Enterprises of Kazakhstan: who makes profits and who is at a loss?

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In 2015, small businesses have shown a negative level of profitability

The share of small enterprises in the total number of operating entities by the condition on 1^st of January 2016 is 96%.

According to preliminary data of the Statistics Committee, in 2015 the income of small businesses compared to the same period of last year increased by 6% and amounted to 13 541 billion tenge. Cost of sales since the beginning of the year also increased by 3.9% (Figure 1). The average fraction of the cost in the turnover of small enterprises, despite a decline in 2015, remains high - 68.7% (against 70.1% in 2014).

Despite the overall revenue growth of small enterprises, a significant increase of "other expenses" for the first time in the last 6 years has led to negative earnings figure. At the end of 2015 a loss of small businesses amounted to 582.4 billion tenge. The average profitability of small businesses on the net profit in 2015 is negative, falling to -1.1%. (Figure 2).

Structure of formation of profit of small businesses by industry has changed dramatically. This is due to a sharp decrease in the production of a number of industries and decrease of their cost-effectiveness. In 2014, a significant share of all profits was given by the mining industry (57%) and construction sector (25%). At the end of 2015 profits of the mining sector decreased 6 times, the construction sector went into minus 240 billion tenge. Profits of small enterprises engaged in financial and insurance activities sharply increased. In 2015 if the sector gave 10%, now it ensures more than a third of the whole economy earnings (Table 1).

Table 1: Financial results of small enterprises of main sectors of the economy

In 2015, in comparison with the previous year, the production costs of small businesses grew by 10%, non-production - by 70%. In the overall structure of costs, the non-production costs also increased from 53% in 2014 up to 64% in 2015. (Figure 3).

More than 50% of production costs occur in material costs, whose share fell from 56% to 50%. As part of the material costs in 2015 in comparison with the previous year, "the cost of raw materials / materials" and "fuel" significantly reduced by 9% and 11%, respectively. Meanwhile, the "cost of purchased semi-finished products / hardware products" increased (76%) and "other material costs" (33%) (Figure 4).

The structure of non-productive expenditure has undergone minor changes. Other expenses increased by more than 2 400 billion tenge or 90%. Their share in the total amount of non-productive expenditures increased from 71% to 79%. As part of other expenses "interest on bank loans" increased by 86 billion tenge up to 321 billion tenge. "Other costs" rose by more than twice, now it is 71% of the total non-operating expenses of enterprises (compared with 60% in 2014.). Material expenses showed zero growth, but their share fell from 9.5 to 5.5% of total non-production costs (Figure 5).

At the end of 2015, in most regions was observed growth of expenses of small businesses. The most significant growth was registered in Almaty and Atyrau regions, where expenses increased 2-fold (Figure 6). Accordingly, high costs have led to losses of more than 860 billion tenge in 10 regions of the country. Karaganda, Akmola, Atyrau, Almaty, Aktobe, Kyzylorda, North Kazahstan, Kostanai regions, Almaty and Astana cities.

For the remaining 6 regions the net result of the activities of small enterprises amounted to 281.5 billion tenge: West Kazakhstan, Mangistau, South Kazakhstan, Pavlodar, East Kazakhstan and Zhambyl regions (Figure 7).

Source: Based on data of Statistics Committee of MNE RK