Information agency Credinform prepared a research on the accumulation of the largest in terms of 2012 turnover Russian companies. According to the research, 50 largest companies accumulate 2.7 trillion RUB or USD 92.4 billion in their accounts (based on the average exchange rate for 2012). Compared to the year 2011 this figure had dropped by almost a half - 41%, but still remains quite impressive and is 4.6% of nominal GDP for 2012. Thereby the share of short-term investments with 66% overrides in the total amount.
50 companies leading by turnover were selected and ranked in terms of "amount of savings" within the ranking. The amount of savings for the selected companies was calculated on the basis of the balance sheet lines "Cash and equivalents" and "Short-term investments." The top ten is shown in the diagram.
On the top ten "most thrifty" has 77.8% of the total savings of 50 largest companies, accounting for 2.1 trillion RUB or 18% of their total revenues.
The 1st ranking line is for Rosneft Oil Company. During 2012 the company has accumulated 817 billion RUB and the purchase of TNK-BP by Rosneft has become the world's largest mergers and acquisitions as of year-end 2012, resulting in Rosneft will become the largest company in the world in terms of oil production. Experts estimate the cost of the transaction to USD 54.5 billion. Now the company is actively raising funds to pay for the transaction. It has got guarantees from banks to receive about USD 30 billion, USD 16.8 billion of which are already brought out. Rosneft also plans to use loans from Russian banks and asset sales to finance the deal.
The 2nd line of ranking is for Surgutneftegas. The company has long been accused of excessive savings. Surgutneftegas became actively save money after the default of 1998, and in late 2008 the accumulation exceeded the company's capitalization. But despite a respectable second place in the ranking with a score of 336.7 million RUB, the company reduced the accumulation of 9.5% compared to last year. In 2012 the company acquired part of the Shpilman field for 46.2 billion rubles in the course of the auction. Also the construction of the airport "Talakan" in the Republic of Sakha (Yakutia) at the end of 2012 was finished. The construction was carried by Surgutneftegaz. The project cost is estimated at more than 5 billion RUB. In early 2013 the airport was gone into service.
Gazprom and its two subsidiaries, Gazprom Neft and Gazprom mezhregiongaz are also included in the rating. Three mentioned companies have accumulated in their accounts 349.5 billion RUB in the whole. Thereby the parent company has significantly reduced their savings be 32,8% compared to the previous year.
Accumulations of Gazprom Neft are very close to the savings of Gazprom, increased for more than 5 times compared to last year. Among the largest deals in the company's 2012 the purchase of Magma Oil Company, a part of Sibir Energy, for 11.15 billion RUB should be noted. Following the transaction, Magma has been integrated into the structure of a subsidiary - Gazprom Neft-Khantos. Average daily production of Magma Oil Company was about 40 thousand tons in 2012. Yuzhnoe and Orekhovskoye fields in Nizhnevartovsk region are in assets of the company.
Last year Gazprom mezhregiongaz was thriftier and increased the amount of their savings to 31.26%. The company continues to expand the geography of supplies by Russia in accordance with the program of gasification of Russian regions. The amount of money spent on this program since 2005 has already exceeded 180 billion RUB, not counting the 100 billion RUB allocated by Gazprom for the construction of branch pipelines and gas distribution stations. At the same time in 2012, sales of natural gas in "Gazprom" group reduced by 5.9%, while sales of domestic customers increased by 2.4% due to the increase in the average selling price of gas by 8.8%.
The 6th line of the rankings is taken by OJSC Russian Railways (RZD), with total accumulations in 118.5 billion RUB. In 2012, the company completed the largest deal in its history on the absorption, buying French logistics operator Gefco for EUR 800 million from a carmaker PSA Peugeot Citroen. But in addition to large purchases in 2012, RZD was also engaged in sales. So, in December Independent Transportation Company (NTC) bought 25% plus 1 share of Joint Stock Company Freight One from Railways. The total purchase price amounted to 50 billion RUB.
Oil Transporting JSC "Transneft" goes a little bit down to RZD. During 2012 the company has accumulated 111.6 billion RUB in its accounts, which is less by 42.8% than the results of 2011. Revenues for 2012 increased by 8.6% compared with 2011. Unlike most of the Top-10 the majority of savings (69%) accounts for cash and cash equivalents.
