Results of financial and business activities
In the current macroeconomic conditions, the Company aims to develop by improving internal efficiency, strengthening its customer focus, working to lower costs in all areas and efficiently utilising its available resources.
On the path to change
In 2015, we devoted special attention to stabilising the Company’s performance and implementing its development plans.
Given the decrease in handling and revenue from freight transportation and the significant increase in price pressure on transportation expenses, key actions were taken to mitigate such risks.
Costs were optimised without instituting additional part-time work and also without slashing the programmes for major repairs to fixed assets.
In 2015, we managed to cut costs on transportation activities by RUB 39.7 bln versus the initial plan. We contained growth in transportation costs to 7.1% despite inflation of 15.5% and industry price indexing of 12.4%. Sales profit increased 43%, compared with 2014. Net profit was actually RUB 318 mln instead of the planned loss of RUB —26.2 bln and last year’s loss of RUB —44.1 bln.Based on materials from the final meeting of the Russian Railways Management Board
The measures taken by the Company to attract additional transportation volume resulted in significantly lower rates of decrease in handling volumes than the decline in the country’s GDP and industrial production in 2015.
Freight handling declined 1% versus the 2014 level, while GDP contracted 3.7% and industrial production decreased 3.4%.
The Company managed to maintain freight turnover at the 2014 level (2,954.9 bln tkm) and increased loaded freight turnover 0.3% in 2015.
The Company transported more than 1 bln passengers in 2015, while overall passenger turnover declined 6.5% compared with 2014. At the same time, significant growth was seen in rapid-transit transportation (+22.2%) and passenger turnover (+25%).
Improved efficiency of Russian Railways in 2015
Key financial results in 2015
Income from transportation totalled RUB 1,326.0 bln in 2015, an increase of 8.2% (RUB 101.0 bln) from 2014, while income from other types of activities grew 4.6% (RUB +8.0 bln) to RUB 184.8 bln.
The Company took timely measures to reduce spending on transportation activities by RUB 39.7 bln versus the initial plan and managed to neutralise the effect of inflation. Transportation costs increased only 7.1% (despite inflation of 15.5% and industry price indexing of 12.4%). As a result, sales profit increased by RUB 25.1 bln, or 43%, compared with 2014.
The Company also promptly amended its accounting policy as regards the use of hedge accounting of its cash flow, which made it possible to significantly mitigate the impact of changes in the rouble’s exchange rate on the financial result by reflecting a substantial portion of foreign exchange rate differences arising from the revaluation of the foreign currency-denominated part of the loan portfolio as capital. In particular, by employing hedge accounting for its cash flow, the bulk of the Company’s RUB 91.8 bln in foreign exchange rate losses (RUB 69.7 bln, or 76%) was classified as additional capital, and the actual restoration to income totalled RUB 22.1 bln.
As part of corporate governance, dividends of RUB 2.9 bln were received from subsidiaries. The lion’s share of dividends (RUB 1.0 bln) came from GEFCO. The Company generated income of RUB 19.3 bln and profit of RUB 5.7 bln from selling stakes in subsidiaries.
Russian Railways met all of its social obligations to the workforce, veterans and pensioners in accordance with the collective bargaining agreement.
For the year, net profit amounted to RUB 318 mln (despite a planned loss of RUB 26.2 bln and an actual loss of RUB 44.1 bln in 2014).
In addition, the Company carried out substantial work to ensure its investment programme has the required sources of funding:
- On 13 March 2015, as part of a debut placement of preferred shares, Russian Railways received a first tranche from the National Wealth Fund in the amount of RUB 50 bln, which the Company spent on the project to modernise the Baikal-Amur and Trans-Siberian Mainlines. In accordance with the decisions adopted by the Russian Government, dividend yield on shares has been set at 0.01% until 2019 and 2.98% starting in 2020. Russian Railways was the first company to receive government support in the form of share capital from the National Wealth Fund.
- The Company placed RUB 97.2 bln worth of infrastructure bonds, including four tranches for a total of RUB 60.2 bln with a floating rate tied to inflation and a term of 25 years from the National Wealth Fund to fund the project to purchase traction rolling stock, and Vnesheconombank purchased two tranches of infrastructure bonds for a total of RUB 37 bln (RUB 20 bln and RUB 17 bln) using money from the Russian Pension Fund under its management.
