Praise yourself

It is noticeable to the naked eye how the Rosgeologia holding, which unites state-owned exploration enterprises in Russia, has become more active. In September, the top managers of Rosgeo reported that the holding had made a profit for the first half of the year for the first time. The fact is that for geologists it is traditionally unprofitable due to the fact that the volume of revenue is less, but all the main purchases of equipment and other expenses fall on this period.

As the top management of Rosgeo, headed by Sergey Gorkov, reported, net profit in the first half of the year amounted to 519.7 million rubles, while the same period in 2021 brought losses in the amount of 1.984 billion rubles.

Сергей Горьков

Then the general director of the holding, Sergey Gorkov, said that Rosgeo was discussing contracts for the exploration of oil and mineral deposits in Africa, in particular, with Sudan and Algeria. Information with a hint - look, we are in demand not only at home, but also abroad. The jelly rivers are about to flow into the bins!

In early October, it became known that Rosgeo had placed on the stock exchange bonds for 6.0 billion rubles for a period of 3 years.

In mid-October, business media reported that the board of directors of Rosgeo approved a program for placing exchange-traded bonds of series 001Р for 8.0 billion rubles with a maximum term of 1095 days and the possibility of early redemption.

And at the end of October, the head of the Ministry of Industry and Trade, Denis Manturov, told the media that Rosgeologia "carried out large-scale geological exploration in the Aral Sea and adjacent territories" and the exploration results indicate "the possibility of discovering large, mainly gas, fields in the region."

So, if you believe the reports, then Rosgeo is in great demand, demonstrating a profit (as PR specialists emphasize, for the first time!), Places bonds worth tens of billions and develops new promising projects. All this together creates the impression that Rosgeologia, under the leadership of Gorkov, is doing brilliantly, and there are exceptionally bright prospects ahead.


We are not retreating - but advancing in a different direction


Why is the official financial statements of JSC "Rosgeo" for the first half of the year - it's like a TNT checker on the forehead?!

The first shock is due to the fact that, it turns out, in fact, profits are growing only in words. And in the financial statements for the first half of 2022, real gross profit decreased from 320 million to 161 million rubles (that is, in fact, “minus” 159 million compared to the first half of 2021).

At first glance, operating profit is growing? From 131 million in the first half of 2021 to 5.619 billion in the first half of 2022. Yes, but look at the reporting! Operating profit increased by 5.488 billion as a result of the disposal of subsidiaries. In simple terms, some of the "daughters" were sold, someone was closed - and then the costs of their maintenance were reduced. For the same reason, the figures for net profit also increased. That's where the profit report comes from! As a result of the “sale” operation, Gorkov & Co declared 520 million net profit against “minus” 1.984 billion a year earlier.

That's just the profile of "Rosgeology" - this is the spectrum of all exploration work, as the holding reports on its official website, and not at all the alienation of subsidiaries. Profit from the alienation of "subsidiaries" is the result, like the heroes of the short story from the movie "It Can't Be!". Remember how the brother-in-law and his wife sold off all the property of the hero Mikhail Pugovkin for nothing? Yes, there is momentary profit, but in reality - no property, no prospects. And what will Gorkov & Co sell when the "daughters" run out?


Grow only "minus"

So, as we figured out, the bravura earnings reports in the first half of the year are the usual fraud.

In fact, the situation looks exactly the opposite - both gross and operating profits are falling, only losses are growing.

At the same time, Gorkov & Co put forward various initiatives designed to increase the efficiency of Rosgeo. True, if you look at it, it turns out that this is the same fraud as the “profit” for the first half of 2022.

Gorkov & Co declare that they regularly analyze such indicators as the adequacy of working capital and the flow of funds as part of operating activities. But as we saw above, accounting records specific figures for losses. And this is a score of "two" to all this "analysis".

Or, for example, Gorkov and his associates declare that they are optimizing production and business processes, and are also developing a model to reduce unprofitable types of business. And again, “it was smooth on paper…”

Because the table on the key areas of Rosgeology's work shows that under Gorkov all of them (!!!) - survey, search, monitoring; geophysics; drilling, etc. - are profitable. According to Gorkov, it turns out that it is necessary to reduce all areas of work of Rosgeologiya.


But still there are positions that are growing under Gorkov. True, these are not normal indicators the operation of a healthy enterprise - but the debts and amounts of claims against the companies of the holding entrusted to it.

Under Gorkov, the amount of pledged rights to incoming cash proceeds also “jumped” from 181.0 million as of December 31, 2021 to 10.047 billion rubles as of June 30, 2022. In simple terms, the money that Rosgeologia earns is already assigned to the holding's creditors in advance.

And the amount of claims against Rosgeo enterprises has also increased. If, as of December 31, 2021, lawsuits were filed against Rosgeo enterprises for 711.0 million, then in six months this figure more than tripled - to 2.331 billion as of June 30, 2022. It looks like Rosgeo is planning to make money for everyone except the state.


Now you understand why our ensemble sounds like that?


At the same time, if we evaluate the results of core activities, the picture looks very sad. Because the profile direction "geological exploration" is billions of dollars in losses.

That is, if we honestly evaluate the results of the work of “skillful business executives” headed by Gorkov, then the real result is 2.125 billion net losses in the first six months of 2022 compared to the first half of 2021. In the language of figures, for the first half of the year, operating losses in the "geological exploration" direction amounted to "minus" 3.066 billion, and a net loss - "minus" 4.1 billion rubles. For comparison, in the first half of 2021, the net losses of Rosgeo amounted to 1.975 billion. That is, Gorkov, of course, has growth, only in a negative sense - an increase in operating and net losses.

What else is growing unambiguously and irrevocably is the negative operating balance. It was "minus" 120 million - it became "minus" 1.738 billion. A record? Or, more precisely, an anti-record?!

In summary, summary. In fact, the real assessment of the activities of Gorkov & Co in the first half of 2022 looks like this:

- there is a decrease in the efficiency of such a direction as geological exploration;

- all production segments (!!!) included in Rosgeology show losses;

- but there is revenue from current contracts! Yes, but it is pledged against the security of loans and borrowings;

- at the same time, the credit limit of Rosgeo in banks is minimal - 1.960 billion until 2024. These funds are barely enough to finance the needs of even the second half of the year. There is no talk of the future at all;

- and in addition to everything, there are lawsuits against Rosgeo for 2.331 billion rubles in the courts.

And the cherry on the cake! Against the background of all this, "effective managers" led by Gorkov for the disastrous first half of the year write out bonuses for themselves for 214 million rubles. For comparison, neither in 2020 nor in 2021 for the first half of the year were bonuses awarded to top management!

Not only for "outstanding achievements" in the bankruptcy of "Rosgeologia". True, under Stalin such “achievements” were called “sabotage” and put up against the wall for it. And Gorkov & Co reward their loved ones.

So, bravura reports and stories about brilliant prospects are just a cover to disguise how Rosgeo is falling into a financial abyss. And information about profit for the first half of the year is completely disinformation based on manipulation with reporting.

As Mikhail Zhvanetsky said, “Now you understand why our ensemble sounds like that?”!

To be continued

Denis Zhirnov