Activity trends of the companies of real economy sector of the Far East

trends 03/04/2020

In order to reduce interregional inequality of the quality of life, accelerate the rates of economic growth and technological development, as well as to ensure the national safety of the country, in February 2019 the Government of Russia adopted the Spatial development strategy of the Russian Federation until 2025, and defined 12 macroregions. One of them is the Far Eastern region, including Amur, Magadan and Sakhalin regions, Jewish autonomous region, Kamchatka, Primorye and Khabarovsk territories, the Republic of Sakha (Yakutia), and Chukotka autonomous district.

Information agency Credinform has prepared a review of trends of the largest companies of real economy in the Far Eastern region.

The largest enterprises (TOP-1000) in terms of annual revenue were selected for the analysis according to the data from the Statistical Register for the latest available periods (2013-2018). The analysis was based on the data of the Information and Analytical system Globas.

Net assets are total assets less total liabilities. This indicator reflects the real value of the property of an enterprise. When the company’s debt exceeds the value of its property, the indicator is considered negative (insufficiency of property).

The largest company of the Far Eastern economic region in term of net assets is JSC ALROSA, INN 1433000147, the Republic of Sakha (Yakutia). In 2018, net assets value of the company amounted to 334 billion RUB.

The lowest net assets value among TOP-1000 was recorded for LLC RIMBUNAN HIJAU MDF, INN 2721143979, Khabarovsk territory. In 2018, insufficiency of property of the company was indicated in negative value of -14 billion RUB.

Covering the five-year period, the average net assets values of TOP-1000 companies has a trend to increase (Picture 1).

Picture 1. Change in average net assets value in 2014 – 2018 Picture 1. Change in average net assets value in 2014 – 2018

The shares of TOP-1000 companies with insufficient property have trend to decrease over the past five years (Picture 2).

Picture 2. Shares of companies with negative net assets value in TOP-1000 Picture 2. Shares of companies with negative net assets value in TOP-1000

Sales revenue
In 2018, total revenue of 10 largest companies of the region was almost 45% of TOP-1000 total revenue (Picture 3). This testifies high level of concentration of capital.

Picture 3. Shares of TOP-10 companies in TOP-1000 total profit for 2018 Picture 3. Shares of TOP-10 companies in TOP-1000 total profit for 2018

In general, there is a trend to increase in revenue (Picture 4).

Picture 4. Change in industry average net profit in 2014 – 2018 годах Picture 4. Change in industry average net profit in 2014 – 2018 годах

Profit and loss
The largest company in term of net profit is Taas-Yuryakh Neftegazodobycha LLC, INN 1433015633, the Republic of Sakha (Yakutia). In 2018, the company’s profit of 54 billion RUB was recorded.

Covering the five-year period, there is a trend to increase in average profit of TOP-1000 companies (Picture 5).

Picture 5. Change in industry average profit values in 2014 – 2018 Picture 5. Change in industry average profit values in 2014 – 2018

Covering the five-year period, the average net profit values of TOP-1000 companies have the increasing trend with the decreasing average net loss value (Picture 6).

Picture 6. Change in average net profit and net loss of ТОP-1000 in 2014 – 2018 Picture 6. Change in average net profit and net loss of ТОP-1000 in 2014 – 2018

Key financial ratios
Covering the five-year period, the average values of the current liquidity ratio were significantly above the recommended one - from 1,0 to 2,0 with a trend to increase (Picture 7).

Current liquidity ratio (current assets to short-term liabilities) shows the sufficiency of company’s assets to repay on short-term liabilities.

Picture 7. Change in industry average values of current liquidity ratio in 2014 – 2018 Picture 7. Change in industry average values of current liquidity ratio in 2014 – 2018

During four out of five years, relatively high level of average ROI values was recorded with a trend to decrease (Picture 8).

