The collapse of Segezha: the weak ruble did not help the timber industry holding
At the end of August, Segezha Group published financial results for the first half of 2023. Apparently, the Russian leader in logging and wood processing continues to experience obvious difficulties.
It should be noted that the depreciation of the ruble, which continued throughout the six months of 2023 and especially intensified in the summer, should have played into the hands of large Russian exporters. Well, in the forestry industry, this certainly includes the Segezha Group holding – the main efforts of this company are concentrated on the export of timber products. In this regard, it was expected that financial indicators would confidently creep up after the depressing figures of last year, but in reality, something opposite to positive expectations turned out.
• The volume of timber harvesting decreased by 42% quarter-on-quarter, and the volume of exports – from 63% to 57%.
• Against the background of falling prices and sales volumes, revenue decreased by 31% year-on-year – to 39.8 billion rubles.
• OIBDA (operating income before depreciation of fixed assets and intangible assets) decreased by 76% – to four billion rubles. This happened due to a decrease in revenue and an increase in logistics costs.
• Total debt increased by 24% year-on-year and amounted to 123 billion rubles, and net debt increased by 20% year-on-year and increased to 114 billion rubles.
If you go into detail, you will notice that Segezha is not doing well with product sales – compared to the first half of 2022, product sales volumes have dropped significantly. Thus, the revenue of the Paper and Packaging segment decreased by 10% year-on-year – to 15.3 billion rubles. The Forest Resources and Woodworking segment showed a 40% year-on-year decrease in sales to 17.8 billion rubles. Sales of the Plywood and Boards segment decreased by 40% year-on-year – to 4.5 billion rubles. Sales in the House Construction segment decreased by 47% year-on-year to two billion rubles.
The drop in sales is due to the fact that the company continues to transform its sales markets and production chains: it fell under sanctions last year, which led to the loss of a significant share of exports. Plus, “Segezhe” had to sell production facilities in Europe due to the inability to operate there.
All this led the timber industry holding to a “domino effect” – following volumes and prices, the company’s financial results fell. Revenue in the first half of the year decreased by 31% – to 39.8 billion rubles – due to changes in sales markets and lower product prices.
It is noteworthy that the company receives most of its revenue from exports, and during the reporting period the ruble weakened noticeably, but this did not save Segezha Group from losses. In the first half of 2023, the company recorded a loss of 7.6 billion rubles – against a profit of 12 billion for the same period last year.
Ultimately, Segezha Group finds itself in a dangerous position, as the company’s debt load shows fantastic growth rates. Due to losses and an increase in the key rate, Segezha’s total debt for the first half of the year increased by 24.2% year-on-year – from 99 to 123 billion rubles. The company’s net debt increased by 20% – to 114 billion rubles – due to an increase in total debt and a decrease in the amount of money the holding operates.
According to financial experts, theoretically, Segezha Group has the opportunity to refinance and reschedule debt payments. However, this option for solving the problem may be complicated by the unstable interest rate of the Central Bank of the Russian Federation – it is growing due to pro-inflationary factors, and it is likely that the Central Bank will raise the rate again in the near future.
