Published in "Expert" Magazine

The Expert RA rating agency, on the initiative of DHL, has prepared another annual rating of exporters.

The last year was a record one in terms of Russia's foreign trade turnover which reached its ten years' high (140.7 billion dollars) with a 2.7% increase over the previous year. However, unlike in the year 2000, the foreign trade turnover structure in 2001 did not give cause for rejoicing. On the one hand, the volume of imports grew slightly due to the improvement of the paying ability of the population (which was partly due to the development (albeit a slow one) of the investment mechanisms and partly because of the growth of real incomes).

On the other hand, the share of exports was down 3.8% to 99.2 billion dollars. The total value of Russian exports began to decrease in the second half of 2001 due to a landslide of the world oil prices (the losses from the reduction of oil prices over the last three months have totalled 1.3 billion dollars) and the worsening of the world economic situation with the accompanying reduction of the demand for export products. Having reached its peak in the second quarter (25.6 billion dollars), in the third quarter exports were down 2.3% and another 3.9% in the fourth quarter (compared to the third quarter).

First stage holdings

In the "Russian export. Top-100" the Pareto principle was at work again: in a system a smaller portion of components is responsible for a larger portion of the results. The Top-100 Russian exporters included in the rating accounted for more than 60% of the entire Russian exports.

Large businesses, which have nearly monopolised the foreign trade activities, have also been the best performers. Against the background of a general decline in exports the Top-100 have shown an almost 10-percent growth once again proving that it is only the heavyweights that matter in foreign trade. However, it is only the raw materials exporters that can boast of their success.

The products of the oil and gas industry remained the most important item in the structure of Russian exports in the year 2001. Concentrated in large holdings, practically the entire oil and gas industry was represented among the Top-100 exporters and accounted for 72.1% of all foreign trade sales made by the companies included in the rating. Last year?s decrease in contract prices for Russian oil and oil products (from 166 dollars per ton in January-September to 122 dollars by the end of the year) was compensated for by a 22% increase in the actual volume of those exports whereas in 2000 the increase was less than 5%. As a result, the overall value of the exported oil and gas products remained practically unchanged at the level of the year 2000 and their share in the overall Russian exports went up a few points from 54.2% to 54.8%.

The second important group of export products are metals and metal ware. Their share in the overall Russian exports in 2001 continued to decrease and was down two and a half percent points to 14.6%. This was caused by a reduction of both the prices and the actual export volumes. Cast iron was the only exception: its sales increased by 63% owing to the increase in the actual volume of exports, and by only 8% owing to their price. This was also reflected in our rating: the share of metallurgical companies in the exports of the Top-100 was 17.7% (in 2000 - 19.1%).

However, the most noticeable tendency of the last year was the quick consolidation of the industry, rather than the improvement of the general situation on the market. The process of the holdings formation in the oil industry was quickly followed by other sectors. A year ago only 32 holdings were included among the Top-100, today the rating list already contains 43 such companies. Nowadays we hear a lot about mergers and acquisitions in the metallurgical and chemical industries. Industrial groups were also gaining prominence in such industries as mechanical engineering and timber industry. For example, two more timber and woodworking holding companies (the Titan and Continentalinvest groups) were added to the list of exporters, besides Ilim Pulp (the leader in the timber and woodworking industry).

Holding companies were also being actively formed in the machine building sector. Besides TVEL that holds a steady position among the top 20, the 2001 rating list was supplemented with such companies as "Sibmashholding", "Energomash Corporation" and "Sibirsky Aluminium" (the latter is included in the Top-100 only due to the foreign trade activities of its machine-building units).

In general, Russian export of machinery and equipment in 2001 increased by 12%, the industry's share in the overall Russian export was up 10.1% (though as far as the Top-100 are concerned this figure was only 2.7% compared to 3.3% in 2000). The achievements of the machine building industry as a whole can be explained by the increased export volumes of the companies within its military-industrial sector. Rosoboronexport is the main link connecting the military industrial complex with foreign buyers (it is not included in the rating list because it is not an industrial company).

Leaders in various nominations

"Exporter with the most active foreign trade marketing policy" . When this nomination was introduced two years ago it was perhaps of merely symbolic nature - we wanted to emphasise the significance of marketing. By now exporters have grasped the notion. Their promotion activities have been developing at such a fast pace that only two companies out of the last year's top-10 ("Kazan Helicopters" and "VSMPO-Avisma" group) have managed to retain their positions. Their success was due to the diversification of their products range and the increase of the staff working on the promotion of their products on foreign markets. The results are self-evident: the export volume has increased by a factor of 1.5-2. A different fate befell TVEL and Nizhnekamskneftekhim (NKNK) who started to pay less attention to promoting foreign sales which resulted in a considerable deceleration of the rate of growth of the number of the buyers of their products (the NKNK's export value dropped by 15% compared with the year 2000).