ROI ratio is calculated as net profit to sum of shareholders equity and long-term liabilities, and shows the return of equity involved in commercial activities and long-term borrowed funds

Picture 8. Change in average values of ROI ratio in 2014 – 2018 Picture 8. Change in average values of ROI ratio in 2014 – 2018

Assets turnover ratio is the ratio of sales revenue and company’s average total assets for a period. It characterizes the effectiveness of using of all available resources, regardless the source of their attraction. The ratio shows how many times per year the full cycle of production and circulation is performed, generating the corresponding effect in the form of profit.

Covering the five-year period, business activity ratio demonstrated the decreasing trend (Picture 9).

Picture 9. Change in average values of assets turnover ratio in 2014 – 2018 Picture 9. Change in average values of assets turnover ratio in 2014 – 2018

Small enterprises
47% companies of TOP-1000 are registered in the Register of small and medium-sized enterprises of the Federal Tax Service of the Russian Federation. At the same time, their share in total revenue of TOP-1000 is about 12% that is significantly lower than the national average figure (Picture 10).

Picture 10. Shares of small and medium-sized enterprises in TOP-1000 Picture 10. Shares of small and medium-sized enterprises in TOP-1000

Main regions of activity
Companies of TOP-1000 are registered in 9 regions and located quite unequally. Almost 52% companies largest in term of turnover are concentrated in Primorye territory and the Republic of Sakha (Yakutia) (Picture 11).

Picture 11. Distribution of TOP-1000 revenue across the Far Eastern economic region Picture 11. Distribution of TOP-1000 revenue across the Far Eastern economic region

Financial position score
Assessment of the financial position of TOP-1000 companies shows that the majority of them have financial position above average (Picture 12).

Picture 12. Distribution of TOP-1000 companies by financial position score Picture 12. Distribution of TOP-1000 companies by financial position score

Solvency index Globas
Most of TOP-1000 companies got Superior / High and Strong / Medium index Globas. This fact shows their ability to meet their obligations fully and by the due date (Picture 13).

Picture 13. Distribution of TOP-1000 companies by solvency index Globas Picture 13. Distribution of TOP-1000 companies by solvency index Globas

Index of industrial production
According to the Federal State Statistics Service (Rosstat), during 12 months of 2019 - 2020, the trend to decrease of industrial production indexes is observed (Picture 14). The average month-to-month figure was 100,3%.

Picture 14. Index of industrial production in the Far Eastern economic region in 2019 - 2020, month-to-month (%) Picture 14. Index of industrial production in the Far Eastern economic region in 2019 - 2020, month-to-month (%)

According to the same data, the share of companies of the Far Eastern economic region in the volume of revenue from sales of products, goods, works and services in 2019 was 2,838% countrywide. This figure is higher that that of 2018 with 2,763%.

Conclusion
Complex assessment of activity of the largest companies of real economy sector of the Far Eastern economic region, taking into account the main indexes, financial ratios and indicators, demonstrates the prevalence of positive trends (Table 1).

Table 1. Positive and negative trends, evaluation factors
Trends and evaluation factors Relative share of factors, %
Rate of growth (decline) in the average size of net assets up10
Increase / decrease in the share of enterprises with negative values of net assets up10
Level of competition / monopolization up5
Rate of growth (decline) in the average size of revenue up10
Rate of growth (decline) in the average size of profit (loss) up10
Growth / decline in average values of companies’ net profit up10
Growth / decline in average values of companies’ net loss up10
Increase / decrease in average values of total liquidity ratio up5
Increase / decrease in average values of return on investment ratio down-10
Increase / decrease in average values of asset turnover ratio, times down-10
Share of small and medium-sized businesses in the region in terms of revenue being more than 22% down-10
Regional concentration down-5
Financial position (the largest share) up10
Solvency index Globas (the largest share) up10
Industrial production index down-5
Dynamics of the share of revenue in total revenue across the RF up10
Average value of relative share of factors up3,8

Up positive trend (factor), Down negative trend (factor).