COMPARISION OF COMPANIES' ACTIVITIES INCLUDED INTO KASE LISTING BY RESULTS OF THIRD QUARTER 2000 (PART 2)

18.01.01 00:00
/IRBIS, Jan 18, 01/ - Information below presents results of analysis made on activity of industrial enterprises whose shares and bonds are included into category "A", "B" of the KASE official list. Comparisons were made by results of economic activities in 1999 and 9 month of 2000. The information is published as an appendix to comparison tables on companies activities for third quarter 2000, published in previous news with the same heading (Part 1). All sums are given in tenge. Kazakhmys Corporation OJSC (Zhezkazgan) is a one of the best developing companies of the listing. On horizontal level such factors as acquisition of mines, increase in ore processing capacity have contributed to growth in production of major item - refined copper (for 9 month 2000 production grew by 12% compared to same period of 1999). Vertical growth, i.e. acquisition of auxiliary companies - power stations, coal pits, machine works, provided company with stability and decrease in cost of produced goods. Sharp increase in virtually all financial indicators for 2000 related to growth of the world prices for copper by 15%. As a result, in year 2000 company holds the first place in respect to net income, second place after Kazakhstan Temir Zholy on volume of sales and included in leading three in respect of ratio performance (ROA, ROE, ROS). By result of third quarter 2000 current assets of company have for the first time since 1996 exceeded its liabilities. Kazakhstan Temir Zholy NSE (Astana) is still largest company in terms of assets, shareholders equity and sales volume. There are two main reasons for considerable improvement of financial indexes of the company in this year. First, growth in freight transportation tariffs which amounts for 77% of gross income between Jan.01 and Apr.01 by 20-100%. Second, large increase in passenger and freight transportation that took place in year 2000. By results of the first six months, goods turnover increased by 46%, passenger turnover - 18% compared to the same period of 1999. Other indicators displaying the company's efficiency has also recorded increase. For instance, return on assets and equity increased about 35 times. SHNOS OJSC (Shymkent) whose shares (88% stake) have been taken by Hurricane Hydrocarbons Ltd. develops Kumkol oil field. Along with Karazhanbasmunai OJSC and Corporation Kazakhmys OJSC the SHNOS has highest ROA, ROE, ROS ratios. In terms of these ratios the company has been a leader by results of 1999 and during 2000. Considerable growth of sales in 2000 relates to rise in oil products prices and export of oil supplied against processing services cost (by 12.6 bln in second quarter and 14.4 bln in the third). Karazhanbasmunai OJSC (Aktau) - is relatively small oil producing company, while still obvious leader in terms of efficiency ratios. There are two reasons for that: first, low production cost (20% to sale price), second, small volumes of equity and assets. Considering appropriate indicators the company has been leading in terms of efficiency during 1999 and by results of the same year, although it had experienced losses and was on the bottom of the rating by results of 9 month 1999. Mangistaumunaigas OJSC (Aktau) was a leader in the rating by result of third quarter 1999. For 9 months 2000 it fell to 5th place. This was reasoned by three times fall in the net income. There were three major causes for that. First, sharp increase in sales expenses: 16.0 bln against 4.7 bln for three quarters of 1999 (partly explained by 110% increase in oil transportation tariffs through KazTransOil pipe-lines). Second, same large increase of administrative and general expenses (14.1 against 2.1 bln). Third, decrease in shareholder's equity (17.7 bln against 31.4 bln). The latter is a result of decline in undistributed profit (19.9 bln to 8.3 bln) and increase of uncovered losses of past periods (from 4.6 bln to 14.7 bln). Accumulated impact of these factors exceeded two times increase in sales volume because of 10% sales growth in real terms and 60% growth of the world prices. KazTransOil NOTC CJSC (Astana) recorded 4 time increase in assets as of beginning of this year because of assets revaluation made by American Appraisal Inc. This allowed company to take second place in terms of assets and equity. As a result of revaluation, current due income tax increased from 0.5 bln (end of 1999) up to 13.5 bln (end of first quarter 2000). Consequently, working capital fell from 3.6 bln to -8.5 bln (in third quarter 2000 - minus 3.7 bln). Sales volume has been growing during last year due to increase in tariffs for oil transportation since March 16 up to $15 for ton per kilometer (previous tariffs - $3 in Aktobe region, $9.6 in eastern region). Growth of assets has started as early as in the first quarter. Nevertheless, the income growth was exceeded by increased costs. As a result, the company suffered losses for 1.6 bln. In second and third quarters, growth in sales volume exceeded expenses, yet efficiency ratios were low. By results of third quarter company took 10-11 positions in terms of the ratios (8th position for same period of 1999). Kazakhtelecom (Astana) strongly holds 5-6th positions in terms of assets and equity capital. Sales volume of goods and services has been stable during 9 month 2000. Shift in company's position in the list (from 4 th in first quarter 2000, to 9th in second quarter) was caused by sales/costs ratio dynamics (in first quarter costs amounted for 52% to sale price, 72% in the second and 62% in the third). Improvement of financial ratios compared to third quarter 1999 is explained by considerable losses company suffered during three quarters related