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6/2017


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DRINKS
Prospects of Development of the Russian Wine Market
Research by the Center for Investigations of Federal and Regional Alcohol Markets (CIFRRA)

Review of the Russian Beer Market
Research by the Company I-Marketing

TEA & COFFEE
Review of the Russian Coffee Market
Research by the Company Step by Step

CONFECTIONERY
Review of the Russian Confectionery Market
Research by the Information Agency Credinform

Review of the Russian Market of Fruit Preserves
Research by the Company I-Marketing

MEAT
Review of the Russian Meat Market
Research by the Company Market Analitika

FISH & SEAFOOD
Review of the Russian Market of Fish and Fish Products
Research by the Company NeoAnalytics

DAIRY PRODUCTS
Review of the Russian Dairy Market
Research by Information Agency Credinform

Ways to Increase Realization of Expired Food Products
Study by the Marketing Agency ScanMarket

INGREDIENTS
Review of the Russian Market of Starch Products
Research by the Company ID-Marketing

TRADE SHOWS
22nd International Exhibition Agroprodmash-2017


4th exhibition Anufood China-2017


34th Exhibition Anuga-2017


Exhibition Drinktec-2017


26th International WorldFood Moscow Exhibition


FOODSERVICE
Review of the Russian Restaurant Market*
Research by the Company RBC Market Research

FINANCE & LOANS
Leasing Market in Russia
Research by the Rating Agency RAEX (Expert RA)

Leasing Market in Russia

Research by the Rating Agency RAEX (Expert RA)

LET THERE BE RECORDS
In the first half of 2017, the leasing market grew two-fold, reaching the volume of 427 billion rubles. More than one fourth of the leasing business fell on operating leasing, formed by transactions with railway and aviation equipment. The volume of the leasing business will continue to grow in the given segments in the second half year, which, according to forecasts by RAEX (Expert RA), will allow the market to reach record volumes.
During the first 6 months of 2017, the volume of new business amounted to 427 billion rubles, which is 55% higher than in the first half of 2016. According to survey results, negative leasing business dynamics in the first half year were demonstrated by 38% of respondents, whereas a year earlier a decline was recorded by a quarter of the study participants. Nevertheless, the decline in new business mainly occurred in small companies. Among the top 10 lessors, forming 66% of the market, slight negative dynamics were demonstrated by only 2 companies, while the other players increased new business substantially in the first half of 2017.
Active growth in the total value of new leasing contracts in the first half year (+56% during the past 12 months) led to an increase of the leasing portfolio by 16% during the period from June 1, 2016 to June 1, 2017 to 3.24 trillion rubles. It should be noted that the size of the leasing portfolio has increased insignificantly since the beginning of the year by 1.3%, which is due to a drastic reduction of the portfolio of one of the market leaders.
Since 2009, the leading positions in the market have been steadily held by state companies. Sberbank Leasing has taken the first place; the State Transport Leasing Company (GTLK) is second; VTB Leasing is third among the leaders. Market concentration on the largest lessor in the first half of 2017 equalled 17% of new business against 13% a year earlier. The share of the 3 largest leasing companies in the new business volume reached 39% in the first half of 2017, whereas the figure for the similar period of the previous year equalled 34%.
As in the previous periods, the main directions for the leaders in leasing are cargo and passenger vans, as well as aviation and railway machinery. At the same time, new business in certain segments is virtually fully formed by the leading companies. For instance, 94% of aviation leases in the first half of 2017 were covered by the 3 largest companies. In railway leasing, the top 2 lessors account for 35% of the market. The least monopolised segments are the segments of cargo and passenger vehicles, where the 3 largest companies account for 21 and 17% respectively.
In the sector distribution of the market, positive dynamics can be observed on the whole. The largest share increase in the first half of 2017 was demonstrated by capital-intensive segments aviation leasing grew by 4 pp to 22.1%; railway equipment by 2.7 pp to 16%; the share of vessels also increased from 1.5% to 3.1%. It should be noted that not only did a redistribution of shares of the smaller segments in favour of larger ones occur, but the latter also grew in absolute terms. Growth in new business volume in the aviation segment in the first half of 2017 amounted to 91%, whereas growth in the railway and vessel segments equalled 77 and 225% respectively. Retail segments, which include car leasing as well as leasing of construction and agricultural equipment according to RAEX (Expert RA), also demonstrated growth in the first half of 2017 (+37%). A decline in volumes of leasing transactions took place in smaller segments, the share of new business of which amounts to less than 1% of the market. For instance, the volume of new business in the segment of food processing equipment dropped by 40% against the first half of 2016 and amounted to 1.74 billion rubles.
As the year earlier, the leader in the segment of food equipment leasing is Siemens Finance. Despite the overall decline in volumes in the given segment, the volume of leasing business of this company increased by 19% in the first half of 2017 against the similar period of the previous year. Import substitution against the backdrop of the food embargo activated development of the dairy and meat industries, which ensures demand for equipment for said production segments. As a result of increased processing volumes, there is increased demand for packaging and storage facilities, which supports leasing of packaging and refrigeration equipment.

