Thursday 12 November 2015

Avtovaz report Q3 2015

Avtovaz, Q3, 2015, front page

Wooops! I am amazed that the share price have remained as high as it have since the release of the report. This was seriously bad news! I have also now found a better source for the reports that I will link to. It is all in Russian but at least Google translator works ok and the reports are offered in English.

For the report in full please go here and to read my previous summary please click on Avtovaz report Q2 2015 and to find out more regarding Avtovaz then please visit Analysis of Avtovaz.

The three page report started off with the balance sheet and this we shall take a little look at before moving further. This is no good news at all! They have during the running nine months built up a debt of around -16 billion Russian Roubles! That is half of the equity they had last year in Q3. They are definitely burning money and fast! As a shareholder, at this time, I need to be concerned that Avtovaz will have to issue more shares to cover their losses because from what I see here things are looking difficult. Am I prepared to step in with more fresh cash if they decide to issue more shares?

Avtovaz, Q3, 2015, equity

In the financial statement below we can very clearly see why the losses have appeared. You simply can not have sales in the size of 131 billions and cost of sales in the size of 133 billion ESPECIALLY when administration, distribution and R&D costs are not included in those sales costs. I mean even then it would have been a loss of 2 billion but that would have been more "acceptable" because -15.8 billion is a lot! We should here also consider that for the running six months Avtovaz were at -6.6 billion so to take an additional quarter cost of -9.2 billion is a lot! One could even say that it is too much because it looks as if our friend Bo Inge Andersson are hunting market shares NO MATTER WHAT THE COST. I know he claimed to have 20% of the Russian market but should that be accomplished at any cost? Obviously he thinks so and I must think about it.

Avtovaz, Q3, 2015, financial statement

Conclusion: I must admit that I am concerned. This report was seriously bad and yet my instinct tells me to buy more shares but I am a bit worried that they will issue more shares and if that happens I would be forced to push in so much money in a country that have... well... a rigid democracy is maybe one way to put it. So right now I do not know what to do. Sell? Buy more? Will new shares be issued?

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