25.08.16Interview with Olga Krivosheina the Chief Financial Officer of Rollman Group PJSC
-Dear Olga, summarizing under IFRS for the first half of 2016 is completed. Have your expectations come up to the financial result?
- Yes, I can say that all the steps of the previous year by funds investing in the modernization and development of production began to show positive results. As you can see from the report, the growth of total revenues by 13% and profits by 43% compared to the same period of last year show positive dynamics. But this is only the beginning. We see the growth at almost all business areas, and the demand for products increases.
- Does import substitution continue to work?
- Yes, we see it at the increase of orders. This year, after the inventory of all contractual relationships we have abandoned low-margin transactions. Earlier we could not allow this action.
- Earlier this year, the newly established production company "Plant"Trimmit" entered a group of companies. Is any progress in this young company?
- Manufacture and sale of trimmer line is carried out from the February 2016. This company shows the positive dynamics in sales. Demand for products has exceeded our expectations. As demand is increasing, it was decided to increase the capacity of the trimmer line and we have already paid for the additional equipment, which price is 9742500 rubles. This equipment will provide production trimmer line under the growing demand. I should add that the mentioned money was send on equipment for package of trimmer line, it is necessary to expand the range of finished products, as it was a rather narrow. Now we will produce trimmer line of more attractive length - 15 meters, before we produced just big spools and that moment limited our sales.
- What was the influence of the additional issue of preferred shares on the positive dynamics of the financial result?
- The purpose of the additional issue was just to attract additional funding for the final solution of issues for modernization of production. We planned that the replacement of the additional issue will be held before the end of the 1st quarter of 2016 and the shares will take participation at the auction of the Moscow Stock Exchange in June 2016. In fact, placement was completed in mid-May, and the admission to the stock exchange is expected until the mid-September. So, the next payment on contracts for the equipment we had to make for own expense.
- How do these circumstances for so long placement of shares may affect the company's dividend policy?
- As the financier, I'm sure, first of all the money must work on the conscience. Before we will see s profit all money have to make some turnovers to be made on the "classic way " Money-Goods-Money. Only then, dividend will be paid out of profits, as it should be.
- Do you understand that the preferred shares of Rollman Group PJSC will continue to be in demand?
- Yes, I am absolutely sure in it, we have a relatively good yield at the present moment, but if the policy of the Central Bank will continue intend to lower rates, our profitability in the future will be very good, and we understand that.
- Do you think that the Central Bank will lower its key rate at the near future?
- I do not know when it will happen, but if it does not happen, the Russian business, or at least a significant portion of small and medium-sized businesses finally cease to exist, certainly we speak about the real sector of economy, those companies that compete directly between themselves and also with foreign companies.
Ultimately, at the market finally will work more financially strong company and it will be foreign companies.
- Why do you think so?
- Now really banks offer loans of 15-16% per annum and above, a small part of the real sector is credited somewhere under 13% per annum and it is large companies. And as for foreign companies, they are credited under 2-3% per annum, even leasing under 3.5% in Europe, it is considered very expensive.
Foreign companies can update the fixed assets, to develop production, even to automate the production process and make it more cost-effective, we need a lot of money and in the long term, and where do we take it here in Russia? Who can give us this opportunity? I'll tell you - nobody.
For example, at the moment, our holding company already has a large overdue receivables, and even conveyor and Railways do not pay on time already, and not to speak of the coal mines or the more conventional of our partners. When we asked why do you not pay, they reply that there is no money, and we understand them, because it's not easy.
- And if you will file lawsuit against them.
- This is the worst variant. We will lose these companies for us, in this case, now he have just wait, wait for the banking system will start to fill the market with money, when the money will be available for small and medium-sized companies. At that moment, when rates will be manageable, and the criteria for companies which can provide loans will be reduced to a reasonable level.
- What do you mean?
- For example, our partner wants to take 3 million for working capital, but bank requirements will be do rude and difficult, that practically nobody will be able to take even if he dares. Partners from the regions are constantly complaining us about this problem.
- Let's go back to the preference and ordinary shares, which way is the company planning to do, if it becomes evident that the preferred shares at 14.2% is very expensive to pay for?
- Well, first of all, I personally do not believe that in the short term the market will change for the better, just on the basis of historical and life experience, that improvements are not worth to wait, so our shareholders nothing to worry about. But if a miracle happens, we will always be able to buy them back , at least to ourselves, we do not exclude it, but this is the case if the rates in the banks will be somewhere on the level of 7-8%, which is not really and in banks interest pay each month, and we can go to the payment once a year, as we did before and as do most companies.
-Does Rollman Group PJSC take new loans?
- No, it does not take anything serious, we have forgotten, when we took the normal loans, under normal conditions and under the normal rate, all that can potentially offer the banking system for our company cannot lead to the development and prosperity of the company
- What do you think the market price of the ordinary shares?
- The market price of ordinary shares is determined by the market, we are unpleasant to realize that the entire capitalization of the company at present moment is about 700 million, and this is where we were placed at 1.5 billion and the dollar and the euro had other rate. So, just the equipment at one plant "Nevsky Filter" in St. Petersburg has been bought by a larger amount than the entire market capitalization of the company. We understand that our company is evaluated by the fundamental, according to today's reality, and here we are powerless.
We have to continue to keep doing what we're doing, do our best and do our job better and better, step by step to return capitalization of the company at least to the offering price.
- How much money did the company raise from the first issue of preference shares?
- For quite a long time we have been able to attract only 77.3 million out of a possible 99, as there were almost not customers at that time for the face value, and we have sold in the market with a large discount, and paid dividends in the market for 35.45 million, almost half of it. As for additional emission is too early to speak about, because it is not completely sold out, and this time we will act in other way, because we are already known and untwisted, so the lowering of the price is not appropriate. By the way, we have a buyer who is willing to buy out the entire issue, and, almost at par value of 99 rubles, but we have refused this deal, declined in our internal corporate reasons, we are not ready to work with everyone who comes to us and who address to us. Everybody has a right for the choose, nevertheless, the demand and faith in our papers is exist.There's another example, we have a potential buyer at 500 million. If we reanimate our bond issue, it also shows a lot, people believe us. And this proposal makes the administration of one of the Russian regions in the conditions that we will move our factory from the center of St. Petersburg in their region, but we think that there are lot of risks. You know that in November 2014 we have opened a book of applications and everything was ready, but there was a collapse of the course on Dec. 16 and our potential purchasers of these bonds come out of the deal.
- Olga, thank you very much for your interview, I wish you good luck, and positive development Rollman Group PJSC at these difficult market conditions.
Interview by Anna Vern