The Continentalinvest group of companies is on top of the 2001 list of the most dynamic exporters . Due to its restructuring the holding has left all its competitors far behind and has reached a 9-fold increase in its export volumes. Such growth of the group's export volume was mainly due to the Ust-Ilimsk Wood Processing Works (WPW) which joined the group last year and is now producing one third of all Russian cellulose (note: more than a half of all Russian cellulose is exported abroad). In 2001 Continentalinvest operated its Wood Processing Combine at 95% of its capacity (at other times this figure rarely reached 30%). At present the combine is included within the Ilim Pulp holding.

Altai-coke, the youngest company in the Russian by-product-coking industry, ranks second having increased its export more than fivefold. The designers of the plant (that was built in the early 80s) incorporated in it the latest achievements of domestic science and technology. At present the company pays particular attention to the quality of its products due to which its products find a ready demand on the foreign market. The company gained its experience in the export of coke while operating on the Indian market. Today it sells its products to Germany, Romania and some other countries who find good value for money in the Altai coke. We can judge about the potential of the export-oriented companies not only by the direct trade figures such as the volume of exports and its growth rate, but also by indirect indicators such as how active the company is in promoting its products on foreign markets. The present situation is similar to the last year's situation: metallurgical companies lead in the nominations reflecting the depth of companies' penetration into western markets. The anti-dumping proceedings in North America, the problems with exporting products to the EU countries have reduced the possibilities of Russian metals exporters forcing them to look for sales markets elsewhere.

In the nomination called "Exporter with the largest number of foreign buyers" the leading position for two successive years has been held by Severstal, a company that has managed to demonstrate three times better results than its closest rival. Severstal remains the leader even though its export client base has shrunk compared to the previous year by 12% leaving the company with 735 customers, which is still quite an impressive figure. The VSMPO-Avisma group that ranks second thanks to its active foreign trade marketing policy has increased the number of its foreign buyers from 217 to 222.

The situation with the exporters who have the widest geographical scope of foreign trade operations has not changed this year. Once again Severstal came out on top with deliveries to 98 countries in 2001. Following this company is the Ilim Pulp group that has added six new countries to the list of its importers.

The Novolipetsky Metallurgical Combine (NLMC) that ranks third has been much more successful in expanding the geography of its exports. This company has secured 15 new buyers during the year.

The same representatives of the metallurgical industry lead in the nomination called "Exporter with the largest number of export deliveries" . This rating shows that the number of foreign sales is heavily dependent on the geographical scope of a company's operations. The first two positions are held by NLMC which in 2001 sent more than 16.5 thousand consignments abroad and by Severstal with 13.5 thousand consignments. Compared with the previous year the number of the customs declarations filled out by these companies has decreased by 9.4% and 2.7% respectively. The third position is held by Ilim Pulp that has superseded in its position another timber and woodworking company - the Balakhna Paper Mill "Volga".

Consumer goods

Regrettably, behind the giants of the raw materials export it is very difficult to discern any signs of the emergence of a hi-tech economy or at least of an economy oriented towards the end consumer. That is why we have carried out an additional research in the field of the export of consumer goods.

It has become apparent that outer clothing, footwear, textiles and watches enjoy the greatest demand. Little known companies are in the lead whereas the owners of well-established Soviet brands are not yet capable of competing with them. However, we do not give any precise figures in this first publication about the leading exporters of consumer goods because no company, not even the most successful one (closed joint stock and limited liability companies), is obliged to inform the public of its economic activities. We can only say that in foreign countries our best exporters of textiles and clothing earn about $10 million per year, watchmakers and footwear makers earn up to $3 million. The companies mainly manufacture goods on commission from the materials provided by their customers.

As far as the export of textiles is concerned, it is mainly coarse (not died) linen (at least here we have managed to benefit from our national traditions). In the middle of the year 2000 the second part of the Tax Code imposing a 20% VAT on source materials imported from the CIS came into force. It dealt a heavy blow to the renascent business. The demand for linen abroad plummeted. In 2001 the export value of linen dropped by 6.6% compared to the "pre-tax" year 2000.

According to different estimates, there are 1350 to 1450 clothes factories in Russia. Surprisingly, the official statistics indicates that the value of the export of Russian costumes, skirts, trousers, coats, raincoats and jackets beyond the CIS countries is comparable to the import value of the same types of goods. The exporters owe their success to tolling: our enterprises sew clothes from imported source materials using foreign templates. In addition to material well-being, tolling provides Russian sewing industry with modern models, know-how, opportunities for perfecting their skills that will also come in useful on the home market. At present the clothes made from tolling materials are exported to a rather limited number of countries. For example, about 50% of the Russian clothes export goes to Germany and the USA.