- In May and October, the Company placed three series of market rouble-denominated bonds for a total of RUB 45 bln with a term of 15 years and offers in 5.5 years (one series) and 4.5 years (two series) at a rate just below 11%.
- In December, Moody’s Investors Service revised its rating outlook on Russian Railways from ‘negative’ to ‘stable’ based on the results of a similar action for Russia’s sovereign rating. The Company’s actual rating was affirmed at the previous level of ‘Ba1’. The ratings of other agencies remained unchanged.
Support from the executive authorities and the Company’s shareholder as represented by the Russian Government also contributed to the positive results achieved in 2015.
A number of government decisions were adopted to improve the competitiveness and financial stability of railway transportation:
- funds were allocated for the first time ever to compensate for losses in income from services involving the use of suburban transportation infrastructure;
- a zero VAT rate was established for the provision of suburban passenger transportation services, which helped to balance suburban transportation operations in 2015;
- RUB 121.2 bln in funds were allocated for the implementation of investment projects. Total government support to Russian Railways in 2015 amounted to RUB 157.9 bln (including extra-budgetary funds);
- as part of an exchange agreement on the transfer of a motorway section to Alpika-Service, property in the amount of RUB 24.2 bln was transferred in 2015 of the total amount of RUB 93.3 bln, thereby enabling Russian Railways to partially reduce its burden on maintaining the road.
Continued work to improve internal efficiency and mutually beneficial partnership relations between the Company, consumers and the federal executive authorities will ensure the stable operation of Russian Railways in 2016.
|2011||2012||2013||2014||2015||Change: actual vs. plan in 2015||Change: 2015 vs. 2014|
|Total income||RUB bln||1,288.3||1,366.0||1,376.6||1,401.7||1,506.9||1,510.8||3.9||100.3||109.0||107.8|
|Income from transportation, infrastructure services and locomotive traction||RUB bln||1,109.1||1,206.5||1,209.5||1,225.0||1,327.0||1,326.0||–1.0||99.9||101.0||108.2|
|freight transportation||RUB bln||1,003.1||1,089.3||1,088.2||1,105.6||1,205.8||1,203.9||–1.9||99.8||98.3||108.9|
|provision of infrastructure services||RUB bln||87.2||96.7||101.7||99.0||99.3||99.8||0.5||100.5||0.7||100.8|
|for freight transportation||RUB bln||1.0||6.0||7.8||9.7||8.2||8.1||–0.1||98.5||–1.6||83.5|
|suburban transportation||RUB bln||25.6||27.3||28.4||27.0||28.6||28.7||0.1||100.2||1.7||106.3|
|long-haul transportation||RUB bln||60.6||63.4||65.4||62.4||62.6||63.1||0.5||100.8||0.6||101.0|
|provision of locomotive traction services||RUB bln||11.4||12.4||11.0||10.3||10.5||10.5||0.0||100.1||0.3||102.5|
|passenger transportation||RUB bln||7.4||8.1||8.6||10.0||11.3||11.7||0.4||103.7||1.7||116.9|
|Income from other types of activities||RUB bln||179.2||159.5||167.0||176.8||179.9||184.8||4.9||102.7||8.0||104.6|
|Total expenses||RUB bln||1,215.6||1,298.6||1,317.8||1,343.2||1,438.6||1 427,2||–11.5||99.2||83.9||106.2|
|Expenses on transportation, infrastructure services and locomotive traction||RUB bln||1.050.8||1.151.5||1.165.9||1.185.6||1.277.9||1.266.2||–11.8||99.1||80.5||106.8|
|freight transportation||RUB bln||933.3||1.017.4||1.027.6||1.048.1||1.149.5||1.137.4||–12.0||99.0||89.4||108.5|
|provision of infrastructure services||RUB bln||102.2||118.8||122.3||119.4||109.4||109.0||–0.4||99.7||–10.4||91.3|
