The credit rating of New Technologies LLC (hereinafter, NT or the Company) is determined by its very strong business profile, strong market position, and medium corporate governance and geographic diversification. The financial risk profile assessment reflects the Company’s very high profitability, medium liquidity assessment, medium assessment of leverage, low assessment of debt service, as well as a weak cash flow and medium size.
The outlook for NT’s credit rating has been changed to Stable due to the multidirectional dynamics of assessments of a number of factors and sub-factors. In particular, the assessment for the size of the Company was improved due to growth of FFO before net interest payments and taxes, as well as the financial transparency assessment, while on the contrary, the debt service assessment was lowered.
NT specializes in developing, manufacturing, selling, and servicing submersible equipment used in oil production. The Company’s manufacturing assets, which have a monthly capacity of up to 600 electric submersible pumps (ESPs), are located in Chistopol and Almetyevsk. Maintenance and repair services are provided at five service centers in Russia (Nefteyugansk, Nizhnevartovsk, Gubkinsky, Noyabrsk, Buzuluk) and two abroad (Columbia, Ecuador).
KEY ASSESSMENT FACTORS
The very strong business profile is based on the substantial and stable contract base, which exceeds the Company’s annual revenues by more than three times and includes contracts for the supply of equipment, lease, maintenance and repair of varying urgency, as well as a strong production base with a wide range of operations (foundry, machining, stamping). Some components are purchased from third-party manufacturers, but the Company retains a high share of its own components in the prime costs of finished products, and also carries out systemic work to increase the level of product localization. Stable demand for NT’s products is due to the large number of oil wells operated using ESP systems.
The strong market position is determined by the stable growth of the Company’s operations and its share in the domestic market amid the changing structure of the market, which after the exit of some foreign producers, as well as market leaders capturing bigger shares, is assessed by the Agency as highly concentrated. The Company is a successful player in the Russian ESP market and one of the three largest Russian ESP manufacturers. The NT production line includes a wide list of names and standard sizes of ESPs and equipment. The Company’s products are sold or leased, including full technical support and maintenance services.
Medium geographic diversification. In the Russian market, the Company operates mainly in the Khanty-Mansi Autonomous Okrug–Yugra and the Yamalo-Nenets Autonomous Okrug, while products are exported to South America and the CIS.
Medium level of corporate governance. The Company has approved a development strategy until 2028, which defines the main directions and targets for the further development and revenue growth, including an increase in the share of contracts that include rental/lease and maintenance services, as well as an increase in the share of export revenues. The risk management system includes a risk committee, risk management policy, and a map of the key risks that is regularly updated. There is no board of directors; NT is managed by the sole executive body. NT began publishing IFRS financial reporting in 2024, which had a positive impact on the Company’s transparency.
Very high profitability and medium size of the Company. In 2024, NT’s revenues reached RUB 19.5 bln, while FFO before net interest payments and taxes was RUB 6.4 bln, which resulted in the size assessment being improved. The Company is growing its operations while maintaining very high profitability, which stood at 32.9% in 2024.
Medium assessment of leverage and low assessment of debt service. The ratio of total debt to FFO before net interest payments was 2.5x in 2024 vs. 2.6x a year earlier. Total debt reached RUB 16 bln in 2024. The loan portfolio grew due to the Company obtaining financing to carry out contracts. The Company’s debt liabilities include various instruments (loans, bond, sale and leaseback); they are dominated by bank loans and have good diversification by lender. The ratio of FFO before net interest payments to interest payments declined more than the Agency’s expectations in 2024 — to 2.3x. The weighted indicator for 2022–2027 is also expected to be 2.3x. These changes stem from the increased size of NT’s loan portfolio and growth of funds spent on servicing it amid the high cost of borrowing.
Medium liquidity assessment and weak cash flow. NT’s free cash flow (FCF) was negative in 2021–2024, as the Company was growing and needed to finance working capital and fund its annual capital expenditures. The FCF margin was -11.5% in 2024. ACRA expects this metric to remain negative in the forecast period of 2025–2027. The Company has a sufficient amount of committed credit lines and can borrow in public markets.
KEY ASSUMPTIONS
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Production volume in line with the Company’s business plan;
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No dividend payments;
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Capital expenditures in line with the Company’s business plan.
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 payments falling below 2.0x coupled with the weighted FCF margin turning positive;
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Weighted average ratio of FFO before net interest payments to interest payments exceeding 2.5x;
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Weighted FCF margin exceeding 2%.
A negative rating action may be prompted by:
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Weighted average ratio of FFO before net interest payments to interest payments falling below 1.0x;
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Weighted average ratio of total debt to FFO before net interest payments exceeding 5.0x;
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Shrinking contract base.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): а-.
Support: none.
ISSUE RATINGS
No outstanding issues have been rated.
REGULATORY DISCLOSURE
The credit rating has been assigned to New Technologies LLC 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.
The credit rating of New Technologies LLC was published by ACRA for the first time on June 8, 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 New Technologies LLC, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and New Technologies 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 New Technologies LLC No conflicts of interest were discovered in the course of credit rating assignment.
