Press Releases / 09.06.2014

Press Release as of 09.06.2014

Sistema JSFC

CJSC AK&M Rating Agency has affirmed the national scale credit rating of Sistema Joint-Stock Financial Corporation at 'A++'. The outlook is stable.


CJSC AK&M Rating Agency has affirmed the national scale credit rating of Sistema Joint-Stock Financial Corporation at 'A++'. The outlook is stable.

The 'A++' rating indicates that Sistema JSFC qualifies as an extremely creditworthy borrower, with the lowest risk of a delay in meeting liabilities imaginable.

We regard the Company's growing consolidated revenues and net profit, higher return ratios, increasing equity capital, stronger equity turnover, continuing loan debt reduction, comfortable debt profile and smart business diversification as the main positive rating drivers for Sistema JSFC.

According to Sistema JSFC's US GAAP financial statement, its consolidated revenue for the whole year 2013 exceeded USD 35 billion. Over the last year expired, Sistema JSFC's quarterly consolidated revenues kept growing steadily with each quarter. This, to a large extent, is the reason behind Sistema's much stronger net profit in 2013 (ca. USD 2.3 billion, almost 2.5 times above the previous year's result).

According to our estimates (here and in what follows), Sistema's return on assets (ROA) ratio increased from 2.1 to 5.1% in 2013, return on equity (ROE) ratio growing from 7% to 16.3%, return on sales (ROS, operating profit margin) from 11.1% to 12.6%, net profit margin from 2.8% to 6.3%, return on invested capital (ROIC) from 3.2% to 7.7%, EBITDA margin from 24.1% to 24.9%. The growing return ratios reflect a higher operating efficiency and stronger creditworthiness of Sistema JSFC.

In 2013, Sistema JSFC increased its consolidated equity capital by 12.5% against the previous year, benefiting from its growth and business expansion. Aggregate capital turnover ratio increased from 0.77 to 0.82, equity capital turnover ratio from 2.52 to 2.59.

The Company's debt burden continues to ease. In 2013, Sistema JSFC's debt liabilities (credits and loans) according to the consolidated US GAAP statement, decreased to USD 13.3 billion, i.e. by almost 15% against 2012. By the end of 2013, Sistema JSFC's aggregate debt to revenue ratio had decreased from 0.9 to 0.78, debt load ratio from 0.55 to 0.5. The Company's interest coverage ratio (EBIT to interest payments ratio) increased from 3.6 to 4.62, which generally has a positive effect on the Company's credit rating.

Sistema JSFC has improved its debt profile cutting down the short-term debt, which adds to its financial stability and contributes to its credit rating. The share of long-term loans, the most reliable source of capital for investment activities, in the Company's portfolio increased from 79.8% to 81.1% in 2013. Besides, almost 68% of the loans taken out by Sistema JSFC are denominated in Russian rubles, securing the Company against forex risks amid the financial market turbulence.

Another appreciable positive signal for JSFC Sistema's rating is the diversity of its business activities. The companies controlled by JSFC Sistema are operating in various economy sectors: telecommunications, fuel and energy, banking, trade, high technologies, medicine and other sectors. This diversity moderates volatility of cash flows and increases immunity against industry-specific risks.

We acknowledge that the Company's earnings ensure full, comfortable and timely discharge of all its obligations. Sistema JSFC's available financial capacities are many times above its projected loan debt service payments over the forthcoming one-year period.


In AK&M Rating Agency's view, the persisting debt burden and negative cash flows generated by some of Sistema JSFC companies are working against the Company's credit rating.

Several companies within Sistema JSFC's business structure are generating negative cash flows, which we regard as a risk factor for the Company's rating. At the same time, these losses are not severe and cannot have a major impact on the Corporation's incomes and profitability as a whole in the foreseeable future.


Established 1993, Sistema JSFC is the largest publicly traded diversified financial corporation in Russia and the CIS with large assets in various sectors of economy. Companies controlled by Sistema JSFC are operating in Russia, other CIS countries, East and West Europe providing services related to telecoms, hi-tech, fuel & energy, petrochemistry, radio and space technologies, banking, retail trade, mass media, travelling and healthcare to more than 100 million consumers. In recent years, Sistema JSFC has evolved from being an operational holding company to an investment fund model. According to Sistema JSFC's consolidated US GAAP report, its assets at the end of 2013 amounted to USD 43.3 billion, equity capital totaled USD 14.5 billion.

Full name: Sistema Joint Stock Financial Corporation.

Short name: Sistema JSFC.

This press release is based on the statement of assigning a credit quality rating to Sistema JSFC.

The credit 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 to the Company.

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
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Moscow, Russia

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18