor of OJSC Holding Company Yakutugol is CJSC ENERGY CONSULTING/Audit, the state registration number 1047717034640; member of the Institute of Professional Auditors of Russia (IPAR, non-profit partnership), primary registration number 10202014620.

This press release is based on the statement of assigning a credit rating to OJSC Holding Company Yakutugol.
The rating score, 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.
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.
AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. 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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Press release by: A.G. Chumachenko
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