Debt to assets ratio of the largest construction companies of Russia

Information agency Credinform prepared a ranking of leading construction companies of Russia.

Companies with the highest volume of revenue were selected for this ranking according to the data from the Statistical Register for the latest available period (for the year 2014). The enterprises were ranked by debt to assets ratio (Top-10).

Debt to assets ratio (x) is calculated as a ratio of long-term and short-term borrowings to the amount of the balance and indicates the proportion of the company's assets funded by loans.

Recommended value is from 0,2 to 0,5. Exceeding the upper normative value indicates the excessive debt load, which can stimulate the development but has a negative impact on corporate finance stability. The value below normative shows conservative strategy of financial management and excessive caution in attracting the new borrowings.

For the most comprehensive and objective view on the company’s financial situation, it is necessary to pay attention not only to the average indicators in the industry, but to the totality of financial indicators and ratios.

Table 1. Net profit, revenue, debt to assets ratio, solvency index Globas-i® of the largest construction companies of Russia (Top-10)
N п/пName, INN, regionNet profit 2014, th RUBRevenue 2014, th RUBRevenue in 2014 to 2013, %Debt to assets ratio, (х)Solvency index Globas-i®
INN 7703266053 Moscow
-5 060 351 109 180 295 54 0,68 550 Unsatisfactory
INN 7729588440 Moscow
15 210 453 224 986 345 99 0,83 246 High
3. Joint stock Company MOSTOTREST
INN 7701045732 Moscow
4 416 369 119 168 335 144 0,88 206 High
INN 7708185129 Moscow
1 653 126 45 640 503 142 0,89 214 High
5. Closed Joint stock Company MOSINZHPROEKT
INN 7701885820 Moscow
1 911 964 84 444 273 102 0,91 196 The highest
6. JSC General Directorate for Troops Accommodation
INN 7703702341 Moscow
80 038 40 199 606 64 0,91 263 High
INN 7709787790 Moscow
1 394 452 50 335 012 151 0,94 236 High
INN 7714572888 Moscow
3 876 677 102 678 119 178 1,00 229 High
9. CJSC SU-155
INN 7736003162 Moscow
127 617 50 319 847 87 1,00 550 Unsatisfactory
INN 7708587205 Moscow
-6 479 531 65 963 289 78 1,01 267 High

All Top-10 companies are in a high degree of dependence on loans. Debt to assets ratio is higher than recommended value and varies from 0,68 and 1,01. Only three companies have indicators lower than for the industry average which is 0,89.

Eight companies of the Top -10 were got the highest solvency indexes Globas-i®. That indicates their ability to timely and fully cover their debt liabilities and the risk of non-fulfilment is minimal.

LIMITED LIABILITY COMPANY STROYGAZCONSULTING and CJSC SU-155 were got unsatisfactory indexes Globas-i®, because of their bankruptcy cases in arbitration proceedings.

Picture 1. Revenue, debt to assets ratio of the largest construction companies of Russia (Top-10)

Revenue, debt to assets ratio of the largest construction companies of Russia

According to the latest published annual financial statements for 2014, total annual revenue of the largest construction companies of Russia (Top-10) amounted to 892,9 bln RUB, which is 4% lower than in the previous year.

This industry is characterized with a high concentration of mainly large construction holdings in Moscow, the largest financial center of the country. The statistics of the Information and analytical system Globas-i® confirms the tendency of distributing of 100 companies with the highest volume of revenue for 2014 registered in the regions (Top-5 of regions):

Moscow - 44

Saint-Petersburg - 16

Moscow region - 6

Sverdlovsk region - 5

Leningrad region - 3

Khanty-Mansi autonomus okrug - Yugra - 3 

In general, the Russian construction industry has difficulties in recent years, construction volume is reduced. The attractiveness of this business to investors falls. This can be illustrated by the data of the Federal State Statistics Service on production of cement, the main component of construction, and on the index of business confidence in construction according to the results of research of the construction companies’ economic activity (Pictures 2, 3).

Picture. 2 Production of cement in 2010 – 2015, th tons

Production of cement in 2010 – 2015, th tons

Picture. 3 Ratio of business confidence in construction, %

Ratio of business confidence in construction, %

If it is possible to hide in offshores?

In present conditions the importance of the exchange of financial and tax information between states is growing more and more. Realizing this, at the G20 meeting the finance ministers of the participating countries approved the automatic exchange of such data as far back as June 19, 2013. Such instrument considers that the Federal Tax Service of the RF will receive financial information from the tax services of other countries. By that, various foreign institutions can serve as data sources (banks, depositories, brokers, financial investment vehicles, insurance companies). 

The complex of information includes data on Russian residents, having their business abroad, as well as:

  • opening and closing bank and other accounts; also information on payments on accounts and balances of them is available,
  • receiving there income from the sale of insurance products, financial assets in the form of dividends and interests on borrowings,
  • participating in private funds, trust companies etc. 

On October 29, 2014 the representatives of 51 states have signed the multilateral agreement on a standardized exchange of information on taxpayers between tax authorities of different countries (Common Reporting Standard Multilateral Competent Authority Agreement CRS MCAA). 

The implementation of the project of automatic exchange of tax information takes place simultaneously with the G20 / OECD project * on the fight against the tax base erosion and profit shifting (OECD Action Plan on Base Erosion and Profit Shifting (BEPS Plan)). This project is aimed at the disclosure of the information on controlled foreign companies (CFC), the tightening of the rules of profit taxation of such business entities, the avoidance of double «non-taxation», the solution to problems that occur by taxation in the area of the digital economy. Also, the plan includes the review of requirements to taxation by transfer pricing of financial transactions and to companies’ documentation within the control over transfer pricing.

On May 12, 2016 at the OECD Forum on Tax Administration held in China, Russia represented by the Federal Tax Service of the Russian Federation became a 81th participant and signed a multilateral agreement on a standardized automatic exchange of information on taxpayers between tax authorities of different countries. The exchange of financial information of the FTS of the RF with tax authorities of other countries will occur since 2018 according to the data of 2017. As a result, according to the Minister of Finance of the RF, «…it means that to hide own income from the Russian tax authorities in foreign countries will be much more difficult, and in course of time impossible to do…».

Currently, the Federal Tax Service of the RF informed about 7,000 legal and natural persons about the business presence abroad within the implementation of the CFC Act. As seen, this process goes slow and grudgingly. Mainly the medium-sized business and natural persons located in transparent jurisdictions disclose their assets abroad. On such assets it is also not required to pay taxes in Russia. However, most of the major companies took the position of waiting and do not believe that the FTS of the RF will reach offshore.

The signing of the above mentioned agreement is part of a package of measures aimed at deoffshoriation of Russia. In addition, approving the automatic exchange of tax information, the G20 countries agreed to impose sanctions on countries that do not participate in the exchange of such data. Perhaps, this can explain the approval of the new anti-offshore "black list" of 111 countries by the FTS of the RF. The profit of CFC located in jurisdictions from this list will not be exempt from taxation, according to the Russian legislation.

Thus, the business, which owns its assets abroad, has only a little less than two months. Prior to July 1, 2016 a set of laws and regulations on the tax amnesty is in force, which allows to avoid the responsibility for undeclared foreign accounts and assets identified by the Internal Revenue Service.

* OECD - Organization for Economic Co-operation and Development