Russian Railways announces 6M' 2014 results according to IFRS
The interim consolidated financial statements of Russian Railways and its subsidiaries ("Group") prepared in accordance with International Financial Reporting Standards comprise the financial results of over 190 of its subsidiaries, the Company says in its press release.
The Group’s total revenues for the six months ended 30 June 2014 increased by 2% year-on-year and amounted to 865.2 billion rubles (848.7 billion rubles for the first half of 2013).
Сargo revenues reduced by 0.2% comparing to a year ago to 563.2 billion rubles. Decrease of cargo loading volumes by 1% as well as lower profitability of cargo transportation due to zero tariff indexation in 2014 and increase in share of low-yield cargos in total freight turnover determined reduction of cargo revenues, despite 5.7% growth of cargo turnover. Revenue in passenger transportation segment declined by 2.3% due to 6.9% reduction of passenger turnover compared to the last year results.
Increased revenues in logistic segment became the main driver of the Group’s total revenue thanks to implementation of the Group’s strategy focused on development of logistic segment and business diversification. Sales in logistic segment hiked from 85.8 billion rubles a year ago to 109 billion rubles for the six months ended 30 June 2014 mainly due to higher sales of GEFCO SA under the contract with General Motors, which came into force on 01 April 2013, and increased share of international operations in the total Group’s revenue. The share of logistics’ revenues amounted to 12.6% of the total Group’s sales for the reporting period.
The Group’s operating costs increased by 4.5% year-on-year over the reporting period to 837.1 billion rubles. Major drivers of costs’ growth were higher volumes of purchased freight forwarding and logistics services, increase in depreciation and amortization and higher staff costs. At the same time higher expenses for purchased freight forwarding and logistics services from subcontractors are explained by significant growth of logistics operations and were fully compensated by revenues in logistics segment.
Depreciation and amortization costs grew by 7.8% to 110.8 billion rubles, which is related to a substantial number of new assets commissioned since 30 June 2013 in line with the Group’s investment program. Labor costs raised by 3.6% to 350.9 billion rubles and attributed mainly to salaries indexation in 2013 in accordance with the Labor contract of RZD. At the same time, it is important to note that expenses for materials, repairs and maintenance reduced significantly by 17% to 83 billion rubles due to undertaken cost optimization measures.
For the six months ended 30 June 2014 the Group generated EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) of 167.1 billion rubles (181.3 billion rubles a year ago). EBITDA margin (adjusted for costs of purchased freight forwarding and logistics services) amounted to 21.3% comparing to 23% for the first half of 2013. Despite zero tariffs indexation in 2014 profitability ratios remain at their target level above 20%.
The Group’s net profit amounted to 26.4 billion rubles over the reporting period comparing to 31.7 billion rubles reported a year ago. A key factor determined lower net profit was reduction of operating profit in 2014 year-on-year under the weak economic conditions, zero tariff indexation and decrease of high-yield cargos share in the total freight turnover structure.
The Net Debt to EBITDA ratio for the last 12 months ended 30 June 2014 was 2.1x compared to the corresponding figure of 1.6x as of 31 December 2013. Higher level of this ratio is mainly explained by reduction of cash and cash equivalents at the end of the first half of 2014 comparing to 31 December 2013 and issuance of infrastructure bonds and Eurobonds in the first half of 2014. EBITDA to Net Interest Expenses ratio (including capitalized interest expenses) amounted to 5.9x.
The Group’s capital investments for the 6 months ended 30 June 2014 totaled to 230.6 billion rubles comparing to 263.7 billion rubles a year ago. RZD continues implementation of its investment projects focused on ensuring necessary capacity on key routes, safety of rail infrastructure and renewal of locomotives as well as fulfillment of infrastructure projects under the state transportation development programs. It is worth noting that due to optimization of structure and level of working capital net cash flow from operating activities boosted by 21% comparing to the numbers for the first half of 2013 providing additional internal sources to finance investment program.
