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6. Key Financial and Economic Indicators of JSC “Transneft”

Profits and Losses from Ordinary Activities Revenue from Sale of Goods (Work, Services)

Indicator Amount, th.th. rubles Change, th. rubles
for 2012 for 2011
Revenue — total 687,139,566 632,780,132 54,359,434
including:
oil transportation services 494,579,033 455,495,487 39,083,546
oil product transportation services 27,912,977 24,260,981 3,651,996
oil compounding services 6,095,600 4,726,809 1,368,791
leasing 1,823,566 3,497,100 (1,673,534)
oil sale for export 155,133,721 143,639,379 11,494,342
other 1,594,669 1,160,376 434,293

Change in the revenue from sale of goods (work, services) of the Company in 2012 as compared with 2011 was caused by:

  • increase of the revenue from oil transportation services due to the increase of tariffs for the oil transportation services and of the volume of the services rendered (cargo turnover), as well as prolongation of the term of the agreed tariff applied on the route “Tikhoretsk — Tuapse Refinery”;
  • increase of the revenue from oil product transportation services due to the growth of tariffs for the oil product transportation services;
  • increase of the revenue from oil sale secured by oil supplies to the People’s Republic of China under a contract with the China National Petroleum Corporation, which was due to the growth of the oil prices;
  • increase of the revenue from oil compounding services caused by growth of the compounding actual volume and average tariff for the sulphurous oil compounding.

Decrease of the revenue from leasing was caused by transfer of the BPS objects as a contribution to the charter capital of LLC “Baltnefteprovod” on January 31, 2012 and purchase by JSC “Svyaztransneft” of the property (communication objects) that was leased.

Cost of the Goods (Work, Services) Sold

Indicator Amount, th. rubles Change, th. rubles
for 2012 for 2011
Cost — total 584,255,486 556,845,405 27,410,081
including:
oil transportation services 470,172,318 450,449,512 19,722,806
oil product transportation services 29,104,820 24,153,046 4,951,774
oil compounding services 3,657,360 2,835,995 821,365
leasing 1,523,630 3,009,193 (1,485,563)
oil sale for export 79,625,703 76,228,906 3,396,797
other 171,655 168,753 2,902

The change in the cost of the goods (work, services) sold in 2012 compared with 2011 was caused by:

  • increase of the expenses under oil transportation contracts made with subsidiaries of the Company due to the growth of expenses for the trunk oil pipeline operation and commissioning of the objects of the Ust-Luga part, BPS-2 and ESPO-2 Pipeline Systems;
  • increase of the expenses for the oil product transportation due to the growth of tariffs for the services of the Transneft entities effecting pipeline oil product transportation for the oil product acceptance, delivery (pumping) to the points of destination, unloading at the point of destination and of the transportation volumes, as well as in connection with the subsidiaries’ need for performance of R&D for reconstruction and technical reequipment in 2013-2014;
  • increase of the cost of the oil sold for export due to the growth of the oil prices.

Decrease of the expenses related to leasing was caused by transfer of the BPS objects as a contribution to the charter capital of LLC “Baltnefteprovod” on January 31, 2012 and purchase by JSC “Svyaztransneft” of the property (communication objects).

Gross Profit th. rubles

Indicator 2012 2011 Change
Gross profit 102,884,080 75,934,727 26,949,353

Increase of the gross profit in 2012 as compared with 2011 was mainly caused by increase of the gross profit from provision of services for the oil transportation received for the investment projects implementation, as well as for the oil sale in connection with oil supplies to the People’s Republic of China under the contract with the China National Petroleum Corporation due to the change of the oil prices. At that additional gross profit from oil sale to the PRC was fully leveraged by expenses for the customs duty payment.

Net Profit  th. rubles

Indicator 2012 2011* Change
Net profit 10,652,444 11,141,791 (489,347)

Drop in the net profit in 2012 as compared with 2011 was mainly caused by decrease of the interest income from placed free borrowed funds in connection with their allocation for the investment projects, foreign exchange loss, increase of tax on profit from foreign exchange differences on external borrowings and writing-off of the deferred tax asset created in relation to the tax loss of JSC “Transneft” incurred at the end of 2011.

Value of Net Assets th. rubles

Indicator As of December 31, 2012 As of December 31, 2011 As of December 31, 2010
Value of net assets 145,126,570 137,159,639 120,475,508

Increase of the value of net assets in 2012 was caused by receipt by JSC “Transneft” of the net profit upon the results of 2012 in the amount of 10,652,444 th. rubles, payment in 2012 of dividends on the basis of the performance results in 2011 in the amount of 2,785,513 th. rubles, as well as growth of the deferred income as of December 31, 2012 as compared with November 31, 2011 by 100,000 th. rubles.

