13 October 2023
Expert RA rating agency upgraded the Volga's credit rating to ruA+, with a stable outlook. Previously, the Company's rating was ruA- with a stable outlook.
The credit rating upgrade is due to the agency's reassessment of the company's forward-looking debt metrics in favour of improvement on the back of strong financial performance in 2022, which exceeded the agency's expectations.
At the end of 2022, the share of standard newsprint in total revenue was 61% (36% a year earlier), while the share of packaging paper was 24% (47% a year earlier). The trend towards an increase in sales volumes of standard newsprint was also observed at the end of 1H 2023, where the share in revenue from sales of this type of products totaled 75%. The increase in the share of newsprint is due to market conditions - the increasing demand for newsprint in the Chinese market and more attractive prices for newsprint compared to packaging paper. Adhering to the strategic project of technological re-equipment being implemented at the production facility to expand production of packaging papers and paperboards, the Сompany plans to increase the share of packaging papers in its product portfolio to 68% by 2025.
Within the framework of the current investment project, the Company continues to modernize its production facilities, due to which the average level of depreciation of production assets has decreased since the last analysis and is assessed by the agency at an average level.
The Company is fully supplied with its own electricity. Since the last rating update, the level of self-sufficiency in timber raw materials including counter supplies has increased from 27% to 30%, but is still assessed as low by the agency's benchmarks. The Company aims to the further level of self-sufficiency in raw materials increase by taking steps to conclude new contracts for the implementation of the priority investment project in the field of forest development, which will support EBITDA in the future.
The Mill's profitability performance profile also has a positive impact on the rating assessment level. For 2022, EBITDA margin increased to 28% (23% a year earlier), mainly due to higher export prices for newsprint and the Mill's production flexibility, which allowed it to switch to more marginal products, reducing the production of packaging paper.
The block of corporate risks is assessed moderately positively. The Agency notes a high level of strategic planning and risk management.
