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Loan protection factor of the largest enterprises, engaged in cast iron and steel production
Information Agency Credinform has prepared the ranking of the largest Russian metallurgical enterprises, engaged in melting of cast iron and steel.
Top-10 enterprises in terms of revenue were selected according to the data from the Statistical Register for the latest available period (for the year 2014). The enterprises were ranked by decrease in loan protection factor (see table 1).
Loan protection factor (x) is the ratio of pre-tax earnings and loan interest to the sum of interest payable. It characterizes the security level of creditors from non-payment of interest for the granted loan and shows how many times during the reporting period the company earned means to pay the interest on loans.
The recommended value is >1.
In other words, the higher is the ratio, the better the company services its debts; if the ratio is lower than 1, the company will face the financial difficulties and liquidity crisis in case of one-time requirements of creditors to fulfil obligations.
For the most full and fair opinion about the company’s financial condition, not only the average values of the indicators should be taken into account, but also the whole set of financial indicators and ratios.
| № | Name | Region | Revenue, mln RUB, 2014 | Revenue growth, % | Loan protection factor, (х) | Solvency index GLOBAS-i® |
|---|---|---|---|---|---|---|
| 1 | JSC URAL STEEL INN 5607019523 |
Orenburg region | 46 330 | 9,2 | 236,7 | 227 high |
| 2 | JSC TULACHERMET INN 7105008031 |
Tula region | 31 835 | 18,7 | 12,2 | 206 high |
| 3 | JSC EVRAZ CONSOLIDATED WEST SIBERIAN METALLURGICAL PLANT INN 4218000951 |
Kemerovo region | 139 247 | 9,4 | 10,8 | 181 the highest |
| 4 | JSC CHELYABINSK ELECTROMETALLURGICAL INTEGRATED PLANT INN 7447010227 |
Chelyabinsk region | 38 233 | 30,7 | 5,2 | 181 the highest |
| 5 | JSC NIZHNESERGINSKY HARDWARE AND METALLURGICAL WORKS INN 6646009256 |
Sverdlovsk region | 34 288 | 0,7 | 5,0 | 264 high |
| 6 | OJSC NOVOLIPETSK STEEL, NLMK INN 4823006703 |
Lipetsk region | 262 742 | 16,5 | 4,6 | 200 high |
| 7 | JSC OEMK INN 3128005752 |
Belgorod region | 67 500 | 16,6 | 4,1 | 206 high |
| 8 | JSC EVRAZ NIZHNY TAGIL METALLURGICAL PLANT INN 6623000680 |
Sverdlovsk region | 111 398 | 2,1 | 1,6 | 253 high |
| 9 | OJSC MAGNITOGORSK IRON & STEEL WORKS INN 7414003633 |
Chelyabinsk region | 266 478 | 18,6 | 0,7 | 264 high |
| 10 | JSC CHELYABINSK METALLURGICAL PLANT INN 7450001007 |
Chelyabinsk region | 87 730 | 7,2 | 0,4 | 297 high |
The loan protection factor of the largest enterprises, engaged in cast iron and steel production (Top-10), varies from 236,7 (JSC URAL STEEL) to 0,4 (JSC CHELYABINSK METALLURGICAL PLANT).
OJSC MAGNITOGORSK IRON & STEEL WORKS also has the ratio lower than recommended value. Debt load is high – the sum of interest payable is higher than net profit before tax; in further lending, under the conditions of falling world prices for metals, it is necessary to estimate the possible consequences of drop in revenue and falling demand for products.
Picture 1. Loan protection factor and revenue of the largest metallurgical enterprises, engaged in cast iron and steel production (Top-10)
According to the latest financial statements (2014), the revenue of the leading enterprises, engaged in cast iron and steel production (Top-10), amounted to 1085,8 bln RUB, that is 13,2% higher than in 2013. Revenue growth is significantly higher than GDP growth and inflation rate for the same period.
The larger is the enterprise, the lower is the loan protection factor: retention of the achieved development potential, the development of new sales markets, rebuilding of the resource base – all these requires significant investment and affects the companies' finances.
The industry leaders should be noted separately: the largest enterprises by revenue are NOVOLIPETSK STEEL and MAGNITOGORSK IRON & STEEL WORKS.
NLMK Group is the leading international manufacturer of high quality steel products (including transformer steel) with vertically-integrated business model. Extraction of raw materials and steel production are concentrated in low-cost regions, manufacture of products is carried out in the vicinity of major customers in Russia, North America and EU countries. NLMK Group invariably demonstrates high financial stability. Despite the significant capital investment in large investment projects for the last 10 years, the company maintains rather low level of debt load. Since the launch of the plant in Kaluga, the company finished the stage of sustainable growth and concentrated on the improvement of the efficiency of all business processes, products quality and strengthening of its market positions.
OJSC MAGNITOGORSK IRON & STEEL WORKS is one of the world largest manufacturers of steel and takes the leading place among ferrous metallurgy enterprises of Russia. The company's assets in Russia include large metallurgical complex with full production cycle, starting from iron ore preparation to deep processing of ferrous metals. The plant produces wide range of metal products, a predominant share among which takes products with high added value.
In 2014 the group produced 13 mln tons of steel and 12,2 mln tons of commercial metal products.
All participants from the Top-10 list have the highest and high solvency index, that shows the ability of enterprises to meet their obligations in time and fully; the risk of unfulfillment is low.