Press Releases / 29.04.2016

Press Release as of 29.04.2016

JSC "KuibyshevAzot"

AK&M Rating Agency has affirmed the national scale credit rating of OJSC KuibyshevAzot at 'A++', with a stable outlook.

The 'A++' rating indicates that OJSC KuibyshevAzot has a superior creditworthiness level, with the lowest risk of a delay in meeting obligations imaginable. The rating assignment was based on the Credit Rating Methodology for Corporates (Issuers) and their Financial Assets.

The positive rating drivers for OJSC KuibyshevAzot include the Company's stronger key balance sheet indicators, heavy investment in the renovation and development of production capacities, high return on current operations, good coverage of financial liabilities by real cash flows.

In 2015, OJSC KuibyshevAzot's assets stayed on the recent years' upward trend increasing by 17.6% to RUB 47.96 billion. It should be noted that the growth was driven by the Company's investments in projects aimed at expanding its technology and production capacities.

Last year, the most generous investment was made in the development of energy efficient cyclohexanone production and the construction of a high technology ammonia production unit (together absorbing about 78% of the whole capex). The Company's commitment to increasing its technological capacity enables it to stay among the market leaders amidst today's tough environment.

Last year's growth of liabilities at OJSC KuibyshevAzot is largely (ca. 57%) attributable to an increase in equity capital (up RUB 4.1 billion owing to the Company's strong profit performance). The Company's long-term borrowings made the second biggest contribution to the growth of financing (a RUB 2.5 billion increase).

The structural changes on the liabilities side of the balance sheet have kept the Company relatively independent of its creditors. The equity to total assets ratio remained close to 50%, which meets the generally accepted standards worldwide.

Besides, the current debt to equity ratio enabled OJSC KuibyshevAzot to take full advantage of the leverage opportunities, so as to boost its production and economic efficiency. In particular, the Company increased its revenue by 23.4% and almost tripled its net profit, with outstripping growth rates in the latter case. As a result, the return on sales and return on assets ratios saw a substantial increase in 2015 reaching 25.9% and 14.9%, respectively.

At the end of 2015, the total loan liabilities to annual cash flow ratio was estimated at 2.1, an evidence of fairly high coverage of the Company's debt liabilities by real cash flows. Besides, the ratio is on a downward trend (decreasing twice last year), indicating the Company's growing capacity to cover its debt liabilities on the medium term horizon.

We regard currency risks and geopolitical risks arising from the continuing economic decline in Russia as rating constraints for OJSC KuibyshevAzot.

In 2015, exports accounted for 53% of OJSC KuibyshevAzot's total revenues. In this regard, competition among international producers of nitrogen fertilizers and caprolactam – taking into account the new projects previously announced in China – becomes a matter of primary importance for the Company. The volatility in the domestic currency exchange rate currently constrains the Company's credit rating. Negative exchange rate changes could negatively affect the financial results of OJSC KuibyshevAzot's production activity.

The deterioration in the Russian economy in the wake of continuing economic sanctions additionally restricts demand for the Company's products from domestic agricultural and industrial consumers.

OJSC KuibyshevAzot is a major player in the chemical industry of Russia specializing in the production of ammonia, nitrogen fertilizers, caprolactam and caprolactam-based products. The Company ranks among the top biggest producers in the domestic nitrogen industry and is recognized as the leader in the production of caprolactam, polyamide-6, textile fibers and technical yarn in Russia, the CIS and Eastern Europe. The Company exports more than half of its products.

AK&M Rating Agency assigned a credit rating to OJSC KuibyshevAzot for the first time on September 1, 2004. The last rating action in relation to the Company was taken on April 24, 2015. All rating action announcements are available on the website.

The rating is valid until April 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Company's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by OJSC KuibyshevAzot. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

This press release is based on the Statement of assignment of a reliability rating to OJSC KuibyshevAzot and the applicable Credit Rating Methodology for Corporates (Issuers) and their 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.


AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

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