The Russian mergers and acquisitions (M&A) market continues to decline: the process has been going on since 2022. According to analysts at the Kept consulting company, the number of internal M&A transactions in the five months of 2024 decreased by 30% compared to the same period in 2023, and their amount by 39%. In 2021, there were 557 domestic transactions, in 2022 at 418, in 2023 at 279, by June 2024 at only 79. By industry, the largest drop in M&A activity is in telecom, media and technology, consumer and oil and gas sectors. The sectors of real estate and construction, agriculture, and finance were the least affected in this sense.
The largest events on the market remain forced transactions made due to the withdrawal of foreign investors or the sale of assets to diversify country risks. However, their number is also decreasing: in the five months of 2022, 62 transactions took place on the exit of foreigners from Russian business (204 in just a year), in 2023 at 54 (120 in a year), in 2024 at 31 transactions so far. In 2022 there was a gap between the price expectations of sellers and buyers the latter were able to purchase assets at a discount. According to Kept's calculations, the average transaction receipt in 2022 fell by 14% compared to 2021 (for transactions over $ 10 million), and in 2023 it won back only 4% of the price.
According to Kept, by the end of 2023, almost two thirds of foreign companies decided to withdraw from Russian assets or forcibly lost control due to their confiscation (a sample of 300 legal entities with a parent company in unfriendly countries with business revenue in Russia of more than 1 billion rouble. and significant assets). Those who left voluntarily in 62% of cases preferred to sell the asset to a third party or co-investor; this option assumes the least losses. Another 21% transferred their business to local management: this type of transaction was popular among consulting and service companies, where highly qualified personnel are a factor of production. 7% of the sample companies closed their Russian business, those that did not have significant assets in Russia (distributors and IT companies). The beneficiaries of the departure of foreigners were strategic investors (82 transactions in 2022 and 55 in 2023) and local business partners (14 and 12 transactions, respectively, including the exit of Uber from the joint venture with Yandex, International Paper from Ilim).
By Diana Galieva for Kommersant (Russia).
https://www.kommersant.ru/doc/6792795?from=main

After a positive start to the day, the Russian stock market closed Friday's trading in different directions. The Moscow Exchange index grew by 0.13% to 3,154.36 points, since the beginning of June the rouble index has lost 1.95%, since the beginning of the year it has grown by 1.78%. The RTS index lost 0.79% on Friday, its value was at 1,158.85 points, it grew by 2.95% over the month, and by 6.96% since the beginning of the year.
The weakening of the dollar index on Friday was caused by the strengthening of the rouble, while the positive dynamics are supported by corporate and dividend news and the reinvestment of dividends received in the stock market.
In general, as Maxim Fedosov, portfolio manager of the First Management Company, notes, the dynamics of the Russian market is determined by the strengthening of the national currency, as well as the tight monetary policy of the Central Bank. At a meeting in July, the regulator may raise the rate by 200 bps at once.
On the interbank market, the Russian rouble sank against the dollar to 85.74 and to 91.92 rouble per euro. The yuan strengthened to 11.74 rouble in foreign exchange trading on the Moscow Stock Exchange. The nearest futures for the dollar rose to 87.19 rouble.
The weakness of the rouble is caused by the end of the peak of the tax period, which reduces the interest of exporters in the Russian currency. Next week, the Russian is likely to move to weakening. Pressure may be exerted by a decrease in the volume of currency sales by the Bank of Russia. "In the first half of the year, the Bank of Russia sold currency in the amount of 6.24 billion rouble daily to mirror the investment of NWF funds. In the second half of the year, the volume of such transactions will be reduced to 2.87 billion rouble per day, as a result, the foreign exchange market may receive $ 4 billion less," explains Maxim Fedosov.
There is a positive movement in the debt market again, the RGBI government bond index is rising by 0.4% to 106.8 points, the index has grown by more than 1.5% over the week, and has sunk by 0.7% since the beginning of the month. The overall dynamics fits into the framework of correction, there is no need to talk about a change in the trend yet.
Today, the Ministry of Finance of Russia announced an increase in the OFZ placement plan in the third quarter by 1.5 trillion rouble, after an unsuccessful second quarter, where only half of the planned 1 trillion rouble were placed. 1.2 trillion of this amount is planned to be placed for a period of more than 10 years. "Since the total volume of placements for the year will be at least 1 trillion more, this may create additional pressure on the debt market. After the news was released, the RGBI index declined by 0.25%, closing at 106.80 points," says Nikita Stepanov, analyst at Finam.
The strong growth of Surgutneftegaz's securities (ord +5.1%, pref +1.2%) caused the company's shareholders to approve dividends for all categories of shares at the AGM.
On the positive side were shares of Sovcomflot (+1.3%), DVMP (+1.2%), AFK Sistema (+1.2%), Renaissance (+1.1%), RusHydro (+0.9%).
Outsiders were led by shares of Seligdar (-3.1%) against the background of a lawsuit against the president of the company.
Shares of developers remain in the red, it is difficult for developers in terms of credit growth and refusal of preferential mortgages: Etalon (-1.3%), PEAK (-0.6%), LSR (-0.2%). The drawdown was also shown by CIAN receipts (-2.7%).
The shares of MCB (-2%), VK (-1.6%), TMK (-0.9%), Aeroflot (-0.8%) turned red.
The Russian stock market is expected to recover next week. In the absence of negative news, the Moscow Stock Exchange index may try to rise to 3,200 points. "In the future, we will see a pullback of the index due to dividend cut-offs, which in some cases will give good opportunities for purchases," PSB analysts predict.
By Anastasia Dolgikh for Finam (Russia).
https://www.finam.ru/publications/item/iyul-rossiyskiy-rynok-nachnet-rostom-20240628-1956/

