The credit rating of GLAVSNAB JSC (hereinafter, the Company) reflects the low assessment of the industry risk profile (given the high volatility of the wholesale trade industry, to which the Agency refers the Company), the Company’s weak market position, medium business profile, weak corporate governance, very small business size, medium profitability, as well as the medium debt coverage and weak free cash flow (FCF). The rating is supported by the low leverage and strong liquidity assessments.
GLAVSNAB JSC is a relatively small but dynamically developing company that focuses on the wholesale and delivery of a wide range of construction and renovation materials in Moscow and the Moscow Region; it also has a branch in Samara. The main sales are online through the corporate website. The Company operates its own fleet of 20 trucks and delivers building materials to customers from its own warehouse, as well as from distributors and manufacturers.
key assessment factors
Medium assessment of the operational risk profile. The Agency considers the Company as a competitive player in the fragmented building materials market. The main buyers of the products sold by the Company are B2B segment customers, many of whom have a history of long-term relations. Thanks to well-developed logistics, which ensures a fast delivery of orders, and strong customer service, the Company has a competitive advantage in its niche. The demand for construction and renovation materials is highly cyclical; ACRA also takes into account relatively low barriers to entry into this market. In its assessment of the corporate governance, the Agency draws attention to the Company’s fairly simple business and management structure that meets its needs at the current stage of development and notes a high involvement of the main shareholder in the current operations, low financial transparency (as the Company prepares only RAS financial statements), and the presence of related-party transactions, including the practice of lending to affiliates.
Very small business size and medium profitability. In 2024, the Company’s revenue increased by 146% to RUB 1.27 bln, with a gross return on sales of 19.0%. The Company plans to maintain high growth rates in the medium term. The Agency expects the revenue to exceed RUB 2.5 bln by 2027 (in line with the Company’s projections) with a gross margin of at least 15%. According to ACRA’s estimates, the weighted average FFO before net interest and taxes for 2022–2027 will be RUB 70 mln, while the weighted average FFO before net interest and taxes margin for the same period will be 2.9%.
Low leverage and medium interest coverage. The weighted average ratio of long-term debt to FFO before fixed charges for 2022–2027 is estimated at 0.8x. The weighted average ratio of short-term debt to revenue for the same period is 0.07x, and the Agency expects the relative size of short-term debt to decrease in the future.
The ratio of weighted average FFO before net interest to interest for 2022–2027, according to ACRA’s estimates, is 2.9x, which corresponds to the medium level of interest coverage.
High liquidity and weak FCF. Against the background of the low leverage, the Company’s short-term liquidity is assessed as high, taking into account the volume of credit lines available to the Company, as well as internal sources of liquidity. ACRA estimates the weighted average FCF margin for 2022–2027 at -0.1%, which corresponds to the weak score for cash flow.
KEY ASSUMPTIONS
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Sales growing in line with the Company’s projections until 2027.
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Gross margin at least 15% for 2024–2027.
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No dividend payments for 2024–2027.
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Continued access to external liquidity sources.
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:
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Weighted average FFO before interest and taxes margin exceeding 8% along with the weighted average FFO before net interest to interest exceeding 5.0x;
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FCF margin exceeding 5%;
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Better financial transparency and corporate governance practices.
A negative rating action may be prompted by:
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Significant deviation of revenues from the Company’s projections;
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Weighted average ratio of short-term debt to revenue exceeding 0.2x;
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Weighted average FFO before net interest to interest falling below 2.5x;
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Weighted average FFO before interest and taxes margin falling below 5%;
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Weighted average FCF margin falling below -2%.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): bb-.
Support: no.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to GLAVSNAB JSC under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings 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 GLAVSNAB JSC for the first time. The credit rating of GLAVSNAB JSC is 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 GLAVSNAB JSC, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and GLAVSNAB JSC 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 no additional services GLAVSNAB JSC. No conflicts of interest were discovered in the course of credit rating assignment.
