Russian business: development trends and leaders

The year of 2016, unclear for the Russian economy, has gone: following the results for 11 months of 2016, at negative GDP dynamics and consumer market fall, the industry demonstrated growth by 0,8% compared to the same period in 2015; stabilization of real income of the population is also observed.

Trends by key indicators of the largest companies’ activity form multidirectional. The Russian business is quite diversified and not concentrated on oil extraction alone. Thesis of “raw-exports role” is disproved with analyses of real economy enterprises’ financial accounts: hi-tech production demonstrates not only significant turnover volumes, but also huge numbers of its growth.

According to the last available accounting reports of companies with revenue over 10 bln RUB for Q3 2016, Russian Нelicopters JSC having increased revenue in more than 11 times in comparison with the relevant period of 2015 and became a turnover growth leader. Manufacture of heavy helicopters is a complex and science-driven process which can be supported by only the largest and economically powerful states.

PJSC Mechel is ranked the second: it appears the corporation has overcome all financial difficulties and demonstrated impressive results: the group’s turnover in Q3 2016 amounted to 11 263 mln RUB opposite to 2 028 mln RUB in Q3 2015.

PJSC Rosseti, key energy networks operator and one of the leading power grid company in the world, closes top three: turnover for Q3 2016 has increased by 382% (see Table 1).

Table 1. Leaders by increase in quarter1
Company Revenue for Q3 2015, mln RUB Revenue for Q3 2016, mln RUB Increase in revenue Business scope2
1 Russian helicopters JSC 3 037 33 852 1015% 11,1 times Russian Helicopters is a leading player in the global helicopter industry, the sole Russian rotorcraft designer and manufacturer. According to the holding’s data, in 2015 there were over 8,400 Russian helicopters operating in over 100 countries. Russian Helicopters products account for approximately 94% of the rotorcraft market in Russia and 10% of worldwide helicopter sales.
2 PJSC MECHEL 2 028 11 263 456%
5,6 times
One of the leading companies in mining and metal industry and producer of coal, iron ore, steel, rolled products, ferroalloys, heat and electric power.
3 PJSC ROSSETI 5 358 25 829 382%
4,8 times
The company is the largest strategic electric grid in Russia and one of the world leaders in the transportation and distribution of electricity. The company manages 2.30 mln km of transmission lines, 490 th substations with transformer capacity of more than 761 GWA. In 2015 net electricity supply to consumers amounted to 720,5 bln kW/h.
4 PJSC NPO Almaz 10 168 32 803 223%
3,2 times
The company develops antiaircraft guided missile system, air defense, missile and aerospace defense system.
5 PJSC PhosAgro 12 178 31 549 159%
2,6 times
One of the world's leading producers of phosphate fertilizers and feed phosphates, nitrogen fertilizers and ammonia.
6 JSC TYAZHMASH 4 895 12 339 152%
2,5 times
The company develops crushing and grinding, fuel preparing, conveying equipment, equipment for nuclear power plants and terrestrial cosmodrome's launch complex.
7 JSC V.A.Degtyarev Plant 8 689 20 063 131%
2,3 times
The company produces military products: aircraft gun armament, anti-tank, anti-aircraft missile weapons, as well as a certain range of civil products.
8 JSC Sukhoi Civil Aircraft Company 12 392 27 829 125%
2,2 times
Currently the company's main project is the program to create the Sukhoi Superjet 100 aircraft.
9 PJSC TMK 49 872 106 064 113%
2,1 times
The company produces a wide range of tubular products for companies of various industries, especially oil and gas.
10 JSC Scientific Production Corporation Uralvagonzavod 31 563 61 479 95%
1,9 times
ПроThe company produces weapons and military equipment, railway rolling stock and light railway, road construction and utility vehicles.

(1) Information in tables 1 and 2 is presented in accordance with selection of real economy companies with quarter revenue for the examined period over 10 bln RUB, provided accounting reports for Q3 2016.
(2) Business scope in tables 1 and 2 is given according to the companies’ own data.

Along with the leaders, every business has companies with negative dynamics of figures. Negative external environment on products and commodity markets, movement of national currency, unstable domestic demand and lack of investment lead to decline in turnover. It should be noted that decrease in percentage is lower than growth. Among companies with turnover exceeding 10 bln RUB the following companies stand apart: JSC RUSAL BRATSK ALUMINIUM SMELTER with -72%, PJSC Kazan helicopter plant and PJSC Irkut Corporation have -50% and -45% relatively (see Table 2).