JSC “Transneft” Accounts Receivable and Payable Accounts Receivable th. rubles

Type of the receivable As of December 31, 2012 As of December 31, 2011 Change
Long-term accounts receivable 118,302 135,579 (17,277)
Settlements for the sale of the share in the simple partnership 87,118 99,452 (12,334)
Settlements on the interest-free loans 23,186 27,815 (4,629)
Settlements for other operations 7,998 8,312 (314)
Short-term accounts receivable 85,956,728 70,996,849 14,959,879
Buyers and customers 20,096,238 15,395,146 4,701,092
Settlements for oil transportation services 6,383,824 11,957 6,371,867
Settlements for compounding services 591,939 485,512 106,427
Settlement under brokerage contracts 261,515 266,114 (4,599)
Settlements for leasing services 126,896 300,481 (173,585)
Settlements for oil sale for export 12,728,270 14,327,006 (1,598,736)
Other 3,794 4,076 (282)
Advance payments 5,261,077 5,136,624 124,453
Under contract agreements for oil transportation 878,184 2,480,682 (1,602,498)
Under contract agreements for oil product transportation 2,243,331 1,018,998 1,224,333
Under brokerage contracts for oil transportation 899,132 1,002,799 (103,667)
Under brokerage contracts for oil product transportation 252,181 359,660 (107,479)
On acquisition of non-current assets 143,881 271,669 (127,788)
Other 844,368 2,816 841,552
Settlement of taxes and dues 43,451,489 37,302,355 6,149,134
Profit tax (before joining taxpayer consolidated group) 96,298 6,915,494 (6,819,196)
Profit tax of TCG 11,131,577 11,131,577
VAT 32,209,356 30,377,803 1,831,553
Other taxes and dues 14,258 9,058 5,200
Settlements with dependent entities 2,518 2,538 (20)
Settlements with personnel under other transactions 395 583 (188)
Other debtors 17,145,011 13,159,603 3,985,408
Settlement on interest on issued loans 13,586,451 10,734,755 2,851,696
Settlement under brokerage contracts 1,078,580 721,203 357,377
Other settlements 2,479,980 1,703,645 776,335
Total: 86,075,030 71,132,428 14,942,602

Long-term Accounts Receivable

The most significant indicator of the long-term accounts receivable is the debt created in connection with sale in 2002 of the share in the simple partnership established for construction of the Baltic pipeline system on a 25 years’ instalment plan. As compared with December 31, 2011, it decreased due to passing of a part of the long-term accounts receivable to the short-term accounts receivable subject to repayment within 12 months as of the reporting date. The receivable balance is denominated in conventional units and shall be repaid by equal instalments on or before January 30, 2027. The payment shall be effected in Russian rubles at the USD rate fixed by the Bank of Russia as of the date of payment.

Short-term Accounts Receivable

The change in the short-term accounts receivable as at the end of the reporting year as compared with the previous year was mainly caused by:

  • increase in the debt of buyers and customers for oil transportation;
  • increase of the accounts receivable under settlements with budget regarding profit tax as of the responsible member of TCG.

Accounts Payable th. rubles

Type of account payable As of December 31, 2012 As of December 31, 2011 Change
Long-term accounts payable 582 582
Settlements with other creditors 582 582
Short-term accounts payable 186,862,497 160,344,136 26,518,361
Suppliers and contractors 132,109,797 121,308,998 10,800,799
Oil transportation settlements 111,467,862 104,757,050 6,710,812
Oil product transportation settlements 11,272,807 6,530,405 4,742,402
Oil purchase settlements 7,658,365 9,187,084 (1,528,719)
Oil compounding settlements 355,164 291,278 63,886
Settlements for construction, reconstruction, modernization and acquisition of fixed assets 285,350 155,476 129,874
Other settlements 1,070,249 387,705 682,544
Debt to the state extra budget funds 165 146 19
Tax liabilities 33,399 75,132 (41,733)
Payments in advance received (VAT excluded) 34,226,223 31,403,333 2,822,890
Under oil transportation contracts 26,636,367 25,700,678 935,689
Under oil product transportation contracts 7,270,937 5,641,765 1,629,172
Under other contracts 318,919 60,890 258,029
Settlement under brokerage contracts 10,292,390 7,525,211 2,767,179
Settlements under brokerage contracts for oil transportation 751,731 838,190 (86,459)
Settlements under brokerage contracts for oil product transportation 1,190,504 1,110,826 79,678
Settlements with the companies of the “Transneft” Group under other brokerage contracts 8,102,267 4,462,883 3,639,384
Settlements under brokerage contracts for oil realization 944,000 (944,000)
Settlement under other brokerage contracts 247,888 169,312 78,576
Settlements with TCG 10,167,620 10,167,620
Settlements with other creditors 32,903 31,316 1,587
Total: 186,863,079 160,344,718 26,518,361

The change in the short-term accounts payable as of the end of the reporting year as compared with the previous year was mainly caused by the following factors:

  • increase of the debt to the companies of the “Transneft” Group under settlements for the oil and oil product transportation;
  • increase of the debt to the companies of the “Transneft” Group under brokerage contracts;
  • creation of the debt under settlements with members of the taxpayer consolidated group.