Russia reports jump in industrial output

In January-May, according to Rosstat estimates, industrial output increased by 5.2% year-on-year, despite the fact that the Ministry of Economy predicts a slowdown in the growth rate to 2.5% for the whole year. A noticeable jump in output in May is found in industries related to the military-industrial complex. Also, the growth of production volumes continues in the chemical industry and in the food production sector.
Rosstat estimated industrial output growth in May at 5.3% year-on-year after an April increase of 3.9%. These estimates turned out to be much higher than expected. Analysts polled by Reuters expected an increase in industrial production in May by 2.5%, and by Interfax by 2.9%. In processing, in May, the annual growth rate of production accelerated to 9.1% from 8.3%, in mining, the rate of decline decreased to 0.3% from 1.7%, in energy, output increased by 4.2% after 0.8%, in water supply, waste disposal and pollution elimination, production growth accelerated to 5.4% from 2.3% in April this year.
Trade restrictions and the extension of the OPEC+ agreement continue to have a negative impact on the dynamics of the extractive sector.
Industries related to the military-industrial complex continue to be responsible for the acceleration in processing, as well as for the high growth rates of output in this sector as a whole. Thus, the production of finished metal products in May increased by 55.9% year-on-year after 24.5% a month earlier; the production of computers, electronic and optical products by 27.5%, the production of other vehicles, including aviation equipment, shipbuilding by 20.9%.
"Metal products slowed down in April, and now there is a new jump," says Vladimir Salnikov from the Centre for Macroeconomic Analysis and Short-term Forecasting. In addition, a noticeable increase in output is observed in food production, which is associated with an increase in wages and private demand, in the production of chemicals and petroleum products, the expert notes.
Experts from RANEPA and the Gaidar Institute, who studied the trend dynamics of industrial production in January-April, assess what is happening in a similar way. The growth of the manufacturing industry in this period, as in 2023, is mostly associated with the production of intermediate products for the military-industrial complex and import substitution, they conclude. High growth rates since the beginning of 2024 have been recorded in the production of motor vehicles and computers, electronic and optical products (which is due to the low base of 2023 and, possibly, the positive effects of production localisation programs).
Taking into account seasonality, according to Rosstat estimates, output in May 2024 jumped sharply, exceeding the average monthly value of 2021 by 10% (in January 2022 it was 5% higher than this level, and in April 2024 by 7%). In May, compared with April 2024, with the elimination of seasonality, industrial output increased by 2% after a decrease of 0.1% a month earlier, the state service calculated.
The CMASF also believes that statistics still poorly take into account the calendar effect, and estimate the seasonally adjusted output growth in May compared with April at 1.2%.
Vladimir Salnikov nevertheless calls the May jump temporary. "If growth continues, it will be much slower," he concludes. The IEP and RANEPA also believe that the industrial potential associated with the development of niches in the domestic market by Russian manufacturers after the departure of foreign manufacturers has not been fully realized, which, in the absence of additional economic restrictions, may allow maintaining positive growth rates until the end of the year.
By Artyom Chugunov for Kommersant (Russia).
https://www.kommersant.ru/doc/6791921?from=main

