Overall liquidity of fishery enterprises in Russia

Credinform Information Agency prepared a ranking “Overall liquidity of fishery enterprises in Russia”. For this ranking, the experts selected fishery enterprises with highest revenue in Russia and then ranked these companies by “overall liquidity” index.

In general, liquidity coefficients reflect ratio of liquid assets to short-term liability and characterize the company’s ability to repay its short-term liability, which is the most risky.

What concerns overall liquidity index, it constitutes the ratio of total current assets of company to short-term liability. This indicator is used for evaluation of the company’s current liquidity and shows the sufficiency of its current assets for repayment of short-term liability.

Recommended value is between 1.0 and 2.0.

We should remind that current assets include the following indicators: inventory, value added tax on acquired assets, accounts receivable, financial investments (except monetary equivalents), monetary assets and monetary equivalents, and other current assets.

Short-term liability incorporates debenture, accounts payable, deferred income, estimated liability, and other short-term liability.

Overall liquidity and solvency index of the fishery enterprises with highest turnover
NNameINNTurnoverin 2011, ml rub.Overall liquidityIndex
1 AkrosFisheryCompany CJSC 4101013772 3,428.73 6.74 190 (highest)
2 Nakhodka Active Marine Fishery Base OJSC 2508007948 5,445.32 3.5 198 (highest)
3 Pacific Directorate of Exploratory Fishing and Scientific Research Fleet OJSC 2536053382 1,996.0 1.95 159 (highest)
4 Okeanrybflot OJSC 4100000530 597.5 1.91 173 (highest)
5 PC V.I. Lenin Fishing Kolkhoz 4101016808 2,967.4 1.83 226 (high)
6 Pacific Marine CJSC 2540071722 2,201.4 1.36 244 (high)
7 ArkhangelskTrawlerFleet OJSC 2901128602 3,229.6 1.25 242 (high)
8 Preobrazhenskaya  Trawler Fleet Base OJSC 2518000814 2,925.57 1.02 243 (high)
9 Morskaya Zvezda LLC 3903017709 1,888.4 1.02 260 (high)
10 DalmoreproduktHoldingCompany OJSC 2504001293 2,285.3 0.97 316 (satisfactory)

Analysis of the table shows that almost all companies possess sufficient current assets for repayment of short-term liability. Moreover, Akros Fishery Company CJSC and Nakhodka Active Marine Fishery Base OJSC possess substantial current assets, which is accordingly reflected in overall liquidity index as well. According to the results of 2011, it has increased for these enterprises by 6.74 and 3.5 respectively.

On the one hand, this fact is positive for both companies, since in this case they possess substantial resources to cover short0term liability. On the other hand, high overall liquidity index bears also a negative load, in particular: excess of products in stocks and delayed receipt of money from partners against critical processes taking place in the country’s economy may result in serious problems for the company, such as: overstocking and arrears in payments. In both cases losses in cash inflow are possible, which may ultimately affect the entire business.

Taking into account that the solvency index of Akros Fishery Company CJSC and Nakhodka Active Marine Fishery Base OJSC is identified by experts from IA Credinform as highest, we should hardly expect serious losses in business of aforementioned companies, while excess of products in stocks and delayed receipt of money from partners has a merely temporary nature related to production activity in 2011.

Overall liquidity index of Dalmoreprodukt Holding Company OJSC is slightly lower than the standard one. In this case, the index result has been affected by excessive number of accounts payable that increased almost up to 2 billion rub. according to the results of 2011.

However, in conclusion, we should emphasize that the overall liquidity index must be mandatorily considered in complex with other financial indicators of financial and business activity of the company. Such complex is constituted by the solvency index.
Against acceptable results of overall liquidity coefficient, the indices vary significantly, for example: the highest is assigned to first four companies, while such company as Dalmoreprodukt Holding Company OJSC has a satisfactory one. Such solvency index is assigned to this company due to losses according to the results of activities in 2010-2011.

Moreover, low solvency indices mean that the company is not all right. These may imply problems in rate of production and sales, poor payment discipline – both that of partners and of the company itself, expensive credits, low profitability of the business, and other factors, the mitigation of which may sometimes require application of radical measures.

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.