Rating agency Expert RA confirmed the rating of Arkhangelsk PPM, JSC to be at ruA. The outlook is stable (https://raexpert.ru/releases/2019/jul15f).
According to the research, despite the strong loan growth during the reporting period, the agency estimates the level of the total debt load of APPM to be reasonable. The value of debt/EBITDA at the reporting date was 1.4, and by the end of 2019 it is expected to be of 2.1. The cash flow to debt ratio at the reporting period is 53 %.
Based on the results of 2018, Expert RA noted that the profitability ratio slightly decreased. However, the values are still rated high: the results recorded over the reporting period demonstrated return on the assets and capital to be 19 % and 36 %, correspondingly, calculated based on the adjusted for currency and assets revaluation net profit. At the same reporting period, EBITDA margin was 39 %. The agency also indicates the persistent exposure of APPM operations to currency risks due to the fact that 23 % of the revenue is generated by export sales, from that 13 % of the liabilities are nominated in foreign currency. This restrains the rating.
As to the corporate risk assessment, Expert RA noted positive changes related to the structure of the Board of Directors – in 2018, the number of non-executive directors increased to 2 while the total number of the members was 6. The quality of strategic planning and risk management continues to support the rating.
Expert RA indicates that Arkhangelsk PPM, JSC is one of the leading pulp and paper companies in Russia. It is among the top-five largest companies producing pulp, container board and offset paper that cover 10 %, 12 % and 14 % of the market, correspondingly.
The products are sold not only to the domestic market but also to European and Asian countries – on the basis of 2018 results, the export revenue of APPM Group is 23 %. Expert RA rates the product diversification of APPM Group revenue high – on the basis of 2018 results, sales revenues are the following: pulp – 24 %, cardboard and paper for corrugation – 39 %, corrugated packaging – 22 %. According to the agency, this revenue mix allows to become less dependent on the pulp prices.
In 2019, the company will complete a major part of the large-scale investment program under the strategy. It includes the construction of the tissue plant in Kaluga Region and installation of the evaporation station at Arkhangelsk PPM, JSC. The planned amount of investment expenditures in 2019 will be 6.75 billion rubles.
According to the IFRS-based financial statements as of 31 December 2018, the assets of APPM, JSC were 54.6 billion rubles, the capital – 27.6 billion rubles. On the basis of 2018 results, the revenue was 38.8 billion rubles, the net profit – 8 billion rubles.
Credit rating is long-term and assigned in accordance with Russian national scale. The rating and its outlook are expected to be revised no later than 1 year after the publication of the press release.
Rating is assigned in accordance with Non-Financial Corporations Credit Rating Assignment Methodology (effective from 20 September 2018).