Russian engineering industry stuck in personnel

Since 2022, machine-building enterprises have been able to quickly integrate into the adaptive mode of operation and intensively level out subsequent challenges. As noted by the Institute for Statistical Research and the Economics of Knowledge (ISREK) HSE, regulatory measures helped to cope with the problems. As proof, for the first time since 2022, in the first quarter of 2024, the entrepreneurial confidence of industry leaders reached the highest level in the last ten years. The growth of production requires solving the problem of personnel in 2023, a critical situation with a shortage of workers arose in mechanical engineering.
For the first time, ISREK analysed the key trends in the activities of machine-building enterprises, including the dynamics of the production of machine tools and robotic complexes. Thus, experts believe that the main feature of the sectoral development of organisations after 2022, when large-scale sanctions were imposed against it in connection with the military operation of Russia in Ukraine, which limited access to foreign financing, technologies and supplies, analysts describe this milestone as the moment of expansion of zones of internal vulnerability and all subsequent business cycles of development, including the first quarter of 2024, this is the operational integration of industry into an adaptive mode of operation and a fairly intensive levelling of subsequent challenges. According to experts, the actions of the regulator helped to cope with the problems of the industry.
The success of government support measures in the ISREK is illustrated by the fact that in the first quarter of 2024, the entrepreneurial confidence of industry leaders reached the highest level in the last ten years (plus 10%).
Recall that the production of machinery and equipment has become one of the industries that, according to the Centre for Macroeconomic Analysis and Short-term Forecasting, has benefited from the economic shocks of recent years following the start of the military operation in Ukraine. The reason is that the main shock in the domestic market, associated with sagging demand, turned out to be temporary, and the recovery of sales with the expansion of government support subsequently smoothed the impact of high interest rates. The ISREK notes that mechanical engineering has received a powerful impetus to development in recent years. Thus, an accentuated increase in the demand for import substitution was noted by about a quarter (26%) of industries, more than 40% of enterprises have a "very high" and "high" potential for the production of import-substituting products.
As follows from the calculations carried out by the ISREK, the decline in the industry was short-lived. The first growth impulse in production expectations since the turnaround in 2022 occurred already in the second quarter of 2023 in annual terms, the recovery was 5.5%. Then the trend intensified and peaked in the first quarter of 2024 (plus 13.5% in annual terms) this is the highest level since 2021. During the same period, it reached another rehabilitation maximum (plus 2.5% compared to the previous quarter) and the dynamics of the production index the industry has been in the stage of compensatory growth since mid-2023. In the first quarter of 2024, the increase to the pre-crisis level of the first quarter of 2021 was 8.9%. The main contribution to the dynamics of the development of mechanical engineering in 2021-2023 was made by enterprises producing general-purpose machinery and equipment, as well as machine tools, machinery and equipment for processing metals and other solid materials (growth in the first quarter of 2024 compared to the level of the first quarter of 2021 by 45.3% and 31.5%, respectively).
The growth of production requires companies to expand hiring: the number of required list workers for vacant jobs has increased more than one and a half times in the industry since the first quarter of 2021, to 16.1 thousand people by the end of 2023, the ISREK notes.
"The dynamics of personnel vulnerability of machinery and equipment manufacturing enterprises, which assess the scale and focus of response to a set of personnel problems (primarily a lack of qualified personnel), indicates that by the end of 2023, for the first time since 2014, a critical situation with a shortage of workers has developed in the industry, the relevance of which began to increase from 2021", experts point out. The data for January-April 2024 only confirm the continued high need for additional workers for the development of production facilities.
In the study "Recent trends in Russian import substitution of technological products", analysts at the Institute of Transitional Economies of the Central Bank of Finland (BOFIT) evaluate the process based on open data from surveys of enterprises (the Bank of Russia and the Higher School of Economics) and detailed statistics from Rosstat on the production and import of 22 commodity groups of electronics and electrical equipment. The authors of the estimates acknowledge that in the current conditions, the analysis is associated with significant uncertainty due to limited data, however, they demonstrate a number of patterns that look consistent in the context of industrial development in recent years.
Thus, the analysis did not reveal a feedback relationship between the complexity of goods and the activity of their import substitution; for example, the lack of import substitution of a technologically simple product, cables, is accompanied by signs of the development of production of more technologically complex receiving equipment after 2022. In general, BOFIT assesses the situation in the studied sector as extremely limited import substitution companies have replaced sub-sanctioned imports with similar goods from other countries, and the shortage of some goods indicates the unavailability of adequate replacement and the inability of national producers to compensate for the loss of imports. Replacing imports that are unavailable due to sanctions with supplies from other countries often leads to increased costs or a decrease in the quality and efficiency of production. At the same time, Russian industry is most dependent on technologically complex imports, which makes import substitution even more difficult, given the country's weak position in most high-tech industries and technological innovations.
Separately, the work records the paradoxical simultaneous absence of substitution and a reduction in imports of nine commodity groups, including microcircuits, coaxial cables and electric motors (see graph), which are used as intermediate goods in a wide range of industrial sectors. However, this may be explained by the non-publicity of such supplies and productions due to their use, including in the military-industrial complex, and in some cases the lack of import substitution is explained by technological changes altogether. Thus, the volume of production and import of lamps with tungsten filament collapsed already in 2021 and has not been restored since then, but this happened, obviously, due to the total transition of lighting to LEDs.
By Venera Petrova for Kommersant (Russia).
https://www.kommersant.ru/doc/6792730?from=main

Russian regions increase trade

Moscow and St. Petersburg remain the richest regions of Russia in terms of total revenue: in 2023, businesses in these cities earned 101.9 trillion and 31.6 trillion rouble, respectively, a study by the Kontur.Focus project showed. At the same time, business in Moscow increased revenue by almost a quarter over the year (from 82.4 trillion rouble), while in St. Petersburg the growth rate was near zero (31.4 trillion rouble in 2022).
Other leading regions include the Moscow Region (revenue growth from 21.2 trillion to 25 trillion rouble), the Krasnodar Territory (from 9.4 trillion to 12 trillion rouble), the Sverdlovsk Region (from 7.8 trillion to 8.8 trillion rouble), Tatarstan (from 7.5 trillion to 8.7 trillion rouble). Among the regions with the lowest business revenue are the Nenets Autonomous Area (38.3 billion rouble), Adygea (43 billion) and the Jewish Autonomous Region (60.8 billion). Thus, the revenue of the business in Moscow was 2.7 thousand. times more than in the Nenets Autonomous Area.
By industry, in all the leading regions, the largest contribution to the total revenue was provided by wholesale or retail enterprises. In Moscow, wholesale trade brought in revenue of 33.3 trillion rouble, in St. Petersburg at 13.8 trillion, in the Moscow region at 8.4 trillion, in the Sverdlovsk Region at 3.1 trillion, in the Krasnodar Territory at 2.9 trillion. Revenue in the retail segment in Moscow amounted to 6.8 trillion rouble, in St. Petersburg to 3.7 trillion, in the Moscow region to 2.6 trillion.
The contribution of other sectors is related to the industry specifics of regional economies. In particular, the capital's enterprises in the financial services sector earned 5.8 trillion rouble, which is twice as high as the results of 2022. The volume of construction in Moscow provided 5.2 trillion rouble to enterprises in this sector (an increase of one third over the year). In St. Petersburg, a significant contribution was provided by enterprises in the field of architecture and engineering design 1.6 trillion rouble. In the Moscow Region and the Krasnodar Territory, food producers are among the leaders in terms of contribution to total revenue: 966 billion (a decrease of 4.6%) and 516 billion rouble (an increase of 5.3%), respectively. In the Sverdlovsk region, metallurgy is on the list of the richest industries, the revenue of producers in the sector amounted to 732 billion rouble (a decrease of 14.4%), in Tatarstan it is oil and gas production with revenue of over 1.5 trillion rouble (an increase of 3.5%).
By Diana Galieva for Kommersant (Russia).
https://www.kommersant.ru/doc/6791922?from=main