|по for freight transportation||RUB bln||0.8||5.4||7.1||8.8||7.4||7.3||–0.1||98.5||–1.4||83.5|
|в suburban transportation||RUB bln||32.6||35.8||35.2||32.5||32.9||33.1||0.2||100.7||0.6||101.9|
|в long-haul transportation||RUB bln||68.7||77.6||80.0||78.1||69.1||68.6||–0.5||99.3||–9.5||87.8|
|provision of locomotive traction services||RUB bln||8.4||9.2||8.2||7.6||7.8||7.8||0.0||100.1||0.2||102.6|
|passenger transportation||RUB bln||7.0||6.2||7.8||10.6||11.3||11.9||0.6||105.4||1.3||112.7|
|Expenses on other types of activities||RUB bln||164.7||147.1||151.9||157.6||160.7||161.0||0.3||100.2||3.4||102.1|
|Total sales profit||RUB bln||72.8||67.4||58.8||58.5||68.2||83.6||15.4||122.5||25.1||142.9|
|Profit from transportation, infrastructure services and locomotive traction||RUB bln||58.3||54.9||43.6||39.4||49.0||59.8||10.8||122.0||20.4||151.9|
|freight transportation||RUB bln||69.9||71.9||60.6||57.6||56.4||66.5||10.1||118.0||8.9||115.5|
|provision of infrastructure services||RUB bln||–15.0||–22.1||–20.6||–20.3||–10.1||–9.2||0.8||91.7||11.1||45.4|
|for freight transportation||RUB bln||0.1||0.6||0.8||0.9||0.7||0.7||0.0||98.5||–0.1||83.1|
|suburban transportation||RUB bln||–7.0||–8.5||–6.8||–5.5||–4.3||–4.4||–0.2||103.9||1.1||80.6|
|long-haul transportation||RUB bln||–8.1||–14.2||–14.6||–15.7||–6.5||–5.5||1.0||84.6||10.2||35.2|
|provision of locomotive traction services||RUB bln||3.0||3.2||2.9||2.7||2.7||2.7||0.0||100.1||0.1||102.4|
|passenger transportation||RUB bln||0.4||1.9||0.8||–0.5||0.0||–0.2||–0.2||—||0.3||34.6|
|Profit from other types of activities||RUB bln||14.5||12.5||15.1||19.1||19.2||23.8||4.6||123.9||4.7||124.4|
|Result from other types of income and expenses||RUB bln||3.8||–1.3||–39.4||–97.7||–70.1||–58.6||11.5||—||39.1||—|
|Result from the sale of shares in S&A||RUB bln||66.3||33.9||1.4||1.4||5.7||5.7||0.0||100.5||4.3||407.2|
|Budget allocations||RUB bln||1.8||23.2||0.9||27.6||31.8||32.2||0.4||101.3||4.6||116.6|
|Exchange rate differences||RUB bln||–6.4||4.5||–18.4||–142.5||–32.8||–22.1||10.7||—||120.4||—|
|Changes in provisions and other estimated liabilities||RUB bln||–51.8||–18.2||–1.7||38.7||13.7||15.2||1.5||110.7||–23.5||39.3|
|Income from participation in other organisations, including dividends||RUB bln||21.3||9.8||23.0||16.7||2.8||2.9||0.1||102.3||–13.8||17.2|
|Expenses on loans and borrowings||RUB bln||–19.6||–19.3||–26.8||–35.5||–64.8||–64.7||0.1||99.8||–29.2||182.2|
|Profit before tax||RUB bln||76.6||66.2||19.4||–39.2||–1.9||25.0||26.9||—||64.2||—|
|Profit tax and other similar obligations||RUB bln||59.8||52.0||18.7||–4.9||–24.3||–24.6||–0.3||101.4||–19.8||—|
|Net profit||RUB bln||16.8||14.1||0.7||–44.1||–26.2||0.3||26.5||—||44.4||—|
|Net debt (Financial debt —cash balance)/EBITDA||0.7||1.1||2.1||2.3||2.8||2.7||–0.1||95.5||0.4||116.9|
|Change in loans and borrowings received (principal of the debt)||RUB bln||74.7||38.3||175.4||96.8||30.2||35.5||5.3||117.5||–61.3||36.7|
|Net change in loan portfolio including exchange rate differences and loan interest||RUB bln||79.8||35.7||196.5||240.1||104.6||132.7||28.1||126.9||55.3|
|Loan debt, including accrued interest||RUB bln||383.9||419.6||616.1||856.2||960.8||988.9||28.1||102.9||132.7||115.5|
|Indicator||As of 31/12/2014||As of 31/12/2015||+, — vs. 31/12/2014||% vs. 31/12/2014|
|Balance sheet total||4,846.7||5,057.1||210.4||104.3|
|Capital and reserves||3,516.2||3,570.4||54.2||101.5|
|Net asset value||3,553.4||3,578.1||24.7||100.7|