Russian Railways announces FY2016 results according to IFRS
The consolidated financial statements of Russian Railways and its subsidiaries
("Group") prepared in accordance with International Financial Reporting Standards
comprise the financial results of over 192 of its subsidiaries.
The Group’s total revenues for the year 2016 increased by 7,1% year-on-year
and amounted to 2 133 billion rubles (1 991 billion rubles for the year 2015).
Cargo and infrastructure access revenues grew by 5,2% to 1 324 billion rubles which
was mainly driven by the tariff indexation for cargo rail transportation at 9% and
cargo volumes increase of 1,6%. Herewith a change in a cargo structure in favor of
low-profit types of cargo and provision of discounts on certain routes had a restraining
impact on the freight traffic revenues of the RZD Group. Passenger revenues increased
by 13,4 % to 219 billion rubles due to increase of passenger turnover in amount of
3,4% compared to the previous year, tariff indexation in the deregulated segment and
reduction of VAT rate to 10%.
Revenues in logistic segment increased by 14,4% to 352 billion rubles due to higher
revenues of GEFCO international sales and due to devaluation of ruble in 2016 on average
comparing to 2015. A share of logistics’ revenues amounted to 16,5 % of the
consolidated sales in 2016.
The Group’s operating costs (excluding loss on impairment of property, plant
and equipment) increased by 3,7% year-on-year over the reporting period to 1 953 billion
rubles. Major drivers of costs’ growth were increase in expenses on electricity
given the tariff indexation in that segment, higher staff costs and increase in purchased
freight forwarding and logistics services. Increase in labor costs of 2,3 % is related
to salaries indexation (by 3,9% on average in 2016) and has been partly compensated
by optimization measures taken in 2016. Higher expenses for purchased freight forwarding
and logistics services from subcontractors are attributable to significant growth
of logistics operations on international markets and are fully compensated by revenues
in logistics segment.
Furthermore, due to increased operational efficiency The Group was able to ensure
additional funding without debt financing for capital repairs and maintenance of railway
infrastructure in the amount of 15 billion rubles. This has allowed not only to increase
the railways’ capital repair volumes but also to prevent the growth of excess
cargo carrying tonnage kilometers.
Moreover, in 2016, The Group spent 0,8 billion rubles from own funds on events
dedicated to “Passenger’s Year” in order to increase client base
and raise operational efficiency of the passenger transportation.
As a result of implemented actions cost of transportation increased by only 0,8%
within severe price pressure, which is significantly lower than annual inflation (7,1%).
The Group generated EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization)
of 443 billion rubles in 2016, which is 15,4% higher compared to 384 billion rubles
in 2015. EBITDA margin was at 23,6% up from 21,8% a year ago due to revenue growth
and optimization of operating expenses thanks to higher efficiency of the Company’s
The Group’s net profit amounted to 10 billion rubles over the reporting period
compared to 8 billion rubles a year ago. The positive result in 2016 was determined
by improved operational performance as well as positive effect of ruble strengthening,
which helped to reduce effect of property impairment.
The Net Debt to EBITDA ratio was at 1,94x as of 31 December 2016 compared to the
corresponding figure of 2,34x as of 31 December 2015. Lower level of this ratio is
explained by higher EBITDA in 2016 compared to 2015 and lower rouble equivalent of
the Group’s debt obligations due to ruble at the reporting date compared to
the beginning of the period. EBITDA to Net Interest Expenses ratio (including capitalized
interest expenses) amounted to 5,4x as of 31 December 2016 compared to 4,8x year before.
Increase is determined by outperforming growth of EBITDA compared to interest expenses.
The Group’s capital investments for 2016 totaled to 450 billion rubles comparing
to 406 billion rubles a year ago. RZD continues implementing its investment projects
focused on renewal of locomotives, ensuring necessary capacity on key routes as well
as safety of rail infrastructure including fulfillment of infrastructure projects
under the state transportation development programs.
JSCo Russian Railways was created on October 1st, 2003 pursuant to Decree of the
Russian Government № 585 "On foundation of Open joint Stock Company "Russian railways"
dated 18 September 2003. TheCompanyis 100% owned by the Russian Government.