Rosstat reports jump in industrial output

In January-May, according to Rosstat estimates, industrial output increased by 5.2% year-on-year, despite the fact that the Ministry of Economy predicts a slowdown in the growth rate to 2.5% for the whole year. A noticeable jump in output in May is found in industries related to the military-industrial complex. Also, the growth of production volumes continues in the chemical industry and in the food production sector.
Rosstat estimated industrial output growth in May at 5.3% year-on-year after an April increase of 3.9%. These estimates turned out to be much higher than expected. Analysts polled by Reuters expected an increase in industrial production in May by 2.5%, and by Interfax by 2.9%. In processing, in May, the annual growth rate of production accelerated to 9.1% from 8.3%, in mining, the rate of decline decreased to 0.3% from 1.7%, in energy, output increased by 4.2% after 0.8%, in water supply, waste disposal and pollution elimination, production growth accelerated to 5.4% from 2.3% in April this year.
Trade restrictions and the extension of the OPEC+ agreement continue to have a negative impact on the dynamics of the extractive sector.
Industries related to the military-industrial complex continue to be responsible for the acceleration in processing, as well as for the high growth rates of output in this sector as a whole. Thus, the production of finished metal products in May increased by 55.9% year-on-year after 24.5% a month earlier; the production of computers, electronic and optical products by 27.5%, the production of other vehicles, including aviation equipment, shipbuilding by 20.9%.
"Metal products slowed down in April, and now there is a new jump," says Vladimir Salnikov from the Centre for Macroeconomic Analysis and Short—term Forecasting. In addition, a noticeable increase in output is observed in food production, which is associated with an increase in wages and private demand, in the production of chemicals and petroleum products, the expert notes.
Experts from RANEPA and the Gaidar Institute, who studied the trend dynamics of industrial production in January-April, assess what is happening in a similar way. The growth of the manufacturing industry in this period, as in 2023, is mostly associated with the production of intermediate products for the military-industrial complex and import substitution, they conclude. High growth rates since the beginning of 2024 have been recorded in the production of motor vehicles and computers, electronic and optical products (which is due to the low base of 2023 and, possibly, the positive effects of production localisation programs).
Taking into account seasonality, according to Rosstat estimates, output in May 2024 jumped sharply, exceeding the average monthly value of 2021 by 10% (in January 2022 it was 5% higher than this level, and in April 2024 by 7%). In May, compared with April 2024, with the elimination of seasonality, industrial output increased by 2% after a decrease of 0.1% a month earlier, the state service calculated.
The CMACP also believes that statistics still poorly take into account the calendar effect, and estimate the seasonally adjusted output growth in May compared with April at 1.2%.
Vladimir Salnikov nevertheless calls the May jump temporary. "If growth continues, it will be much slower," he concludes. The IEP and RANEPA also believe that the potential available in industry associated with the development of niches in the domestic market by Russian manufacturers after the departure of foreign manufacturers has not been fully realized, which, in the absence of additional economic restrictions, may allow maintaining positive growth rates until the end of the year.
By Artyom Chugunov for Kommersant (Russia).
https://www.kommersant.ru/doc/6791921?from=main

Rostselmash combine plant predicts reduction in production this year
Rostselmash Combine Plant predicts a decrease in production by the end of 2024 compared to last year, the company's CEO Valery Maltsev told reporters on Thursday.
"The forecast for the first half of the year and the year: there will be a decline in combine harvester production, because the market is currently difficult. Grain prices are low, export duties affect grain prices, among other things, and therefore solvency this year is worse than last year. (We expect) a decline of up to 20% by the end of this year compared to last year," Maltsev said.
He added that currently the tractor plant (Rostselmash plant in Rostov-on-Don, opened in March 2024) is operating normally and produces 160-180 tractors per month.
"Production plans for tractors are 1.6 thousand per year, for combines 4.5 thousand for this year," Maltsev added.
According to the results of 2023, Rostselmash Combine Plant received a net profit under RAS in the amount of 16.292 billion rouble, which is 1.6 times more than a year earlier. At the same time, revenue increased 1.4 times, to 98.745 billion rouble. As reported, both revenue and profit at the end of last year are record for the company since its foundation in 2003.
Rostselmash Group is under the control of the President of the Russian Association of Manufacturers of Specialized Machinery and Equipment (Rosspetsmash) Konstantin Babkin and his partners Yuri Ryazanov and Dmitry Udras. The product line includes more than 150 models and modifications of agricultural machinery, as well as road construction. These include grain and forage harvesters, tractors, sprayers, forage harvesting, grain processing and other equipment. The company has designed and is testing the first models of road construction equipment telescopic and front-end loaders. Two more models backhoe loaders and crawler excavators are under development.
Reported by Finmarket (Russia).
http://www.finmarket.ru/news/6202924

Petrostal implements new investment project
As Alexander Efimushkin, General Director of Petrostal Metallurgical Plant, reported at the XXVII Congress of the Russian Union of Industrialists and Entrepreneurs, after the change of ownership in 2022, the company has made significant progress.
In 2023, Petrostal produced 120 thousand tonnes of high-quality long products for the defense industry, machine building, aircraft manufacturing and other sectors of the Russian economy. Sales increased by 64% compared to the previous year, and revenue increased by 94%.
Since 2022, an investment project worth 2.4 billion rouble has been implemented at Petrostal. Its result was the creation of a new complex for the production of special steels and alloys. In the future, the company plans a large-scale modernisation of production to expand the range, increase the quantity and improve the quality of products.
In 2024, Petrostal entered into an agreement with the Government of St. Petersburg represented by the Committee for Industry of the City of St. Petersburg and with the involvement of the St. Petersburg Industry Development Fund for a new investment project of 1.3 billion aimed at further expanding the production of special steels and alloys.
This year, it is planned to supply two 2 turning machines, one heating and 4 thermal furnaces, two electroslag remelting units and one vacuum arc remelting furnace, as well as a small induction furnace with a nominal capacity of 2.0 tonnes. The program is designed until 2027.
Reported by Metal Supply and Sales (Russia).
https://metalinfo.ru/ru/news/162401

