Domestic fruits in scarce supply

According to experts from Credinform, Russia’s accession to WTO largely worsens positions of domestic fruit producers, which are already not too stable. Import share of this type of products is dramatically growing today. For example, import volume of stone fruit crop has grown in 2010 by 7%, and in 2011 - by 17% in natural units already.

According to analytical survey of Credinform “Fresh fruits market in Russia”, market of citrus and subtropical cultures is the most depending on import. Almost 100% of the market is imported products. The leaders among citrus suppliers to Russia are Egypt, Marocco and Turkey. Moreover, the total volume of domestic manufacture of citruses in Russia amounted to approximately 1 100 centners in 2011; almost the same figures of harvest are forecasted for 2012.

What concerns other fruit-and-berry crop in the country, its share also continues to diminish. Today, more than a half of fruit and berry harvest is covered by pomaceous fruits (apples, pears, etc.), another 30% are berries, and only 20% are stone fruits (apricots, peaches, etc.). Currently, key Russian fruit producers are concentrated in the Southern Federal District and the Volga Federal District, which is stipulated by climatic conditions; however, they are not so numerous even there. Many domestic manufacturers try to establish their own production and to compete with imported products, which is quite difficult. This is related with objective complexity of business conduct in the sphere of agriculture, low profitability of such production, problems with sales, etc.

According to experts, it is rather difficult to forecast the situation on the fruit market in Russia in the nearest future, since a great variety of factors affects the market. However, it can be clearly stated that without investments to the development of agriculture, including fruit-and-berry farms, it would be almost impossible to strengthen positions of domestic producers. We need a qualitative modernization of farms as well as their expansion and incentives for agricultural production that would allow raising domestic manufacturers to a profitable level and thereby making the Russian fresh fruits market less import-dependent.

Return on equity of Russian workwear producers

Credinform Information Agency prepared a ranking Return on equity of workwear producers in the Russian Federation. For this ranking, we selected Russian workwear producers with highest revenue and then ranked these producers by “return on equity” index.

This financial indicator characterizes the business profitability for its owners. It is a crucial financial indicator of return for investors and business owners that shows how economically efficient the use of funds invested in business was. Return on equity ratio characterizes utilization efficiency not of entire capital (or assets) of organization, but only of its part, which is owned by company proprietors. It is actually the main index for strategic investors (in Russian context – those investing for one-year term and longer). It allows defining utilization efficiency of capital invested by company owners. Owners get return on their investments in the form of contribution to the equity capital.

In particular, the considered indicator – return on equity – is calculated as ratio of profit gained by enterprise over a period to average equity rate over the same period. Recommended value of the considered indicator is over 30. Coefficient value between 35 and 70 is one of indicators of the company’s high ability to repay its debentures.

Solvency index and return on equity of workwear producers with highest turnover
NNameINNTurnoverin 2011, ml rub.Return on equity Index
1 BTC Group OJSC 7816043890 4,424.97 394.07 276 (high)
2 Fakel Textile Production Enterprise LLC 7715707513 537.38 49.37 282 (high)
3 WorkwearFactory CJSC 0274043510 1,251.68 47.75 153 (highest)
4 Meridian CJSC 5259003336 889.90 44.83 217 (high)
5 Kuzbasslegprom LLC 4205010254 545.23 37.15 229 (high)
6 High-Force Materials Centre “Armoured Composites” CJSC 5042001735 531.67 35.96 163 (highest)
7 Production and Implementation Limited Liability Company “Firma Tekhnoavia” 7724152603 6,177.74 35.18 185 (highest)
8 Formex Production and Commercial Company CJSC 7709204215 929.61 33.1 218 (high)
9 Red Fox LLC 7825387961 836.75 23.76 323 (satisfactory)
10 FIG Energokontrakt CJSC 7703268269 3,076.59 23.27 202 (high)

Among first ten companies with highest turnover, only six enterprises met the standard D/E ratio (Fakel Textile Production Enterprise LLC, Workwear Factory CJSC, Meridian CJSC, Kuzbasslegprom LLC, High-Force Materials Centre “Armoured Composites” CJSC, and Production and Implementation Limited Liability Company “Firma Tekhnoavia”). All these companies were assigned by Credinform Agency with the highest and high solvency index, which proves their ability to repay debentures timely and in full.

Return on equity index of BTC Group OJSC exceeds the target ration. Despite the fact that the higher is the indicator, the better is the return on equity, high value of indicator may occur due to a too high financial leverage, i.e. higher prevalence of borrowed funds over equity, which may negatively affect financial stability of organization. This matches with the key business rule – higher profit means higher risk. But other financial indicators shows high solvency rate of the company, which is confirmed by GLOBAS-i Index.

Red Fox LLC and FIG Energokontrakt CJSC showed coefficient value lower than the recommended rate; therefore, the mentioned companies use equity with poorer economic efficiency than other surveyed companies.

For retaining market sustainability and ensuring opportunities for further development, these enterprises need to pay better attention to return on equity, as well as to manage debt burden more efficiently and to build capital.