Press Releases / 02.07.2015

Press Release as of 02.07.2015

Baltic Coast

AK&M Rating Agency affirmed the national scale credit rating of Baltic Coast (CJSC) at 'A+', with a stable outlook

The 'A+' rating indicates that Baltic Coast qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is insignificant. The rating assignment is based on the Credit Rating Methodology for Corporates (Issuers) and Financial Assets.

Baltic Coast is operating as part of the same-name group specializing in the breeding, processing and sales of fish and fish products. The group has the leading position in the market of preserves made of herring fillet, seafood and laminaria. As of January 1, 2015, the Company's assets exceeded RUB 6 billion, equity capital was more than RUB 952 million.

The credit rating assigned to Baltic Coast (CJSC) reflects the Company's profitable operations, well-structured and continuously growing equity capital, faster receivables turnover and high solvency metrics.

The financial performance of Baltic Coast (CJSC) was analyzed based on the Company's consolidated statement according to IFRS standards.

In 2014, revenue of Baltic Coast (CJSC) from sales of finished products increased by 30.1% exceeding RUB 8.5 billion, resulting in a higher net profit (+84.5% to RUB 294.7 million at the end of the year). The profitability improvements contribute to the strong financial result in 2014. In particular, net return on cost increased by 1 p.p. to 3.4%, return on assets by 2.1 p.p. to 7.4%.

At the end of 2014, net worth of the Company increased by 44.8% reaching a peak of RUB 952.8 million net of the non-controlling equity interest. The bulk of Company's net worth traditionally comes from retained earnings which consistently improved to reach RUB 954.2 million on January 1, 2015.

The accounts receivable turnover ratio improved to 4.99. The ratio of accounts receivable to accounts payable saw an upward trend in 2010-2014 and stood at 6.8 at the end of 2014. These achievements indicate the Company's efficiency in relations with counterparties and the reasonable application of working assets.

The income generated by Baltic Coast (CJSC) enabled it to fully pay the interest on its current loans and credits. The Company's interest coverage ratio never fell below the minimum acceptable level reaching 1.99 at the end of in 2014. The cash flows projected by the parent company (unadjusted for interest payments and financial results) for the period from April 1, 2015 to December 31, 2016 may reach ca. RUB 6.8 billion, 2.2 times above the scheduled loan payments over the next 1.5 years.

In AK&M Rating Agency's view, the government's assistance to Baltic Coast Group in the project of breeding Atlantic salmon and the group's participation in import substitution programs (PJSC Russian Salmon).

The Company's rating is constrained by the substantially higher debt burden, the low share of equity capital in liabilities and the problematic structure of borrowings.

In 2014, consolidated debt liabilities of Baltic Coast (CJSC) attributable to loans and credits increased by 45.8% to RUB 4.8 billion. Since 2012, debt to equity ratio has decreased from 18.6 to 5; while the excess of borrowings over equity is still dramatic and putting pressure on the Company's credit rating, it is acceptable for companies expanding their production capacities. In 2014, the Company's gross loan debt to EBITDA ratio was 5.6, which is also tolerable for this stage of business development.

The share of equity capital in liabilities of Baltic Coast (CJSC) has been low for years. While increasing a bit to 15.7% in 2014, this ratio still below the comfortable level.

Another constraint for the credit rating of Baltic Coast (CJSC) is the poor debt structure, namely, the extremely high percentage of short-term obligations (80.2%) in the overall loan debt profile. In 2014, the short-term component of obligations increased soared 3.4 times to RUB 4.2 billion.

Baltic Coast (operating as part of the BALTIC COAST Group) was established on October 27, 2000 as a company specializing in the production and sales of fish and various kinds of fish products. The Company's core business activities currently include the breeding, processing and marketing of fish and fish products.

This press release is based on the Statement of assignment of a credit rating to Baltic Coast (CJSC). The rating assignment is based on the Credit Rating Methodology for Corporates (Issuers) and Financial Assets.

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.


AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

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