Russia's commodity export industries with West suffer from geopolitical shocks
During the sanctions confrontation with the West, two groups of industries have formed in Russia: "victims" and "beneficiaries". Export-oriented industries suffered the main losses. And companies that ensure the saturation of domestic demand have won, a new study by the Centre for Macroeconomic Analysis and Short–term Forecasting (CMASF) shows. According to experts, the current dynamics indicates the preservation of this division of Russian enterprises. Government support and domestic demand will remain key conditions for production growth.
The Russian economy has been facing massive negative external shocks since 2022. The basis of these shocks is the cessation of interaction with foreign partners, the closure of certain traditional export markets and the rupture of familiar supply chains. This was supplemented by the final closure of access to external financial markets, high volatility of global commodity prices and the exchange rate, according to experts of the CMASF.
Along with the negative consequences for a number of industries, there have been positive changes. In particular, the scale of government demand has expanded significantly recently. The process of import substitution accelerated, preferential lending programs for enterprises were launched, which made it possible to compensate for the high level of market rates.
As a result of analysing the dynamics of production, researchers identify two groups of industries in modern Russia the affected and the winners. They include the export of raw materials, as well as individual manufacturing industries that are closely linked to the supply of imported materials and/or components. And the second category includes industries focused on rapidly growing segments of domestic demand (state defence orders, infrastructure investments and civilian segments with an increased need for import substitution).
The most affected or losers from external shocks were primarily companies engaged in the extraction of raw materials, logging, manufacturing industries such as woodworking, paper and paper products, chemical industry, metallurgical production, automotive industry. All these industries have faced a deterioration in their financial situation, despite the fact that they account for up to 37% of the revenue of all branches of material production, with the exception of the oil and gas complex.
The reasons for the deterioration of the financial situation of this group of industries are different. Thus, the export and raw materials industries suffered primarily due to the closure of certain export markets (demand-side shock), and industries focused on the domestic market with high dependence on imports (automotive, pharmaceuticals) suffered mainly due to the withdrawal of investors and restrictions on the supply of imported materials and components.
For the raw materials industries, the closure of traditional markets has led to the need to restructure logistics flows. "This caused an immediate contraction in revenue and a decrease in the share of paid products due to the need to stimulate buyers in new markets," the economists note. They cite the example of forestry and woodworking, where in two years revenue decreased by 26 and 21% to the level of 2021, respectively.
Among the non-primary industries, the most affected industry was the automotive industry, where revenue fell by 32% in two years compared to 2021.
As a result, in order to maintain demand, enter new markets and maintain supplies of raw materials, materials and components, the affected companies had to reduce profitability through offers of price discounts and discounts on products (or high premiums for imported raw materials and components). "An additional factor in reducing profitability was the extremely unstable dynamics of product sales prices, which did not correspond to the dynamics of cost, which led to high volatility and ultimately a decrease in profitability in this group of industries," the CMASF economists report.
On average, in the group of victims, profitability over the past two years has decreased by 10 percentage points (pp) compared to the level of 2021. However, the researchers emphasise, despite this, the level of profitability in this group as a whole remains above the average in the economy. Scientists are concerned only about the decrease in profitability in woodworking and coal mining, where the decrease in two years was 20 and 16%, respectively.
Experts emphasise that all the affected industries have been affected in one way or another by the high volatility of the rouble exchange rate and world commodity prices. In contrast, the group of "beneficiary" industries, which is more focused on the domestic market, turned out to be less susceptible to fluctuations in the rouble exchange rate.
They primarily include light industry enterprises as beneficiaries: the production of textiles, clothing, leather and leather products; the production of metal products, machinery and equipment, and other finished products; the production of computers, electronic and optical products, and electrical equipment. "The share of this group in the total revenue of the material production sectors averaged 13% in 2022-2023," the CMASF clarifies.
And, in fact, due to the sanctions pressure, it was the manufacturers of clothing, metal products, electrical equipment, machinery and equipment and other things that significantly improved their financial situation. As the calculations of the CMASF show, as a result, over the past two years, profitability in the group of beneficiaries has increased by an average of 5 percentage points.
"These industries began to attract more loans, but due to the rapid increase in revenue, this did not lead to an undesirable increase in the debt burden," the researchers conclude. Over two years, the increase in bank debt in this group of industries averaged 35%. However, thanks to the partial subsidisation of interest rates by the budget, as well as due to the positive profitability situation, these industries were able to cover interest payments on loans without any difficulties. "Revenue dynamics in these industries turned out to be even higher, as a result, the debt burden did not increase," experts say. They also expect that the financial position of these industries will remain strong, anticipating further growth in demand for the products of beneficiary companies.
Nevertheless, this group of industries also faced primary market compression, but the force of this compression was not so significant. According to the CMASF, the sagging of the markets was noted only in the middle of 2022, but the markets recovered quickly enough. "To a large extent, a slight decrease in the total volume of private demand was offset by the state, as well as increased import substitution, which turned out to be very powerful factors," the scientists emphasise.
Also, enterprises of the beneficiary industries, unlike the first group, did not experience a serious deterioration in the logistics of imported components, including due to state support, and dependence on components was not so critical.
Economists from the Gaidar Institute came to similar conclusions. As follows from their review, only by the end of 2023, industries focused on foreign markets were most severely affected by the sanctions imposed. They include oil and gas production, the production of petroleum products, chemical production, and woodworking. At the same time, for industries focused on domestic consumption and the production of intermediate products for the defence industry, restrictions have not become a deterrent.
And an analysis of the dynamics of production indices in January–April 2024 makes it possible to assume that the potential available in industry associated with the development of niches in the domestic market by Russian manufacturers after the departure of foreign manufacturers has not been fully realized, economists continue. They expect that in the absence of additional economic constraints, positive growth rates in this group of industries will continue until the end of the year.
Currently, it is possible to identify a trend of some kind of clustering, segmentation of the economy, even in a single and dynamically developing economic system, draws the attention of associate professor of the Financial University Andrey Gusev. He also suggests highlighting the internal and external segments. "Previously, many companies lived only through exports or imports and had high revenue and high profits. And those companies that then worked with domestic consumers often went bankrupt or changed owners and underwent restructuring. Now the situation is reversed. The domestic market is growing, and you can make money from this growth," the economist notes.
"The industries that benefit are defence orders and those who work for import substitution. First of all, this is mechanical engineering, information technology, production of software and various kinds of software for the needs, including defence orders," lists Oleg Abelev, head of the analytical department of RIKOM-TRUST. At the same time, he suggests not to attribute the raw materials industries to the victims.
The conclusions of the CMASF specialists clearly illustrate the negative effect of the sanctions policy, says Associate Professor of the Russian University of Economics after Plekhanov Anatoly Kolesnikov. "Analysts note a significant improvement in the financial situation in industries focused on rapidly growing segments of domestic demand (state defence orders, infrastructure investments and civilian segments with an increased need for import substitution), which is a consequence of the record attraction of state funds in industries related to import substitution policy. Thus, the presented data indicate the strengthening of the model of state capitalism, which has gained additional momentum since 2022," the expert argues.
According to Yaroslav Kabakov, Director of Strategy at Finam, the data helps to make a forecast for the near future. "For the affected industries, financial difficulties can be expected to continue in the short term due to the continued instability of export markets and supply problems. Temporary production cuts and cost increases are possible. And the beneficiary industries will continue to show revenue and profitability growth in the short term due to increased domestic demand and government support, as well as the active development of import substitution programs," he expects. Government support and domestic demand will remain key factors of stability and growth.
By Olga Solovyova for the Nezavisimaya Gazeta (Russia).
https://www.ng.ru/economics/2024-06-26/4_9036_manufacture.html

