Page 34 - RusRPTJun19

4.3.2 Corporate profits dynamics
Corporate profits in Russia climbed 49% to RUB3.86 trillion in the first quarter of 2019 from RUB2.590 trillion in the corresponding period of the previous year.
The result was the best in three years as Russian companies start to recover and grow again, but the m/m profit of RUB1389bn was still slightly down from the RUB1499bn companies earned in 2016, which was an exceptionally strong month that year.
Cumulative profits have been increasing each year for the last three years and Russia Inc is on course to end this year further ahead.
Profits increased in mining (11.8% to RUB0.36 trillion); manufacturing (59.9% to RUB1.024 trillion); wholesale & retail trade (83.6% to RUB0.813 trillion); transportation & storage (66.2% to RUB0.190 trillion) and electricity, gas, steam & air conditioning (16% to RUB0.317 trillion).
Corporate Profits in Russia averaged RUB4,603.70bn from 2010 until 2019, reaching an all time high of RUB13,797.20 in December of 2018 and a record low of -RUB224bn in January of 2015.
Russia’s state-owned companies have increased their already sizable share in the economy in the past five years despite calls from President Vladimir Putin for increased competition.
A 600-page draft annual report published by the Federal Anti-Monopoly Service found that state companies make up close to or more than half of each of the four major sectors in the Russian economy -- energy, transport, mining and finance. Old-and-gas giants Gazprom PJSC and Rosneft PJSC alone contribute as much as 14% to gross domestic product, the report found. State- run banks controlled 66% of the banking system last year, up from 59% in early 2017.
The report warned that the state’s growing role hurt growth prospects by depressing productivity, innovation and the growth of small- and medium-sized businesses. “The economy is starting to ‘spin its wheels,’ which shows up in slower rates of growth and falling further behind technologically.”
Russia’s plans to privatize a raft of state companies have stalled since the 2014 Crimea crisis sank the economy and reduced demand among foreign investors. A RUB25.7 trillion ($400bn) investment plan for for the country over the next five years largely focuses on state-driven projects.
Research by Bloomberg Economics found that the 10 biggest companies in Russia account for about half of revenue, or 20 percent of total spending in the economy. While that’s a lot compared with the U.S., it’s only a bit higher than Germany, they found.
New bill would force SOEs to pay contractors on time, A new bill would require state-owned companies to pay contractors for goods and services within 30 days of receipt. The bill has been supported by the government. The situation is so bad that some have compared it to the 1990s. SOEs are required by law to pay contractors who are small and medium businesses within 30 days, but there is no upper limit for large contractors. SOEs often delay payment by 6 months or longer, forcing contractors to take out loans to continue production. The contractors do not turn to the courts, however, for fear of losing business. So many contractors hover on the edge of bankruptcy — an outcome that is bad for both the contractors and the SOEs. Putin ordered the government to fix this problem in November 2016. SOEs spent 17
34 RUSSIA Country Report June 2019 www.intellinews.com