Taxes

Taxes and dues liabilities accrued during the reporting and previous year are characterized by the following data:

Item No. Tax 2012, th. rubles 2011, th. rubles Change (+/-)
th. rubles %
1 Corporate profit tax (8,696) (908) (7,788) 858
2 Profit tax accrued by TCG 44,120,277 44,120,277
3 Value added tax (VAT) (61,321,308) (59,070,982) (2,250,326) 4
4 Estate tax 198,903 287,326 (88,423) (31)
5 Other taxes and dues 1,372,278 645,658 726,620 113
6 Total: (15,638,546) (58,138,906) 42,500,360 (73)
including:
to the federal budget (56,743,461) (59,012,029) 2,268,568 (4)
to the regional and local budgets 40,504,876 716,804 39,788,072 5,551
to extra budget funds 600,039 156,319 443,720 284

In 2012, JSC “Transneft” accrued and paid its profit tax as a responsible member of the Transneft taxpayer consolidated group (TCG) that comprised 37 companies of the Transneft system under agreement for the TCG foundation No. 175/TNF/12 dated March 19, 2012.

The total amount of the profit tax accrued for TCG in 2012 equalled 44,120,277 th. rubles, the amount of the TCG profit tax actually paid to the budget for 2012 equalled 55,251,045 th. rubles. The excessive payment of 11,130,768 th. rubles arose due to the fact that the total amount of the monthly advance payments effected in Q4 2012 according to the rules of the Tax Code of the Russian Federation exceeded the amount of the TCG profit tax accrued for the corresponding period.

The amount of other taxes and dues accrued in 2012 for payment to the budget and extra budget funds (tax on the dividend income, estate tax, personal income tax, insurance contributions to the state budget funds, transport tax) equalled 1.6 bln rubles.

The value added tax refundable from the budget in 2012 amounted to 61.3 bln rubles. According to the effective tax laws, the amounts of the tax credit on transactions on the services for the oil and oil products transportation beyond the Russian Federation, as well as on the oil sale to the PRC can be refunded from the budget.

Indicators of the JSC “Transneft” Financial Standing

Data on Profitability, Working Capital Turnover

Indicator Calculation method 2012 2011 Change
Coefficient of the current liquidity (line 1200 F1 — line 1220 F1 — line 1231 F1) / (line 1510 F1 + line 1520 F1 + line 1550 F1) 0.93 1.24 -0.31
Critical liquidity (intermediate coverage) coefficient (line 1200 F1 — line 1210 F1 — line 1220 F1 — line 1231 F1) / (line 1510 F1 + line 1520 F1 +
line 1550 F1)
0.93 1.24 -0.31
(Products) Sales profitability, % Line 2200 F2 / line 2110 F2 * 100 2.68% 0.40% 2.28%
Accounts receivable turnover coefficient Line 2110 F2 / ((line 1231 F1 n + line 1232 F1 k + line 1232 F1 n + line 1232 F1 k) / 2) 8.76 11.84 -3.08

Decrease in the liquidity coefficient indicators as compared with 2011 was caused by quicker rates of the current assets reduction as compared with decrease in the current liabilities. The current assets were reduced primarily through decrease of the volume of the short-term financial investments and funds in the result of issue of long-term loans to the related parties for implementation of the investment program of JSC “Transneft”.

The positive dynamics of the sales profitability indicator was caused by revenue increase in the context of lower rates of growth of the full cost value of the performed work and services in connection with receipt of revenue for implementation of investment projects.

Accounts receivable turnover dropped due to the fact that growth of the average annual amount of the accounts receivable exceeded the rate of the revenue growth.

Credit Ratings of JSC “Transneft”

In 2012, JSC “Transneft” maintained its credit ratings at the high investment level:

BBB (forecast: stable) — as per S&P’s international scale

Baa1 (forecast: stable) — as per Moody’s international scale

From the point of view of rating agencies, the company has a high potential to perform its financial obligations. The JSC “Transneft” rating corresponds to the sovereign rating of the Russian Federation as per the Moody’s and S&P scales, which is one of the best indicators among Russian companies (fig.1).

Fig. 1. Ratings of the major Russian companies as per Moody’s and S&P scales

Рейтинги крупнейших компаний России по шкалам Moody`s и S&P

Note:
Sberbank of Russia has no Standard&Poor’s long-term credit rating.
The credit rating of the bank as per Moody’s scale is Baa1.

The high credit rating of JSC “Transneft” plays a very important role, in particular, when considering issues of the external borrowing cost. Due to the high level of its creditability, JSC “Transneft” was able to raise large amounts for financing of the major infrastructure projects at an acceptable rate.