The credit rating of Urozhai LLC (hereinafter Urozhai, or the Company) is based on the very weak business profile assessment, which in turn is due to the weak vertical integration, low share of products with high added value, and low product diversification. The business profile assessment is also limited by operations that are primarily carried out on a leased land bank. At the same time, ACRA moderately positively views the Company’s geography thanks to its proximity to the main sales markets and low climate risks. The Company’s corporate governance practices are assessed by the Agency as medium.
The financial risk profile assessment reflects the small business size, medium leverage, low interest coverage, and the weak liquidity. The block of financial factors is positively affected by the very high profitability, which is typical for producers of sunflower seed that accounts for the main share in the revenues, and the moderately high score for cash flow.
Urozhai is a small regional producer of grains and oilseeds in the Saratov Region. The Company sold 67,100 tons of products in 2024. The area of the Company’s agricultural land is 110,000 hectares.
KEY ASSESSMENT FACTORS
Weak assessment of the operating profile. Urozhai is a competitive producer in a highly fragmented local market for oilseeds and grains, which corresponds to a low assessment for market position according to ACRA’s methodology. The Agency moderately positively assesses the geography of the Company’s activities, thanks to its proximity to the main sales markets and low climate risks.
The very weak assessment of the business profile is primarily due to the lack of vertical integration coupled with a low share of products with high added value. In addition, ACRA assesses the Company’s product diversification as low. By the end of 2024, the share of sunflower in revenues was 78% vs. 76% in 2023 and, according to the Company’s projections, it will exceed 80% in 2025–2027. This indicates the Company’s very high dependence on the key product, while in this factor assessment, ACRA takes into account the fact that sunflower seed is one of the most profitable agricultural crops.
ACRA notes that in 2024, the diversification of the Company’s buyers improved. The share of Kazansky Zhirovoy Kombinat JSC declined to 11% of revenue (previously, this share was 85% of revenue), since the Company sold its products to large traders and other oil extraction plants who offered better prices.
In ACRA’s view, the Company’s corporate governance matches the scale of its business. Urozhai does not have a board of directors, while the sole owner, who is also the CEO, oversees all corporate operations. The Company’s equipment is insured, but crop failure risks and finished products are not. According to the Agency’s assessments, the financial transparency of the Company is low since it prepares RAS reports only (since 2024, the auditor is INTERCON Audit Firm).
Small business size and very high profitability. Last year, the Company’s revenue amounted to RUB 1,333 mln, which is 11% higher than in 2023. According to the Company’s projections, revenue may reach RUB 1.4 bln in 2025–2027. According to ACRA’s calculations, FFO before net interest and taxes for 2022–2027 is RUB 400 mln, which corresponds to a very low assessment of business size as per the Agency’s methodology.
Urozhai enjoys very high profitability, which is mainly due to the nature of its key product, sunflower seed. The FFO before net interest and taxes margin equaled 28% in 2023, which is assessed as very high. According to ACRA’s projections, this indicator will remain around the same level in 2025–2027.
Medium leverage and low interest coverage. The Company’s debt portfolio is primarily made up of bond issues. The ratio of total debt to FFO before net interest remained unchanged in 2024 — at 2.9x. ACRA expects a gradual decline in the leverage in 2025–2027, while the weighted average ratio of FFO before net interest to interest for 2022–2027 is estimated by the Agency at 2.4x, which indicates a low interest coverage.
Low liquidity assessment and moderately high cash flow. In 2024, the Company’s free cash flow (FCF) entered the area of positive values, amounting to RUB 209 ml. Given that the Company does not have a significant investment program and is not expected to pay dividends in the forecast period from 2025 to 2027, ACRA estimates the FCF margin for 2022–2027 at 5%, which explains the moderately high score for cash flow.
The lack of committed credit lines, as well as repayment peaks expected in 2026 and 2027 (when the Company will have to repay about 80% of the current debt) explain the low liquidity assessment.
KEY ASSUMPTIONS
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Prices for grains and oilseeds in 2025–2027 no lower than in 2024.
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Average yield maintained at the level of 2022–2024, provided that climate risks do not materialize.
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Stable area of agricultural land at around 110,000 hectares.
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No annual dividend payments or significant capex in 2025–2027.
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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 ratio of total debt to FFO before net interest falling below 2.0x;
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Weighted average ratio of FFO before net interest to interest exceeding 5.0x;
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Significant improvement of corporate governance practices and financial transparency;
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Improved liquidity.
A negative rating action may be prompted by:
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Weighted average ratio of total debt to FFO before net interest exceeding 5.0x;
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Weighted average ratio of FFO before net interest to interest falling below 1.0x;
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Weighted average FFO before net interest and taxes margin falling below 15%;
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Weighted average FCF margin turning negative;
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Materialization of climate risks that result in serious deterioration of the Company’s performance and financial standing.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): bb-.
Support: none.
ISSUE RATINGS
No outstanding issues have been rated.
REGULATORY DISCLOSURE
The credit rating has been assigned to Urozhai LLC 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 Urozhai LLC was published by ACRA for the first time on May 24, 2023. 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 Urozhai LLC, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and Urozhai LLC 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 to Urozhai LLC. No conflicts of interest were discovered in the course of credit rating assignment.