to non-operating activity (5.3 bln by results of third quarter). According to the Auditors conclusion (Deloitte & Touche LLP) for 1999, 4.7 bln losses were made because of exchange rate differential (i.e. main part of non-operating losses). Aluminii Kazakhstana OJSC (Pavlodar) takes 8th position (third quarter 2000), while has been 4th by results of the first quarter. This partly related with positions of other companies in the list. The worsening of third quarter indicators occurred because of large inflows from selling of Trans-World Group stake share in the same period of 1999. As of Oct.01 1999, these funds amounted for 2,952 mln, year end - 4,584 mln. The figures indicating profitability of assets and capital in 2000 has also fallen. For instance, net income decreased from 1.8 bln (first quarter) down to 0.6 bln in the third. In turn, decline of net income was caused by rise in costs - 406 mln, income tax - 681 mln and general and administrative expenses by 267 mln. KAZCHROME TNK OJSC (Almaty) has continued to increase sales volumes that is probably connected with growth in world prices for ferrochromium alloys (company informed that real volume of ore mining and alloys production did not exceed the figures of the last year). Losses for 1.1 bln company suffered in third quarter are explained by advanced growth of expenses: cost of goods increased by 65% while sales volume by 21%, current expenses increased by 40% (from 3.0 bln to 4.2 bln). Sharp decline of income and efficiency indicators compared to resulting data for 1999 has similar reasons as in case with Aluminii Kazakhstana OJSC. Net income of 14.7 bln for 1999 mainly resulted from non-operating receipts (71% of the income) - sale of Trans-World Group stake of shares (by court's decision) for a total of 3.4 bln. Almaty Kus OJSC (Chapayevo village, Almaty region) has significantly increased volume of sales. By results of 9 months, sales totaled KZT95 mln against 71 mln for comparable period of the last year. Most of growth occurred in second quarter. Nevertheless, beginning form this quarter company has started incurring losses. Fall in net income was conditioned by deductions to the reserve formed to service coupon payments for bonds (Oct 14, 2000). In second quarter, company reserved 22.1 mln, in third - 22.7 mln. In third quarter, company managed to avoid losses mainly due to costs decrease. UKTMK OJSC (Ust-Kamenogorsk) displayed some improving in financial statements for third quarter provided by growth of sales volume and net income compared to 6 moths. Year to year comparison (9 months) shows decline in sales volume by 543 mln. The zero figure of non-operating losses (third quarter 1999 - 517 mln) provided 124 mln of net income against 71 mln losses in the same period of 1999.Undoubtedly, the company's position in rating and its financial situation is not adequate to company's potential in terms of size, modernization. Main reasons that negatively affect activity are following - narrowness, high monopolization level of titanium market and lack of raw material base. At present, company increases production of commodity magnesium (which is in high demand) and prepares for development of Satpai titanium deposit. VITA LLP (Almaty) was included in the listing on Dec 2000. First half year was successive for the company: sales volume increased 2.5 times and exceeded same figure for 1999. (There were no changes in the rating for the same period as most of companies also displayed positive results). In third quarter, sales volume and net income fell 4.7 and 11.5 times correspondingly in comparison to second quarter. This was caused by modernization of production process conducted during the period. The modernization included construction of vegetable oil deodorization workshop that would led to increase in degree of oil processing. Bayan-Sulu OJSC (Kostanay) has managed to achieve profitability and improve financial statements because of advanced growth of sales volume against costs of goods and expenses. At the same time, company is still having lowest ROS ratio explained by high portion of costs in sales prices. In conditions of strict competition company has to maintain low prices. Purchasing 70% of raw materials abroad company has much suffered from devaluation of tenge. For instance, as a result of tenge floating in April 1999 company lost 59 mln. Positions of food industry companies (Bayan-Sulu OJSC , Almaty-Kus OJSC and VITA LLP) in the end of the rating could be explained by several reasons of general nature. First, all three companies are relatively small. Second, these companies, as a rule, have low efficiency levels. In condition of strict competition they have to maintain low prices. Third, the companies are mainly oriented on domestic market. Their activity was disposed to losses from devaluation of tenge in 1999. The economic policy of the government towards stability of the exchange rate and protective measures for domestic producers must positively affect activity of mentioned companies. The general trend from third quarter 1999 to the same period of 2000 was successive for most companies of the KASE listing. Total sales volume increased from 220 bln up to 426 bln or by 94%, net income rose from 26.6 bln to 75.8 bln or 2.8 times, average ROA and ROE ratios recorded double growth. At the same time, estimations made in US dollars present almost the same growth figures as devaluation rate of the dollar for period in question equaled 1.8%. Since seven out of thirteen companies export production abroad the growth in world prices for oil and metals could be considered as a main contributor to increase of gross indicators. The activity of other companies was affected by improvement in general conditions of the economy also related to export performance.