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The loss of profits of NKNK last year was due to large foreign currency loans

April 12/2021

MOSCOW (MRC) - Net profit of Nizhnekamskneftekhim in 2020 decreased by 81% to 4.4 billion rubles, but not because of the lockdown caused by the coronavirus, but because of gigantic loans in euros, BUSINESS Online reports.

NKNK's revenue also decreased, but not so much - by 15%, or 26.2 billion, to 147.9 billion rubles. According to the consolidated financial statements in accordance with IFRS, the operating result fell generally by only 5.4 billion to 22.7 billion rubles.

Earlier it was noted that the key owners of the TAIF group, which includes Nizhnekamskneftekhim, decided that financing of the construction of an olefin complex with a capacity of 600 thousand tons of ethylene per year would be carried out mainly through borrowed funds. And in 2018, at the St. Petersburg economic forum, they signed an agreement with a consortium of banks to raise EUR807 million.The general contractor was Linde Engineering, an agreement with which the Taif people signed in 2017 at the same forum in the presence of Vladimir Putin.

One of the consequences was an increase in long-term and short-term loans of NKNK by 47 billion to 103 billion rubles based on the results of 2020. On currency revaluation of assets and debts, NKNK received a negative balance of 16.5 billion rubles. In the consolidated financial statements, the net exchange rate difference is estimated at minus 11.8 billion rubles.

As for other external sources of funds, in 2020 the accounts payable (to suppliers and customers) of NKNK doubled to 22 billion rubles, while accounts receivable (counterparties' debts) decreased by EUR0.5 billion to EUR13.9 billion. Together with the fall in retained earnings and the growth of bank debts, this is a wake-up call, especially if we take into account the decline in the company's revenue. If this trend continues, the debt burden of petrochemists will sharply increase relative to their own funds, which could potentially lead to a revision of credit conditions.

At the same time, about half of NKNK's revenue is generated in the ruble zone, that is, making foreign currency loans unprofitable, the weak ruble simultaneously helps smooth out the price dip. Against the dollar, the Russian currency dropped 11% over the year to 72.1 rubles per dollar, while prime cost declined slightly more slowly than revenue, dropping 14% to 111.7 billion rubles. At the same rate, commercial expenses (storage, advertising, sales) decreased by 14%.

Earlier it was reported that by the end of 2020, sales of Nizhnekamskneftekhim were able to restore to the level that was before the coronavirus crisis. However, due to the pandemic, the demand for all types of rubber has decreased, which has led to overstocking of warehouses on a huge scale.

According to the ScanPlast of MRC, Nizhnekamskneftekhim produced just over 19,000 tonnes of propylene polymers in the last month of 2020 against 18,000 tonnes a month earlier. During the period under review, the total polymer output at the Nizhnekamsk enterprise reached the level of 219,700 tonnes against 211,700 tonnes in 2019.

PJSC "Nizhnekamskneftekhim" (NKNKH) is one of the largest Russian producers of petrochemical products. The production complex of the company includes ten factories of the main production and ten departments (railway transport, main ethylene pipelines, etc.). NKNKh produces over 120 types of chemical products, including synthetic rubber, polyethylene, polypropylene, polystyrene, surfactants. Nizhnekamskneftekhim is part of TAIF Group.
Author:Anna Larionova
Tags:PP, PS, PE, natural rubber, synthetic rubbers, Nizhnekamskneftekhim, Russia, Taif -NK.
Category:General News
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