Russian Railway announces 2017 Consolidated Results under IFRS
The consolidated financial statements of Russian Railways and its subsidiaries
(‘the Group’) have been prepared in accordance with International Financial
Reporting Standards (IFRS) and comprise the financial results of its 194 subsidiaries.
In 2017, Group Revenues increased by 5.6% to 2,252 billion roubles, up from to
2,133 billion roubles in 2016. During the reporting period revenues from freight and
infrastructure access increased by 9.5% and amounted to 1,449 billion roubles. The
highest growth among revenues of all kinds кesulted from a 6% increase in freight
turnover and tariff indexation.
Euro-denominated logistics revenues from GEFCO increased by 5.1% to EUR 4.442 billion.
Passenger revenues increased by 9% to 238 billion roubles due to tariff indexation
and a substantial rise in the number of passengers transported, which amounted to
1,117.9 million, an increase of 7.8% compared to 2016.
Implementing the Operating Expenses Optimisation Programme (excluding losses on
the impairment of property, plant and equipment and intangible assets) enabled the
Group to hold the growth in expenses at 2.9% or 2,010 billion roubles. As a result,
revenues increased by 5.6% and was thus nearly double the growth in expenses.
Key factors driving the increase in operating expenses were the higher costs of
repairs to infrastructure and rolling stock. Expenses such as wages, salaries and
related contributions increased by 5.6% in 2017 compared to 2016 due to indexation
(on average by 5.4% for operating personnel and by 5% for the remaining categories)
and employee transfers from part-time to full-time employment. In addition, labour
productivity increased to 9.2% due to the implementation of programmes aimed at reducing
the labour component by modernising operating equipment and procedures. The cost of
sales increased by just 0.9%, which was substantially below the inflation rate of
In 2017, operating expenses, including losses on the impairment of property, plant
and equipment and intangible assets, amounted to 2,049 billion roubles and decreased
by 2.2% compared to the previous year (2,095 billion roubles).
In 2017, EBITDA amounted to 496 billion roubles, an increase of 11.8% on 2016 (443
billion roubles). The EBITDA margin during the accounting period amounted to 24.7%
as compared to 23.6% in the previous year due to the growth in revenues and the optimisation
The Group’s net income in the reporting period amounted to 139.7 billion
roubles as compared to 10.3 billion roubles in the previous year. The increase was
attributable to improved operating results and lower losses on impairment of plant
and equipment and intangible assets. The substantial decrease in losses on impairment
was due to the stabilisation of long-term forecasts regarding the Group’s operations,
including the decision of the Russian Government to enact a long-term tariff policy
for OJSC RZD up to the year 2025.
The Group’s capital expenditures in 2017 amounted to 528.7 billion roubles
compared to 450.9 billion roubles in 2016.
The 2017 investment programme prioritised the implementation of projects of federal
importance in accordance with instructions issued by the President and the Government
of the Russian Federation. These projects were the modernisation of the Baikal-Amur
Main Line (BAM) and the Trans-Siberian Main Line , the complex reconstruction of the
Mezhdurechensk-Taishet section, the development of the Moscow transport hub, the renovation
of the railway infrastructure on the approaches to the ports of the Azov-Black Sea
basin, the construction of the Moscow-Kazan high-speed railway line, the development
and renewal of the railway infrastructure on the approaches to the ports of Russia’s
North-Western basin, and the construction of a new Zhuravka-Millerovo railway line.
Services on the Zhuravka-Millerovo line were launched one year earlier than planned.
In 2017, OJSC RZD reconstructed 2,500 kilometres of railway lines and constructed
131 kilometres of new and second railway track.
Despite the Group’s substantially increased investment programme and borrowings,
which rose from 942 billion roubles as of 31 December 2017 to 1.1 trillion roubles
as of 31 December 2016, the ratio of net debt to EBITDA as of 31 December 2017 amounted
to 1.97, only slightly higher than the figure of 1.94 on 31 December 2016. The interest
coverage ratio, calculated as the ratio of EBITDA to net interest expense (including
capitalised interest expense) increased from 5.4 in 2016 to 6.4 in 2017. The increase
was due to growth in EBITDA and a reduction in net interest expense. The latter resulted
from OJSC RZD’s implementation of its borrowing programme, which was aimed at
refinancing at lower interest rates.
OJSC Russian Railways was created on 1 October 2003 pursuant to Decree No. 585
of the Russian Government “On the Foundation of the Open Joint Stock Company
Russian Railways” dated 18 September 2003.
The Company is 100% owned by
the Russian Government.