OJSC Novolipetsk Steel has increased its savings in 2012 of 11.8% compared to the year 2011 and thus earned the 8th place in the ranking. In 2011 the company entered into a number of large transactions. The most significant agreements include: the purchase of a service center in India; consolidation of renting assets of Steel Invest and Finance SA and the establishment of overseas divisions (total amount is about USD 600 million), the sale of Independent Transportation Company (NTC) to UCL Rail BV for USD 325 million. However, in 2012 the company turned out to be calmer and less remarkable on the big deals.
LLC "LUKOIL Permnefteorgsintez" with the amount of 82.9 billion RUB savings also hit the rating. Company’s bank decreased by 5.22% compared to 2011. Thereby the accumulations are almost 100% made up of financial investments.
Summing up the results of 2012, it can be concluded that despite the reduction in the amount of savings by almost half, the major players in the Russian market still save up rather substantial amount for their accounts. The capital flight to the West is becoming more and more noticeable trend: investments in domestic companies are insignificant against the background of large transactions of Rosneft and Russian Railways. Especially those savings seem intimidating amid stagnation of industry and a lack of investment for the economic development of the country. Let's hope that next year the largest Russian companies will properly dispose of accumulated funds, which could well serve as a lever for development.
Stagnation of Russian economic is a fact admitted by many experts and politicians. There are different reasons to explain the nature of this phenomenon: from external (international financial crisis) to internal (inefficiency of resource-based economy). The authorities of the country see the root of the problem outside the country, whereas international experts more often advise to pay attention to internal structure of the economy. Thus, international rating agency Standard & Poor’s (subsidiary company of McGraw-Hill Corporation, researching analytical investigation of financial market) came to conclusion that modern Russian economic model, based upon government-owned major corporations and monopolies, has ceased to be effective, and only refocusing of country economics towards small and medium enterprises (SME) may change the situation.
Development of this economy sector will not only conduce the creating of new vacancies, but also will favourably influence on investment climate, having reduced the outflow of funds from the country. It seems that authorities of the country realize the necessity of reforms in this field. Thus, on the international investment forum in Sochi the Prime Minister of Russia Dmitry Medvedev declared that despite the difficulties, the state intended to continue the support of small companies, mainly manufacturing and investment companies. The fixed budget has about 70 billion rubles for these purposes.
The Ministry for Economic Development (MED) has offered measures for supporting SME. One of the top targets that MED sets, is improvement of availability of credit provision for SME.
The government proposes to deposit from the Sovereign Wealth Fund (SWF) 100 billion rubles during several years in Bank for Foreign Economic Activity at annual interest 5,25% in order that the BFEA could extend a credit for commercial banks, working with small and medium enterprises at annual interest 6,25% . At the same time the banks are obliged to cut rates for SME to 10% per annum and to reduce terms of the credit to 7 years maximum. By the way, nowadays the rate for medium enterprise equals 13,5% per annum, and for small varies from 14,5 to 16-17%, depending on business stability. According to the head of the Ministry Alexei Ulyukaev, the creating of more convenient system of credit refinancing scheme to small and medium enterprises will lead to increase of the credit portfolio of 400-500 billion rubles per year. At the same time the Minister thinks that under existing interest rates and terms of credit the situation when economics will simply bump against the debt load, was inevitable. It is possible to avoid it only by extending this sector due to getting rid of administrative burden. Ulyukaev also notes that state banks could spread the model of “lending factory” on small and medium enterprises, similar to retail lending.
The second topical issue related to small and medium enterprises is a problem of insurance premiums. It is to be recalled that for small enterprises, working in manufacturing and social spheres, there is a reduced rate of insurance premiums of 20%. The first Deputy Prime Minister Igor Shuvalov has accepted an offer of the MED of preservation of this benefit till 2016. Thus, the offer of the Ministry of Labour and Social Security on gradual escalation of insurance premiums (on 1% per annum) beginning in 2014 was delayed.
The experts agree that essential reforms in monetary policy are necessary to stimulate the development of this economy sector. Firstly, this refers to reduction of refinancing rate. Secondly, business struggle in banking sector should be developed. Today due to dominant position of banks with state participation it practically doesn’t exist. Thirdly, there should be changes in the policy of banking regulation; first of all, the point is about instruction CB 254-P, determining regulatory limits for banks. And at last, one should pay attention on borrowers’ rights protection, which actually doesn’t exist.
Offers of the MED are certainly the steps in the right direction, though they are very small. And the rate of 10% is still high enough. Let’s hope that these steps towards entrepreneurs will become by far not the last ones and together with other reforms, such as “tax holiday”, they will deliver the positive results, giving rise to development of other economic sectors.