Table 2. Companies with negative dynamics in quarter revenue
Company Revenue for Q3 2015,
mln RUB
Revenue for Q3 2016,
mln RUB
Decrease in revenue Business scope
1 JSC RUSAL BRATSK ALUMINIUM SMELTER 58 042 16 224 72% The largest aluminum producer in the world.
2 PJSC Kazan helicopter plant 36 178 18 134 50% Manufacture of Mi-8/17, "Ansat" helicopters and make preparations for production of new Mi-38.
3 PJSC Irkut Corporation 38 143 20 954 45% The company designs and manufactures aircraft equipment for military and civil purposes.
4 PJSC United Aircraft Corporation 20 922 12 878 38% One of the largest players in the global aviation market. Companies included in Corporation have the rights to such famous brands as "Su", "MiG", "IL", "Tu", "Yak", "Beriev" as well as new - SSJ, the MS-21.
5 Oil company LUKOIL PJSC 249 294 180 935 27% One of the largest vertically integrated oil and gas companies in the world, which accounts for 2% of global oil production and about 1% of proven hydrocarbons reserves. The company controls the entire production chain from oil and gas to oil products. 88% stocks and 83% hydrocarbon production accounts for the RF.
6 PJSC Uralkali 129 974 99 667 23% Leading vertically integrated global manufacturer of potassium, one of the most important elements for development of all living organisms. The company accounts for about 20% of the world production of potash fertilizers. The company controls the entire production chain from potash ore mining to supply of potash chloride to customers.
7 PJSC Mashinostroitelny Zavod 14 192 11 164 21% One of the world's leading manufacturers and suppliers of nuclear fuel for nuclear power plants. The company also produces fuel for research reactors and reactor facilities of the navy ships.
8 PJSC Southern Kuzbass 24 572 19 485 21% Produces concentrate of coking and steam coal, anthracite, coal for PCI and middling product - supplied in the enriched form and graded (97% of total production) on the domestic market and for export.
9 PJSC Tolyattiazot 46 132 36 739 20% One of the largest enterprises of chemical industry of Russia, one of the three major producers of ammonia in the country and the world's top ten. The world's only chemical plant, capable to produce 3 million tons of ammonia per year.
10 PJSOC Bashneft 399 561 340 510 15% The company is engaged in exploration and production of oil and gas, production of petroleum products and petrochemicals. At the end of 2015 the company was ranked sixth in terms of oil production and fourth in terms of primary processing volume among Russian oil companies.

Despite of structural problems of the economy, business environment in Russia develops positively. Gross revenue of real economy companies (taking into account the price deflator) grows together with balanced net profit: according to the Federal State Statistics Service data for January-September 2016, the share of companies with net profit over 71% in the country. Positive quarter GDP values and revival of demand on products of the Russian manufacturers are expected in 2017, and the new year could be dealt with optimism.

Changes in the legislation concerning criminal liability of entrepreneurs

The Federal Law of 19.12.2016 №436-FL «On Amendment to Article 299 of the Criminal Code of the Russian Federation and Article 151 of the Criminal Procedure Code of the Russian Federation» was signed by the President of Russia.

The Law hardened liability of law enforcement authorities for groundless pursuit of entrepreneurs and compulsion to cease activities. According to the new edition of Article 299 of the Criminal Code of the RF functionaries in the law enforcement authorities can be subjected to criminal prosecution for illegal initiation of criminal cases that are related to their self-interest in termination of business activities of an entrepreneur. Such violation is punishable for functionaries by imprisonment from 5 to 10 years.

Criminal prosecution of known to be innocent is now punishable by imprisonment for up to 7 years. The same violation related to accusation of commission of serious and particularly serious crimes or causing large-scale damage or heavy consequences, - is punishable by imprisonment from 5 to 10 years.

Besides, damage is considered large-scale when it exceeds 1,5 mln RUB.

It is worth mentioning that the Plenum of the Supreme Court of Russia has earlier adopted a regulation protecting entrepreneurs from groundless pursuit.

In the Criminal Procedure Code of the RF there are provisions prohibiting arrest during investigation of entrepreneurs accused in economic crimes. This refers to articles of fraud, assumption or waste of monetary funds, infliction of damage by abuse of trust. Besides, arrest cannot be applied to entrepreneurs accused in illegal business and banking activities; legalization of monetary funds gained by illegal means; limitation of competition. The law enforcement practice showed that above mentioned provisions need to be clarified.

Decision of the Supreme Court explains that it is forbidden to arrest entrepreneurs, previously convicted for non-economic crimes, if an economic crime was committed for the first time.

The Supreme Court prohibited to initiate criminal cases against entrepreneurs under the article «Fraud» without complainant claim.

According to experts, all of the above mentioned changes will contribute to humanization of criminal legislation concerning entrepreneurs and help to provide a background for release of pressure on business and improvement of business climate in general.

Measures on legislation improvement, taken in recent years, deliver positive results in decrease in amount of groundlessly convicted citizens. Data from the General Prosecutor`s Office of the RF approve this. (Picture 1).

Amount of people groundlessly convicted to criminal liability (in relative terms for 1000 accused); standard units
Picture 1. Amount of people groundlessly convicted to criminal liability (in relative terms for 1000 accused); standard units