Logistics still leader in Russia in terms of salary growth
Logistics is still the leader in wage growth in Russia: in January-May, companies from the transport and logistics industry offered applicants twice as much as a year earlier, while enterprises from other industries increased wages by a maximum of 38%, according to a study by the online recruiting platform hh.ru and the logistics company PECK. A significant increase in salaries in logistics is explained by an aggravation of the shortage of warehouse staff and truck drivers, as well as increased requirements for working conditions on the part of applicants.
On average, the amount of salaries offered by Russian employers in January-May 2024 amounted to 62.1 thousand rouble per month. Thus, compared to the same period last year, the wage level has increased by more than a third. At the same time, wage growth was observed in all sectors of the economy and business.
The highest median salaries were offered by companies from the transport and logistics industry (139 thousand rouble), from the mining segment (116 thousand rouble) and heavy engineering (110 thousand rouble), as well as construction (103 thousand rouble) and oil and gas companies (102 thousand rouble).
The most modest remuneration turned out to be in organisations in the field of culture and art (55 thousand rouble), the telecommunications industry (52 thousand rouble) and retail trade (52 thousand rouble).
Transport and logistics companies have taken a leading position by a significant margin both in terms of salaries and the rate of their increase. So, in January-May 2024, they offered applicants 2 times more than a year earlier, while representatives of other segments of the economy increased the amount of wages by a maximum of 38%.
Excluding logistics, the highest wage growth was observed in the oil and gas industry (+38% year-on-year), in automobile enterprises (+33%), in state budgetary institutions (+33%), in the metallurgical industry (+26%), in the segments of industrial equipment production (+26%) and chemical products (+25%).
The lowest is in non-profit organisations (+4%), educational institutions (+6%) and financial organisations (+8%).
If we consider the situation with wages regardless of the industry, then Russian companies offer the highest salaries to senior and middle managers (125 thousand rouble), specialists in financial strategy and investments (99 thousand rouble), specialists in the field of raw materials extraction (98 thousand rouble), agriculture (93 thousand rouble), as well as construction and real estate (92 thousand rouble).
The sixth place in this indicator was taken by specialists in the field of logistics 90 thousand rouble.
At the same time, enterprises of various industries are ready to offer salaries to owners of linear logistics specialties, including couriers, storekeepers, drivers, packers, warehouse managers, 44% more than a year earlier. This is the second largest annual increase compared to other specialisations. Only the salaries of staff engaged in customer service, premises and buildings, machinery and production lines, as well as support for trade and production processes grew faster (+48% year-on-year, up to 78 thousand rouble).
Why are salaries in logistics growing so actively?
A significant increase in the average salary level in the transport and logistics industry is associated with an aggravation of the shortage of line staff and truck drivers, explains Victoria Tsoi, HR Director at PEC.
"The number of vacancies is growing faster than the number of resumes. The average closing time for one vacancy has more than doubled to 25 days. As a result, in January-May, the salary level of truck drivers increased by 20-50% year on year up to 200-250 thousand rouble per month, warehouse workers by 30%, up to 100 thousand rouble," she continues.
In addition to the salary, the quality of working conditions is becoming increasingly important for such applicants, Victoria Tsoi emphasises.
According to Eva Klimentenko, head of the personnel department at Skif-Cargo, the basic requirements that applicants in the logistics industry are now demanding are territorial accessibility of the employer company, corporate transport, meals, absence of fines and overwork, social guarantees.
It is important to approach the formation of a social package flexibly, focusing on the needs of employees: one employee may need to pay for accommodation or provide a hostel, the second compensation for food or travel, etc., says HR BP of the Boxberry production department Olga Chernova.
Flexible schedules, fixing specific days off, and support from the company are becoming more and more important for employees, adds Marina Dudnik, HR Director at Gruzovichkof. To speed up and simplify employee immersion in work, logistics companies are actively developing their own corporate training and mentoring systems.
As for truck drivers, they choose employers based on criteria such as the quality of the fleet, the downtime during repairs, the availability of surcharges for related operations (loading / unloading), as well as the level of comfort, including the ability to visit home if there is free time on the flight, GLT says.
The expanded life and health insurance program for drivers of the "CE" category and an improved system of rest during the shift are also equally important, says Dmitry Ievlev, General Director of Avto-PEC.
In turn, the commercial director of MTEK-Logistics Evgeny Simakov draws attention to the fact that it is necessary to improve the conditions of employees' stay in the workplace. For example, the development of soft skills of administrative staff can help in this, since a driver who has been alone for a long time in a stressful traffic situation needs more environmentally friendly communication.
What are the prospects?
The average salary level in the logistics industry may increase by another 20-30% by the end of the year, mainly due to an increase in the number of truck drivers and warehouse line staff, the review participants predict.
"Businesses may face an increase in the average wage level as early as August. Traditionally, the high season begins in logistics in autumn and, consequently, companies that have not had time to set up processes and attract the necessary number of employees are ready to overpay in order to avoid disruptions in the processing and delivery of goods," notes Victoria Tsoi.
Olga Chernova also believes that there are currently no prerequisites for reducing the need for line staff, since automation processes are quite slow.
In order to reduce staff turnover, as well as the cost of finding and recruiting staff, companies will continue to improve the working conditions of employees, as well as develop motivation systems, concludes Victoria Tsoi.
Reported by Trans (Russia).
https://trans.ru/news/logistika-po-prezhnemu-ostaetsya-liderom-v-rossii-po-rostu-zarplat