OPERATIVE RISE
The share of operating leases in the structure of new business has increased significantly over the past few years. Whereas in the first half of 2012 operating leasing accounted for 4% of new business, during the 6 months of 2017 the share of such lease transactions grew by 6.5 times, reaching 26%. At the same time half of all deals in the first half year were accounted for by Sberbank Leasing, operating leasing occupying 70% in its structure of new business and being represented by aircraft leasing. It should be noted that nowadays leasing of both airplanes and helicopters has been widespread. VertoletyRossii (Russias Helicopters) holding company and Sberbank Leasing JSC signed a memorandum of cooperation aimed to expand the possibilities of using helicopters and their modifications in both domestic and foreign markets. GTLK was additionally capitalised with 3.8 billion rubles in order to conclude a contract with "VertoletyRossii" involving a purchase of 29 helicopters within the programme for the development of air medical services.
New business volume in operating leasing in the first half of 2017 was mainly formed from railway machinery (24%) and contracts with airplanes and helicopters (71%). Aircraft operating leasing has been actively supported by state programmes. Anton Borisevich, first deputy CEO of GTLK, commented, The aviation business is actively expanding due to the implementation of the programme for SSJ-100 leasing as well as due to new types of aircrafts. Programmes for helicopter leasing have been launched within the framework of the development of air medical services and Russian-based production of L-410 aircrafts.
The highest operating lease penetration rate was observed in the aviation segment in the first half of 2017, 79% of all transactions with aircrafts were lease contracts. The share of operating leasing is much lower in other segments around 37% in the railway segment; 12% in transactions with oil and gas production and processing equipment; not more than 3% in new business in car leasing. In the future, most active growth in the share of leasing should be expected in the railway segment. The situation is following global trends the light asset model is widespread among foreign companies; the model implies that non-core assets are not put on the company balance sheet. For instance, in the US the share of operating leases amounts to around a half in the rolling stock market, says Alexander Godeev, head of the finance department at NPK OVK.
It should be noted that in most Western countries, the rental model is common in case of a vehicle fleet. The share of motor vehicle rentals in the Russian market is insignificant (1.2% in the first half of 2017). The main vehicle fleet tenants are representatives of international companies. Further development of operating leasing will depend on how common consumer leasing will become among individuals.

SECOND YEAR OF GROWTH
According to the Russian Federal State Statistics Service (Rosstat), growth in volumes of investments in fixed assets in the Russian Federation in the first quarter of 2017 amounted to 5.2% compared to the first quarter of 2016. The industrial production index in the first half of 2017 demonstrated positive dynamics compared to the similar period of the previous year. Gross domestic product in the first quarter of 2017 was demonstrating slight growth (+0.5%) against the similar period of the previous year. Growth in the main indicators characterising the state of the Russian economy shows that the economy is recovering from the recession, which, in turn, contributes to the recovery and further growth of the leasing market. A survey conducted by the agency revealed that 87% of respondents are expecting further market growth in the second half of 2017.
According to statistics by Rosstat, in the first half of 2017 production of motor vehicles compared to the similar period of the previous year increased as follows: cars by 20.7%; buses by 31.4%; trucks by 16.4%. According to experts at RAEX (Expert RA), this will lead to growth in the volumes of car leasing in 2017 by at least 30% compared to 2016.
As a result of railroad cars being written off nowadays, production of railway machinery increased: according to Rosstat, in the first half of 2017 growth to the first half of 2016 amounted to 92.7%*. This will support the market of railway leasing. By the end of the year RAEX (Expert RA) expects growth in the volume of new business of around 7075% in the railway segment. However, in the long term the railway segment is more likely to stagnate than to grow further due to the lack of regulation of the train car market size.
According to RAEX (Expert RA), the dynamics of leasing in the aviation segment will retain their upward trend in the second half of 2017, exceeding the result of the first 6 months of the current year, as traditionally the main volume of large deals is structured throughout the year and reaches the final stage in the fourth quarter. Other segments of the market will maintain the dynamics of the first half year and will grow by 45% over the year. As a result, in 2017 new business volume will increase by 15%, amounting to around 850 billion rubles. Experts of the agency consider this scenario to be the most likely with the inflation rate of 4%, which will require that the key rate is maintained at the level of 88.25%.

* On Industrial Production in the First Half of 2017
http://www.gks.ru/bgd/free/B09_03/IssWWW.exe/Stg/d02/140.htm.

Pavel Zholobov,
RAEX (Expert RA)





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