AvtoVAZ said about the risks: what’s with the auto giant reporting?
- Friday, February 12, the Russian concern “AVTOVAZ” has published the reporting under IFRS, according to which the group’s loss for the year of 2015 has increased almost three times, to 73,85 billion. However, the company has violated the covenants (restrictions) on several loans totaling in 36,58 billion roubles, in this connection, banks may demand from the company early repayment of the debt.
- At the end of the year long-term liabilities of the group amounted to 48.9 billion rubles, while they increased in comparison with 2014 year by 67%. Current assets at the end of 2015 amounted to $ 47.5 billion roubles (-13,6%), and the size of short-term debt – 115,3 billion.
- The company said that without the support of shareholders may not be able to continue its operations.
Evaluation of the auditor and the position of creditors
- Auditor Ernst&Young notes that the loss of “AVTOVAZ”, as well as short-term liabilities exceeded at the end of 2015 current assets on 67,78 billion rubles, which makes the auditor’s doubt in the ability of the group to continue operating as a going concern without shareholder support.
- With a number of banks – ROSBANK, Garanti Bank-Moscow and Societe Generale on total debt at 2,711 billion rubles of the carmaker have already agreed on maintaining credit conditions. But the remaining amount is 24,394 bn – recorded in short-term debt.
- Meanwhile, it is not the only, negotiable debt obligations of the company “AVTOVAZ” should suppliers 47,3 billion (+45,6% compared to 2014).
“AVTOVAZ” has countered the challenges of 2015
- In 2015, the decline was most significant in recent years – 35,7% compared to 2014, to 1.6 million units. “AvtoVAZ” in the physical sales dipped for the year is slightly less – at 30% to 269 thousand cars.
- Despite the decline in purchasing power, “AVTOVAZ” in 2015, began serial production of LADA Largus Cross and LADA Vesta in Izhevsk in mid-November, started the Assembly of LADA Granta in Chechnya and talks about the organization of the Assembly at Chechen plant LADA Vesta in 2016.
- December 15, AVTOVAZ started serial production of new models LADA XRAY. New model sales will start in Russia on 14 February. During the year the carmaker plans to sell from 16 to 25 thousand
- In addition, the group plans this year to increase the production of LADA 4×4 Urban, the next step is to start the production of LADA Vesta Cross.
As the giant began 2016
- According to the Association of European businesses, sales of “AVTOVAZ” in January 2016 fell 11% to 15,577 thousand cars.
- The cars of the brand LADA remained the most sold in the first month 2016
What are the prospects of employees
- AvtoVAZ, said goodbye over the past two years with nearly 18 thousand employees, this year no plans to cut jobs. At least, the factory does not have this issue, in January was declared by the Chairman of labor Union of the automaker Sergey Zaytsev.
- In order of reductions was not, in February the plant is for a period of six months, the regime of incomplete working week, during which reduction can’t be carried out.
- After the introduction of the 4-day work week in the wages of workers of “AVTOVAZ” reduced by about 20%. As reported, the mode of reduced working week at the plant is introduced from February 15.
- In addition, during the regime of the four-day work week of employees of “AVTOVAZ” will be sent to corporate summer vacation. This year he also, as in 2015, will last for three weeks.
- Now, the company employs approximately 48 thousand employees, the average wage which, according to the Chairman of the trade Union, is about 28 thousand rubles.
What say the shareholders
- The largest shareholders of AVTOVAZ – Renault-Nissan Alliance and state Corporation “rostec”, which is in control of the company via a joint Dutch company Alliance Rostec Auto B. V. Alliance manages the controlling package of “AVTOVAZ” and “rosteh” – a blocking stake.
- The group needs additional measures of support reported in the press service of “Rostec”. The Corporation is in discussion with Renault-Nissan recapitalization of AVTOVAZ by depositing additional funds in the capital and conversion of debt.
- “We are closely monitoring the situation and together with the shareholders of Alliance will take measures on financial recovery of “AVTOVAZ”. As a possible scenario includes recapitalization by depositing additional funds in the company’s share capital and conversion of debt. While rostec intends to maintain its equity at 25%,” – said the Corporation.
- According to the senior analyst IK TCS Partners Andrew Tretinnikov, can we talk about the issue, where the debt will become shares of the company as a result of the investment of shareholders. In this case, Renault may increase its stake in the company. Earlier, Renault said it is considering a recapitalization of AVTOVAZ.