Rail exports of raw materials from Russia increase by more than 20%
The volume of goods transported through railway checkpoints on the border of Russia and China increased by 20% in the first five months of 2024, the press service of Russian Railways said. Imports of goods from China increased by 5.3%, and exports of raw materials from Russia increased by 21.2% at once. The largest flow of goods passed through the Zabaikalsk/Manchuria checkpoint.
Thus, the total cargo flow through railway checkpoints between Russia and China in January-May 2024 amounted to 16.75 million tonnes: 1.15 million tonnes imports from China, 15.6 million tonnes exports from Russia.
Most of the exported raw materials were transported through the Zabaikalsk-Manchuria railway crossing 8.5 million tonnes (an increase of 15% compared to the same period last year). The most massive exports were coal (3.1 million tonnes, an increase of 1.4 times), iron ore (1.9 million tonnes, an increase of 1.2 times) and timber cargo (1 million tonnes, an increase of 3.4%).
The second most in demand, as follows from the data of Russian Railways, is the Grodekovo/Suifenhe transition. However, the indicators in the export direction have not changed compared to last year 3.4 million tonnes. However, this was due to a decrease in the volume of other goods, since coal transportation immediately increased by 1.8 times.
As for two other railway crossings (Nizhneleninskoye/Tongjiang and Kamyshovaya/Hunchun), coal also accounted for the bulk of the exported raw materials. Moreover, coal was mainly exported through the Kamyshovaya/Hunchun checkpoint (1.5 million tonnes, an increase of 1.3 times).
At the Nizhneleninskoye/Tongjiang checkpoint, coal exports immediately increased 2.1 times (1.4 million tonnes) compared to last year. Another 674 thousand tonnes were accounted for by iron ore, which is 2.3 times more than in January-May 2023.
Reported by Trans (Russia).
https://trans.ru/news/zheleznodorozhnii-eksport-sirya-iz-rossii-viros-bolee-chem-na-20

