The credit rating of Limited Liability Company «Sibirskoe steklo» (hereinafter, Sibsteklo, or the Company) stems from its business profile assessment, which is based on a stable contract base and the low diversification of manufactured products. The Developing outlook reflects, on the one hand, the Company’s progress achieved in 2022–2023 in obtaining the ownership title to the production assets taken on lease by the Company, and, on the other hand, uncertainty regarding allegations to the Company’s ultimate beneficiary, which, according to the Company, are not associated with Sibsteklo. The rating is supported by the good geographical diversification of sales and profitability. Among the factors that limit the rating, the Agency notes the small size of business compared to major Russian non-financial companies, medium leverage (taking into account issued sureties and factoring), low coverage (given factoring expenses), and the liquidity assessment which is not high due to debt repayments expected in 2025–2026.

Sibsteklo produces colorless and colored container glass in Novosibirsk. Its ultimate beneficiary is E. A. Taran. The Company is part of RATM Holding.

key assessment factors

Medium operational risk profile assessment. The Company’s market share in Russia as a whole is around 7%, while its market share in the Siberian and Far Eastern Federal Districts is about 62–65%, which, in ACRA’s opinion, characterizes its market position as medium. The Company is one of the five largest manufacturers of glass containers in Russia. The Company has a stable contract base and has worked with its main counterparties for more than five years. The Company’s contract base is shaped generally for one year ahead and depends on orders from key customers. According to ACRA’s projections, in 2024, the Company’s revenues will increase by 1.3%. The Company’s production model is quite flexible — replacing one assortment of glass containers with another takes just several hours. The Agency estimates that the primary products — beer bottles of various modifications — account for around 90% of production volume. The market of glass containers has its own seasonality: the peak demand for containers for beer falls on March–November, for other alcoholic beverages — on March–December; the demand for small jars is smooth throughout the year, and the demand for large jars is cyclical, peaking in spring and autumn. From March to November, demand for the Company’s products exceeds its production capacity, while from December to February, part of manufactured products are stored at the warehouse for future shipment. The Company’s production facilities are located in close proximity to sales markets (the Novosibirsk Region accounts for around 30% of sales); products are also sold in other regions and exported. The Company’s strategy is aimed at increasing internal efficiency. A board of directors was formed at the Company is September 2021, and risk management guidelines were adopted in October 2021. The group structure includes a single company, but certain transactions are carried out with related parties. The Company has also issued sureties for a related party. Sibsteklo does not disclose its IFRS reports. The Company discloses its RAS reporting on the corporate website and in the disclosure section of Interfax’s website. In October 2024, mass media reported that the Company’s beneficiary is subject to certain allegations. Previously, the Agency noted heightened risks that limit the score for corporate governance, and the current situation supports these limitations. According to the Company, the beneficiary did not participated in the operational management, which may limit a negative effect of this event on the Company’s business.

Small size of business and good profitability. FFO before net interest and taxes for 2024 is expected at RUB 1.6 bln (RUB 1.5 bln for 2023). According to ACRA’s projections, this indicator may grow organically in the future. The FFO before net interest and taxes margin reached 23% in 2023, and is expected to increase slightly in 2024 and remain at this level in the future.

Medium leverage and low coverage. As of September 30, 2024, the Company’s debt portfolio amounted to RUB 4.5 bln (including issued sureties). The Company’s debt portfolio includes bank loans, bonds, digital financial assets, and loans from its owner. The ratio of total debt (including sureties and factoring) to FFO before net interest was 3.3x in 2023. When calculating leverage, ACRA added sureties issued by Sibsteklo to its principal debt, since previously the Company serviced one of these sureties at its own expense. According to ACRA’s projections, the weighted average leverage will remain at the current level in 2024–2026, which is explained by the planned investments and dividend payments. The Company had issued sureties worth RUB 579 mln as of the date of this press release. ACRA expects that by the end of 2024, coverage (FFO before net interest to interest) will decline to 1.1x (3.7x at the end of 2023) due to a growth of interest expenses, including factoring. According to the Agency’s projections, the weighted average coverage will grow to 1.6x in 2025–2026.

Free cash flow (FCF). In 2020–2023, the Company’s FCF was negative, which was largely due to capital investments made to develop production. According to the Agency’s calculations, the FCF in 2024 will remain negative in view of the Company’s investment activities and expected dividend payments, and then it will turn positive.

The liquidity position is weak due to the significant debt repayments scheduled for 2025–2026 and the absence of available credit limits.

key assumptions

  • Stable contract base.

  • Dividend payments as declared.

  • The Company’s capital investment program carried out as planned.

potential outlook or rating change factors

The Developing outlook assumes a variety of trends: the rating may stay unchanged, be upgraded or downgraded within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Weighted annual leverage (ratio of total debt to FFO before net interest) falling lower than 2x accompanied by the weighted annual coverage (FFO before net interest to interest) exceeding 5x;

  • Weighted annual short-term liquidity ratio exceeding 1.25x and the weighted annual FCF margin exceeding 2%.

A negative rating action may be prompted by:

  • Investigative allegations against the Company’s ultimate beneficiary;

  • Weighted annual FFO before net interest and taxes falling below RUB 500 mln along with the weighted FFO before net interest and taxes margin falling below 15%;

  • Weighted annual leverage (ratio of total debt to FFO before net interest) growing above 3.5x;

  • Weighted annual coverage (FFO before net interest to interest) falling below 1x;

  • Available liquidity is not sufficient to cover debt repayments.

rating components

Standalone creditworthiness assessment (SCA): bb-.

ISSUE RATINGS

No outstanding issues have been rated.

REGULATORY DISCLOSURE

The credit rating has been assigned to Limited Liability Company «Sibirskoe steklo» 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.

The credit rating of Limited Liability Company «Sibirskoe steklo» was published by ACRA for the first time on December 12, 2021. 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 data provided by Limited Liability Company «Sibirskoe steklo», information from publicly available sources, and ACRA’s own databases. The credit rating is solicited, and Limited Liability Company «Sibirskoe steklo» participated in its assignment.

In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided additional services to Limited Liability Company «Sibirskoe steklo». No conflicts of interest were discovered in the course of credit rating assignment.

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