OJSC Russian Railways announces 6 months 2020 results according to IFRS
The consolidated financial statements of JSC Russian Railways and its subsidiaries ("Group") in accordance with International Financial Reporting Standards as of the reporting date take into account the results of 194 subsidiaries.
In the first half of 2020, the Group’s total revenues amounted to 1,085 billion roubles, 12.3% less than the results in the same period in 2019 (in the first half of 2019 - 1,238 billion roubles) facing the difficult economic situation caused by the negative impact of restrictions imposed following the expansion of new coronavirus infection in the world.
Cargo transportation and infrastructure access segment showed the least drawdown rate with the revenues decreased by 5.5% to 755 billion roubles (in the first half of 2019 - 799 billion roubles) due to 5.6% decline in freight turnover in the first half of 2020. Also, deconsolidation of PJSC “TransContainer” in December 2019 had an additional impact on this figures; on a consistent basis (excluding PJSC “TransContainer” consolidation in the first half of 2019), the revenue decreased by 3.4% compared to the first half of 2019.
Logistics revenues decreased by 28.2% to 150 billion roubles (in the first half of 2019 – 209 billion roubles) given the 30.1% reduction of GEFCO’s revenue to 1.7 billion euro (in the first half of 2019 – 2.5 billion euro) due to quarantine measures in European countries and automobile plants shutdowns in March-April 2020.
Passenger revenues decreased by 41.0% down to 68 billion roubles (in the first half of 2019 – 115 billion rubles) following the 40% decrease in passenger turnover in the first half of 2020 as a result of quarantine restrictions introduction. Total drop in passenger turnover noted in the 2 quarter of 2020 amounted to72% compared to previous year.
The Group’s operating expenses decreased by 3.8% (excluding losses on the impairment of property, plant and equipment) to 1,044 billion roubles. With that, the cost reduction rate underrun the rate of revenues’ due to, among other factors, the necessity to ensure passenger transportation even in the midst of significant decline of passenger turnover. Furthermore, the Group’s companies met the goal set by the President of Russian Federation Mr. Vladimir Putin on preserving jobs and income of employees as the basis for preserving social workforce stability.
The Group’s EBITDA for the first half of 2020 amounted to 194 billion roubles, 34.9% less than the results in the same period in 2019 (298 billion roubles) affected by negative impact of coronavirus infection expansion. The EBITDA margin for the first half of 2020 was 19.8% (in the first half of 2019 – 27.2%). At the same time, the Company continued to fulfill its social obligations with regard to ensuring passenger transportation and sustaining stable situation in allied industries.
Following the revenues decline OJSC Russian Railways had to consider the reduction of the investment program from 821 billion roubles, budgeted for 2020 year, to 210 billion roubles. However, thanks to opportune decisions of The Russian Government the issue by Russian Railways of perpetual bonds was approved that allowed to restore the investment program to 642 billion roubles. The proceeds of perpetual bonds issue will be used to finance projects under the Comprehensive plan for the modernization and expansion of the railway infrastructure for the period up to 2024 year in the amount of 82 billion roubles. In addition, thouse funds also help to maintain purchase orders with the manufactures of machinery and railway equipment, that allowed to preserve the number of employees not only in the RZD Holding but in the whole supply chain. Considering engagement of allied industries the abovementioned measures should allow to form related investments in the total amount of about 1.3 trillion rubles. Also, the aggregate staff number involved in Russian Railways’ projects implementation will ensure employment for more than 1.7 million people, that will contribute to stabilization of economic environment in the country.
In June 2020 Russian Railways initially issued perpetual bonds (30 billion roubles) under the program approved by The Russian Government in May 2020, which assumes the issue of perpetual bonds in the amount of up to 370 billion roubles as the government assistance instrument. This placement was the first experience of such bonds’ placement by corporate issuer in the Russian Federation. Planned issue of perpetual bonds in the second half of 2020 should allow to conduct financing of the Russian Railways investment program without additional pressure on debt burden since this instrument is accounted for in equity.
The Group’s capital investments totaled to 362 billion roubles in the first half of 2020 compared to 336 billion roubles in previous year. Increase of capital investments of the Group related primarily to implementation of projects under government programs of railway infrastructure development, in particular aimed to increase capacity of Baikal-Amur and Trans-Siberian railways, development of Central Transport Hub, efficiency and safety of railway transportation, and renovation of locomotive fleet and passenger rolling stock.