European Union softens towards transactions from Russia
The proposed mechanism cannot be used to systematically unblock transfers, all decisions will be made individually. The European Union has allowed money transfers from Russia to the EU to be unblocked, frozen due to the participation of intermediary banks or sender banks in the transfer chain, which are under sanctions. Changes have been made to the Regulation of the Council of the EU No. 269/2014, according to which funds were blocked. This is reported by RBC on the basis of information from the official journal of the EU. After the introduction of restrictions against the Russian financial system, the number of such blockages has increased many times, but it is difficult to give an accurate assessment of the blocked funds as a result of cross-border transfers. For example, Russian individuals could face freezing operations when trying to transfer money abroad, make international payments for goods and services, pay a loan from a foreign bank, and so on, says Gleb Boyko, a lawyer at the NSP Sanctions Law and Compliance practice.
The trade turnover between Russia and Europe has reached a mutual decline. Russia has restricted exports and imports to the European Union, the United States and some countries have imposed large-scale sanctions against almost all major Russian banks: Sberbank, VTB, Alfa-Bank, T-Bank (former Tinkoff) and others. The list of sub-sanctioned banks is expanding. This means freezing the assets of these banks on the territory of the European Union or the country that imposed restrictions, closing correspondent accounts, and prohibiting citizens and companies from the sanctioned jurisdiction from conducting transactions with these banks. EU member states can now "on conditions that they deem appropriate" remove the block from a suspended payment if the transaction was frozen due to the presence of a sanctioned bank in the chain of intermediaries. D
To do this, it is necessary that the sender and recipient of funds, which include individuals, companies and organisations, are not under EU sanctions, and the transfer is carried out using accounts in unauthorised banks, and the sub–sanctioned bank is only an intermediary, whose participation the client might not have guessed. The transaction should still not violate the general regulation of the Council of the EU, on the basis of which the blocking occurred. In fact, the withdrawals are aimed at unblocking funds that were frozen solely due to the participation of a sub-sanctioned bank as an intermediary without the participation of any other authorised persons, said Yuri Shumilov, founder of the Belgian law firm YS Advisors, a sanctions specialist. It can be a violation if the recipient or sender of the payment actually acts in the interests of the sanctioned person, as well as if the transfer is carried out in order to pay for European goods and services, the export of which is prohibited to Russia, Boyko gives an example.
The transfer of funds will not violate the regulations if they are not aimed directly or indirectly at providing benefits to individuals or legal entities, organisations or bodies under sanctions, and are not aimed at circumventing sanctions measures, adds the partner of the Pen Bar Association & Paper by Kira Vinokurova. Another change concerns transfers that were made from the account of the sanctioned bank between two unauthorised individuals, companies or organisations. The EU can unblock such transactions if the beneficiaries of the transfer are citizens of the European Union, the European Economic Area or Switzerland, as well as individuals with temporary or permanent residence permits in these countries. This paragraph also includes the requirement to comply with the general EU sanctions regulation. The provisions developed by the EU are not intended for systematic use, Shumilov notes, when working with applications, only one permit for unblocking transfers can be issued to an applicant.
The country that provided it must inform other European states and the European Commission within one week from the moment of unfreezing the operation, it follows from the regulations. The document emphasises that this mechanism does not apply to funds held in European securities depositories (these include Clearstream and Euro Clear). The new mechanism does not solve the urgent problem of blocking the assets of individuals in Euroclear accounts due to EU sanctions against the National Settlement Depository. The new rules on unblocking apply to almost any transfers between individuals and legal entities from Russia to EU countries, for example, transactions for payment for goods and services, training, treatment, debt repayment and other personal matters, according to George Voloshin, an expert on combating financial crime.
The funds could have been blocked due to participation in the payment chain of a correspondent bank licensed in the EU and subject to blocking sanctions, for example, a subsidiary of VTB or Sberbank, says the expert. In particular, after the introduction of Sberbank into the SDN list of the United States, its British subsidiary Sberbank CIB (UK) lost the opportunity to conduct transactions with American correspondent banks. The new rules may also apply to cases where the correspondent bank or sender fell under sanctions after the initiation of a payment from Russia, but before it was carried out by a foreign bank, as a result of which the payment was blocked, admits Artem Kasumyan, a lawyer at the Delcredere Bar Association.
The new procedure covers an exceptionally wide range of transactions from money transfers between the accounts of one or more individuals and payment for goods and services to payment of bills related to trade and commercial transactions, agrees Anna Barabash, CEO of Enterprise Legal Solutions law firm. The lack of an exhaustive list of types of transactions allows for a fairly broad interpretation of these provisions, which opens up equally wide opportunities for unlocking funds that, as a result of the introduction of restrictive measures, could never reach the recipient, the expert believes.
The second point on transfers involving sub-sanctioned sending banks, where the requirement for a European beneficiary is established, can only apply to transactions between individuals, since by definition any foreign trade payments do not fall here, Voloshin believes. It's more about personal transfers, for example, from Russian parents with a Sberbank account, to children who are citizens or residents of the EU/CES, said the source of the publication. It is the recipient who should be considered the beneficiary, because he benefits from the transaction funds are credited to his account, says Kasumyan from Delcredere. The beneficiaries of such a decision may also be relocants, a significant part of whom, living in EU countries, currently already have a residence permit, Barabash suggests.
To unlock funds, you will need to contact the competent authority of the EU country whose financial institution has frozen the transfer, explains the Boyko mechanism. In Germany, the Central Bank is in charge of this, in France, the General Directorate of the Treasury, etc., lists Voloshin. Applications to local regulators in the interests of their clients will be able to be sent directly to European banks that have blocked funds. The person submits an application, the European regulator verifies that the conditions of unblocking are met (the sub-sanctioned person does not receive benefits, etc.). Then a license is issued and executed," explains Kasumyan. The EU has already allowed funds to be unblocked in such situations on the basis of Article 6 of Regulation No. 269/2014 adopted in March 2014, but it referred to payment from a sanctioned person if the obligation to make a payment was established before the imposition of sanctions, Boyko recalls.
In April 2022, the European Commission clarified that a transfer between unauthorised persons, but passing through a sanctioned intermediary bank or sent from an account of a sanctioned bank, can also be unblocked if obligations under it were concluded before the restrictions were imposed. According to Voloshin, the new relief measures can be described as humanitarian, since their purpose is to allow persons who have not been sanctioned to fulfil obligations to each other, especially when it comes to personal matters. There is a so-called general rule on the termination of any obligations that arose before the imposition of sanctions, probably, the EU Council considered that making monetary payments could not always be associated with any obligations, therefore, it developed a new mechanism to unblock other transactions, Kasumyan believes. According to Eurotat, in 2023, the trade turnover between Russia and the EU fell by 65.5%, amounting to about €90 billion (in 2022 €257.7 billion). Supplies of goods from the European Union decreased by 30%, and from Russia by 75%.
Reported by Logirus (Russia).
https://logirus.ru/news/custom_and_ved/evrosoyuz_smyagchilsya_k_transaktsiyam_iz_rossii.html