Bank guarantee will become not binding

The Government will soften requirements to suppliers and contractors on public contracts. These measures were listed into the bailout plan presented by the Government of the RF on the 28th of January 2015. 

Suggested easing is meant for the year 2015. As for government contracts, which should be completed till the end of the current year, customer and supplier have the right now to come to an agreement about the change of price, volume of work or amount of goods, as well as of the time of performance. Governmental customers will also get the right to postpone the payment of forfeitures, penalties and fines.

Key changes were undergone by the stance on a bank advance payment guarantee. As a reminder, according to the law on federal purchasing system a winner of the tender (auction) is obliged to stand security of a contract - to provide a bank guarantee or transfer caution money to a client. The amount of collateral varies from 10 up to 30% of contract value. In accordance with introduced changes the amount of collateral will be reduced to 10%.

Bank advance payment guarantees will become not binding. Thus it will be prescribed by the government regulation a number of cases, when a governmental customer has a right, but is not obliged to require security of a contract.

Since 2015 it is suggested to withdraw from bank advance payment guarantees on state contracts priced at more than 1 bln RUB, because advances on these contracts can be transferred only to accounts opened in the Federal Treasury.

Moreover, bank guarantees won’t be required for contracts, on which a customer retains a part of the sum by payment for executed works. In these cases the amount underpaid serves as security.

It was also suggested not to require collaterals, when a state contract means banking support, i.e. all settlements are carried out through special account in a bank, as well as for small contracts. However, concerning small contracts the price threshold is under discussion. Now therefore, it remains extremely small number of cases, when bank guarantees will be in use.

Bank guarantees became a problem for contractors as far back as in the previous year. So that, their price on building contracts increased from 1% up to 5% of contract value for the year, and now it can reach 11-12% at all. The experts suggested to withdraw from bank guarantees on small contracts long before, because many of them become unprofitable due to this, what is additional attack on small business.

Inventory turnover of the coal mining enterprises

Information Agency Credinform has prepared the ranking of the companies engaged in the coal industry.

The largest enterprises in terms of revenue were selected according to the data from the Statistical Register for the latest available period (for the year 2013). Then, the companies were ranged by decrease in inventory turnover.

Inventory turnover (times) – is a ratio of revenue to average value of stocks for a period. The ratio shows the speed of inventories sale.

The ratio is characterized by the company’s effectiveness of using of the resources taking into account the time factor.

The standard value of the ratio is not set, herewith it is recommended to maximize its value.

While making an assessment of the company’s activity, the industry average rate should be taken into account. 

For the most full and fair opinion about the company’s financial condition, not only the average revenue values should be taken into account, but also the whole set of financial data.   

Table 1. Revenue, inventory turnover and solvency index of the largest coal mining enterprises (Top-10)
NameRegionRevenue, mln. RUB, 2013Inventory turnover, timesSolvency index GLOBAS-i®
INN 2466152267
Krasnoyarsk Territory 18 115,0 44 270 high
INN 4234001215
Kemerovo region 29 872,9 30 284 high
3 JSC OUK Juzhkuzbassugol
INN 4216008176
Kemerovo region 30 574,4 27 288 high
INN 4205003440
Kemerovo region 18 949,4 25 258 high
INN 1103019252
Komi Republic 25 894,2 17 282 high
6 JSC Tugnuisky razrez
INN 0314002305
The Republic of Buryatia 19 770,0 16 248 high
INN 4212024138
Kemerovo region 60 492,0 16 330 satisfactory
INN 4205049090
Kemerovo region 52 298,7 9 295 high
INN 4214000608
Kemerovo region 29 139,8 8 306 satisfactory
INN 1434026980
The Republic of Sakha (Yakutia) 19 081,4 8 331 satisfactory

coal industry

Picture 1. Inventory turnover and revenue of the largest coal mining enterprises (Top-10) 

According to the latest financial statements, the revenue of the companies engaged in the coal industry amounted to 304,2 bln. RUB, which is about 49% of the total industry revenue. In 2013 the total revenue of Top-10 enterprises decreased by 6,1% from the level of 2012.

The average inventory turnover is 16 times. Almost all leaders of the market exceed the average value of the index, that allows them to attract additional revenue and indicates the existence of better production cycle.

The highest speed of the inventory turnover (44 times) showed OJSC SUEK-KRASNOYARSK – the largest manufacturer of brown coal in the Krasnoyarsk Region.

OJSC SUEK-KUZBASS – the largest coal enterprise in Russia by revenue makes 16 cycles of inventory turnover per year.

According to an independent assessment of the Information Agency Credinform, seven out of ten participants from the Top-10 list received the high solvency index. Such fact speaks about ability of the largest market participants to meet its obligations on time and fully, the risk of unfulfillment is low. 

OJSC SUEK-KUZBASS, JSC YUZHNYI KUZBASS, OJSHC YAKUTUGOL have the satisfactory solvency index, which shows to a potential investor the need of attraction of the additional guarantees for credit and business-cooperation purposes.