Information agency Credinform prepared a ranking of return on equity of companies engaged in precious metals ore extraction in Russia. Companies with this activity, largest in terms of turnover for the latest available in the Statistical Register period (2012), were selected for the ranking. The first 10 selected enterprises were ranked in terms of return on equity decreasing.
Return on equity indicates how many monetary units of net profits were earned by each unit invested by the company’s owners. This index allows assessing the effectiveness of the use of equity capital, invested by the owners. It is calculated as the ratio of net income to equity.
As is known, the standard values for profitability ratios are not defined, as the values of which differ considerably depending on the industry. That is why the ratio should be evaluated in comparison with the industry index values and the values of other companies in the industry.
However, many experts consider that return on equity should be higher than 10-12% for inflationary economies, such as the Russian one. The main comparative criterion is an alternative profitability, which the owner could get by investing in other businesses.
| № | Name INN | Region | Return on equity, % | Turnover, mln. RUB | Solvency index GLOBAS-i® |
|---|---|---|---|---|---|
| 1 | CC CMGC INN 8709009294 | the Chukotka Autonomous District | 85,54 | 29 959 | 197 (top) |
| 2 | LLC Omolon Gold Mining Company INN 4909109130 | the Magadan Region | 66,36 | 9 391 | 238 (high) |
| 3 | LLC Okhotskaya Mining INN 2715005530 | the Khabarovsk Territory | 42,58 | 9 813 | 177 (top) |
| 4 | CJSC Serebro Magadana INN 4900003918 | the Magadan Region | 35,85 | 20 861 | 178 (top) |
| 5 | OJSC "Uzhuralzoloto Group of Companies" INN 7424024375 | the Chelyabinsk Region | 32,51 | 8 218 | 218 (high) |
| 6 | OJSC "GV Gold" INN 3802008553 | the Irkutsk Region | 30,87 | 8 584 | 120 (top) |
| 7 | OJSC Aldanzoloto GRK INN 1402046085 | the Republic of Sakha Yakutia | 29,89 | 7 292 | 158 (top) |
| 8 | Gold of Nothern Urals CJSC INN 6617001534 | the Sverdlovsk Region | 27,20 | 8 456 | 165 (top) |
| 9 | CJSC Mnogovershinnoye INN 2705090529 | the Khabarovsk Territory | 25,19 | 7 738 | 139 (top) |
| 10 | CJSC "Gold-Mining Company "Polus" INN 2434000335 | Krasnoyarsk Territory | 18,71 | 60 959 | 150 (high) |
The first line of the ranking is for CC CMGC with a value of return on equity of 85.54%, which is a very good result and indicates the effectiveness of owners’ equity usage and high investment returns. CC CMGC is also the second in the industry in terms of turnover and it has got the highest solvency index GLOBAS-i ®, which characterizes it as a financially stable.
The second and third lines of the ranking are for LLC Omolon Gold Mining Company and LLC Okhotskaya Mining with the values of 66.36 and 42.58 % respectively, which is also an excellent result. Enterprises were given high and the highest solvency index GLOBAS -i ®, respectively.
CJSC "Gold-Mining Company "Polus", the leader in terms of turnover, closes the ranking with 18.71% ration of return on equity, which also can be considered a good result.
In general, companies in the industry have high indexes of return on equity in excess of 15%, which indicates the investment attractiveness of the industry in general and companies in the ranking in particular. All companies in the ranking were given solvency index GLOBAS -i ® from high to the highest. This indicates the financial strength of companies. Enterprises of the ranking are the most attractive from the point of view of revenue opportunities and risks minimization.
In view of deteriorating situation in domestic economy, IMF lowered forecasts of Russian GDP growth to 1,5% from с 2,5% in 2013 and to 3% from 3,25% in 2014. Under these deplorable figures experts note that unemployment rate is historically low and capacity utilization has reached pre-crisis level. Among other things, price on hydrocarbon (basis of country’s export) continues to stay on the high level for several years running. Obviously, present growth model has run its course.
Increase of the tax burden with simultaneous build-up of government expenditures is a temporary measure that won’t lead to quality change of situation. On the contrary it will enhance uncertainty in future.
Russian officials are more optimistic in their forecasts. Thus, the head of the Ministry of Economic Development and Trade Alexei Ulyukaev stated that January-September the GDP growth worked out 1,5%, and in the end of year it should be 1,8%. In a panel session of Foreign Investment Advisory Council, which includes the leaders of largest world companies, the Prime Minister of Russia Dmitry Medvedev gave an opinion that in 2013 economy will be up by 2%.
In order to bring the country to other level of technological development and living standards, it is necessary to change corporate style of management, to increase labor efficiency, to encourage investments, to make rules for business maximum transparent and predictable, but not to change legal system every year. It must be admitted that we haven’t got far in solving these problems. Thus, as an example, we should mention a growing investment outflow from the country, which has worked out in monetary terms 48 billion dollars for 9 months of 2013.
We may conclude that the country will continue to drown in the stagnation, the exit from which might be delayed for an indefinite period, if there are no new reforms and no positive signals to business.