>

Bond, Syktyvkarskiy Lesopil'no-Derevoobrabatyvayushchiy Kombinat, Issuer, Russian Ruble, Expert RA

Expert RA Affirms Bond's B+ Rating, Syktyvkarskiy Lesopil'no-Derevoobrabatyvayushchiy Kombinat

Expert RA has affirmed the B+ rating assigned to the bond series RU000A103BK88 (RU000A103BK88, the issue of 1,000,000,000 RUB, maturity — May 31, 2027) of Syktyvkarskiy Lesopil'no-Derevoobrabatyvayushchiy Kombinat (SLDK).

The rating reflects a strong business profile of SLDK, strong debt service metrics, and weak corporate governance assessment. The rating is constrained by moderate financial leverage and weak liquidity.

The key rating factors are as follows.

• Strong business profile. SLDK is a leading Russian manufacturer of sawn timber and plywood with a high market share in the domestic market. The company has access to a significant and competitively priced resource base and has well-developed sales and logistics channels.
• Strong debt service metrics. SLDK's debt service metrics were strong in the past years. The company's FFO/Net debt ratio was 29.8% in 2021 and 22.7% in 2020. The FFO/Interest expense ratio was 6.22x in 2021 and 4.69x in 2020.
• Weak corporate governance assessment. Expert RA assesses SLDK's corporate governance as weak. The company's key management positions are concentrated in the hands of several related parties, and the company's related-party transactions are not always adequately disclosed.
• Moderate financial leverage. SLDK's financial leverage is moderate. The company's Net debt/EBITDA ratio was 2.3x in 2021 and 2.6x in 2020.
• Weak liquidity. SLDK's liquidity is weak. The company's current liabilities exceeded its current assets by RUB 1,404 million as of December 31, 2021.

The outlook is stable. Expert RA expects that SLDK will maintain its strong business profile and debt service metrics in the medium term. However, the rating may be downgraded if the company's liquidity does not improve or if there is a material deterioration in its corporate governance assessment.