Credit security of the largest Russian car manufacturers

Information agency Credinform has prepared the ranking of the largest Russian car manufacturers.

In order to prepare the ranking, the list of Top-10 enterprises by the annual revenue volume in the last available in the Statistical register financial period (2014) was created; besides, the revenue dynamic relating to the previous period and interest coverage ratio were calculated (see Table 1).

Interest coverage ratio(x) is a ratio of the profit before taxes and credit interests to total interest payable. It characterizes the creditors’ security rate from non-payment of interests for the provided credit and shows how many times within the accounting period the company earned the assets for payment of interest charges. Recommended value is: >1.

Thus if the ratio is lower than 1, it demonstrates company’s inability to meet all the loan liabilities immediately. This may in its turn lead to business financial imbalance in the present complicated macroeconomic environment, especially in the period of significant (to 40%) car sales decrease on the Russian market. 

If the value of the indicator under consideration is not available, there won’t be borrowed assets in company’s accounts and therefore interest payable to creditors. It can be in itself considered from the positive point of view. However for the successful business operations, market holding, implementation of innovations, there is a necessity for access to the capital market. Due to this the aim of the financial management involves reasonable balancing between development and its financial well-being.

In order to get the fullest and fairest view of the company’s financial situation, it is necessary to pay attention not only to the average indicator values in the industry, but also to all the submitted financial indicators and ratios of the company.

Interest coverage ratio value of the largest car manufacturers (Top-10) varies from -18,6 (OOO Ellada Intertreid) to 21,2 (ZAO Renault Rossiya). The negative indicator shows that there is a net profit before taxes (the company may get the net profit due to changes of deferred tax assets). 

Figure 1. Revenue and interest coverage ratio of the Russian largest car manufacturers (Top-10)

Following the results of 2014, the annual revenue of the Top-10 companies amounted to 1119,1 bln RUB. It is higher than the total indicators of the same car manufacturers in the previous period by 0,9%. Taking into consideration the inflation, the financial result of the industry’s giants seems to be modest.   

The range of companies have decreased the revenue: OOO Ford Sollers Holing (-34,4%); OOO Avtomobilny zavod GAZ (-13,9%); OOO Volkswagen Group Rus (-4,4%); ZAO Avtotor (-4,4%); PAO KamAZ (-2,6%).

The situation in the automobile industry is complicated; the consumer resistance broke down the sales practically of all companies. Only those companies are going to stay alive, which managed to locate the manufacture within the country, to establish cooperation with Russian suppliers thereby protecting themselves from exchange rate fluctuations. 

Nevertheless, the losses took place: the largest brands General Motors – Chevrolet and Opel declared their exit from market. 

According to the Association of the European Business (AEB), 129,9 thousands of new cars were sold in October 2015 in Russia. It is by 38,5% lower than in October 2014 and by 7,7% lower comparing with the previous month. 

The Top-3 leaders by concerns (alliances) are the following ones: Avtovaz-Renault-Nissan, Hyundai-KIA Group, VW Group. 

In the whole, 1,32 million of cars were sold within 10 months, that is by 33,6% lower than in the same period of 2014.

224,0 thousand cars were sold under Lada brand. It is followed by KIA - 134,1 thousand cars (-13%), Hyundai 133,5 thousand (-10%), and Renault - 98,1 thousand (-37%). 

The leading models are: Lada Granta – 99 653 cars (-22,7%), Hyundai Solaris – 95 047 (0,0%), and KIA Rio – 80 667 (+9,7%).