The credit rating of EuroTrans JSC (hereinafter, EuroTrans, the Company) reflects its strong business profile that takes into account the high diversification of fuel and related products sales formats and the availability of fast EV charging stations, high quality of corporate governance, as well as the Company's medium position in the market of Moscow and the Moscow Region, and medium geographic diversification. The financial risk profile includes the Company's less than medium size (as confirmed by the FFO before fixed charges and taxes), high profitability, strong cash flow, and medium liquidity. At the same time, high leverage has a constraining effect on the of the Company's credit rating.
In 2022, EuroTrans acquired shares in Magistral Oil CJSC, Trassa GSM LLC, and Vector LLC. This transaction resulted in a noticeable change in the structure of the Company's balance sheet, which is taken into account by the Agency in the outlook part of the rating.
EuroTrans is a dynamically developing fuel group of companies operating under the TRASSA brand, focused on retail sale of fuel of all grades and more than 10,000 names of goods at gas filling stations, wholesale of fuel stored in its own tank farm, sale of winter windshield washer liquid of its own make, fuel transportation by fuel trucks, as well as services for design and construction of filling stations. The Company is included in the list of systemically important entities of the Russian economy.
Key assessment factors
Medium market position. The Company is a successful player in the moderately concentrated gasoline and diesel fuel retail market of Moscow and the Moscow Region. EuroTrans is a large chain of filling stations with an annual sales volume of over 300,000 tons of petroleum products (according to the Company's estimates, its market share is about 3%). In addition, a portion of the revenue is generated by wholesale of fuel stored in its own oil depot located in Elektrougli to third-party gas filling chains and vertically integrated oil companies.
The strong business profile is based on the low cyclicality of demand for the Company's products, given the steady growth in the number of motor vehicles, as well as the attribution of gasoline and diesel fuel to non-food essentials, good diversification of sales formats focused on the mass market segment (the share of retail fuel sales in revenue is about 60%), the presence of fast EV charging stations (five stations with a capacity of 150 kW), and a wide range of related and fast food products (about 10% of revenue) supplied from the Company's own kitchen factory, as well as restaurants at gas stations. The Company operates under a recognizable brand TRASSA, which it has been developing since 2005. EuroTrans uses a variety of promotion tools, which include, among others, a mobile application and fuel cards. The Company's retail chain includes 54 gas stations located in Moscow and the Moscow Region.
High score for corporate governance. The Agency positively views the Company's consistency in the development of its chain of gas stations, as well as in the construction of its own production assets, which include an oil depot, a kitchen factory, and a windshield-washing liquid production plant. The risk management system is established by a relevant regulation that defines goals, principles, responsibilities, and organizational levels of interaction. The risk map is updated on an annual basis. The insurance policy provides for mandatory insurance of hazardous production facilities. Property insurance contracts against fire and other hazards are issued for each gas station, the oil depot, and the kitchen factory. The Company has a board of directors and board committees. The owners of EuroTrans are members of the board of directors, and they are also act as CEOs in the Company's subsidiaries. At the same time, three members of the Company's board of directors are independent. The structure of the group is simple and includes the Company that operates gas stations and manages retail and wholesale trade of petroleum products, food in shops and cafes, as well as an oil depot operator, a transport company, and a company operating the fleet of fuel trucks and the truck depot. Related-party transactions are carried out, but they are economically reasonable. EuroTrans prepares its financial statements in accordance with IFRS. The 2021 financial statements are presented with an auditor's reservation regarding the amount of reported reserves. This fact, as well as the lack of publicly available reports, are taken into account in the medium score for the financial transparency of EuroTrans.
Financial risk profile assessment. The Company's size is less than medium as the weighted FFO before fixed charges and taxes is less than RUB 5 bln.
In 2021, the above indicator equaled to RUB 2.7 bln. The Company's revenue in 2020 and 2021 showed stable growth and in 2021, it amounted to RUB 48.9 bln. According to the Company's estimates, in the nine months of 2022, its FFO before fixed charges and taxes amounted to RUB 4.3 bln. The Agency believes that by the end of 2022, the indicator may exceed RUB 5 bln. The expected improvement in this indicator will largely be caused by an increase in the marginality of the EuroTrans business. The favorable fuel price environment, which is facilitated by a reduction in export supplies, as well as an increase in the volume of exchange purchases of raw materials in the Company's costs structure, resulted in an increase in the FFO before fixed charges and taxes margin, which is expected to reach 17.5% in 2022 versus 5.5% in 2021 (the weighted FFO before fixed charges and taxes margin for the period 2019–2024 is expected to be 11.1%). The Company's leverage is high but tending to decrease in the forecast period: the adjusted total debt to FFO before fixed charges (including lease obligations) amounted to 9.2x in 2021, however, given the growth of FFO before fixed charges, this indicator will decrease to 4.7x in 2022, with the potential for further improvement in 2023–2024 due to a reduction in the amount of debt. In 2022, the Company's debt structure has changed significantly. In particular, the loan portfolio consisting of credit lines granted by Promsvyazbank PJSC (ACRA's rating — AA+(RU), outlook Stable) was fully repaid, including due to the repayment of loans issued by EuroTrans. The main assets (gas stations, tank farm, kitchen factory), which were previously used by the Company on the basis of lease agreements with affiliated companies, were purchased by Gazprombank Leasing LLC in 2022 and leased to EuroTrans. Thus, the Company's current loan portfolio mainly includes leasing obligations, as well as a credit line from a large Russian bank. The liabilities are denominated in rubles at floating rates. The debt service indicator (FFO before fixed charges to fixed charges) weighted for 2019–2024 is expected to equal 2.6x. The strong cash flow is due to the high FCF margin (4.4% in 2021) and the low ratio of capex to revenue (2.6%). The medium liquidity assessment is due to the availability of committed credit lines and a positive operating cash flow.
Key assumptions
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The FFO before fixed charges and taxes margin at least 17% in 2022–2024.
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Capex in lines with the Company's plans for 2022–2024.
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No dividend payments.
Potential outlook or rating change factors
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- FFO before fixed charges and taxes weighted for 2019–2024 exceeding RUB 5 bln, the ratio of total debt to FFO before net interest weighted for 2019–2024 declining below 5.0x, and the ratio of adjusted total debt to FFO before fixed charges weighted for 2019–2024 declining below 4.0x.
A negative rating action may be prompted by:
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The FFO before fixed charges and taxes margin declining below 10%;
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The ratio of FFO before net interest to interest declining below 2.5x.
Rating components
Standalone Creditworthiness Assessment (SCA): a-.
Support: none.
Issue ratings
There are no outstanding issues.
Regulatory disclosure
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
A credit rating has been assigned to EuroTrans JSC for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on the data provided by EuroTrans JSC, information from publicly available sources, as well as ACRA’s own databases. The credit rating is solicited, and EuroTrans JSC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA's opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to EuroTrans JSC. No conflicts of interest were identified in the course of credit rating assignment.
