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Apr 30, 2015

Russian Railways announces FY2014 results according to IFRS


The consolidated financial statements of Russian Railways and its subsidiaries (“Group”) prepared in accordance with International Financial Reporting Standards (IFRS) comprise the financial results of 175 of its subsidiaries.


The Group’s total revenues for the year 2014 increased by 1.3% year-on-year to 1 796.2 billion rubles comparing to 1 773.6 billion rubles for the year 2013.

Freight revenues grew by 0.3% to 1 168.8 billion rubles. Decrease of cargo loading volumes by 0.8%, zero tariff indexation in 2014 as well as increase in the share of low-yield cargos in the total freight turnover due to longer distance of transportation caused reduction of cargo revenues. However, the tariff indexation of certain cargo types within the tariff corridor in the second half of 2014 partially compensated influence of negative factors and determined positive dynamics for the whole year. Passenger revenues decreased by 5.1% due to 7.0% reduction of passenger turnover compared to the previous year determined mainly by more than 30% drop of passenger turnover on the interstate routes.

Increased revenues in logistics segment became the key driver of the Group’s total revenue. Sales in logistic segment increased by 23.5% to 221.3 billion rubles, that is mainly attributable to growth of GEFCO SA’s revenues from international operations and ruble devaluation over the reporting period. The share of logistics’ revenues amounted to 12.3% of the consolidated sales comparing to 10.1% a year ago.

The Group’s operating costs (adjusted by loss on impairment of fixed assets) grew by 1.1% year-on-year to 1 714.9 billion rubles with cargo turnover raised by 5%. Major drivers of costs’ growth were increase in depreciation and amortization and higher electricity costs.Depreciation and amortization costs grew by 7.5% to 220.7 billion rubles, which is related to a substantial number of new assets commissioned at the end of 2013 according to the Group’s investment program. Growth of electricity tariffs by 7-7.5% and increase of freight turnover surged electricity costs by 7.3% which was partially offset by implementation of cost optimization measures and efficiency increase resulted in reduction of specific electricity consumption.

At the same time, it is worth noting that staff costs declined by 0.5% to 697.5 billion rubles, which is attributable mainly to the headcount optimization including staff transfer to companies outside the Group’s perimeter according to the outsourcing of service contracts. Expenses for materials, repairs and maintenance reduced by 3.2% thanks to cost optimization measures.

The Group generated EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) of 352.6 billion rubles in 2014, which is 5.9% higher comparing to 332.9 billion rubles a year ago. EBITDA margin (adjusted for costs of purchased freight forwarding and logistics services) amounted to 21.6% comparing to 20.3% a year ago due to cost optimization under the zero tariffs indexation in 2014.

In spite of improvement of operational performance, the Group reported net loss for the period in the amount of 99.3 billion rubles. The results on the bottom-line in 2014 were mainly defined by foreign exchange loss due to revaluation of the Group’s debt obligations nominated in foreign currency caused by significant depreciation of the Russian Ruble against the key foreign currencies in the second half 2014.

The Net Debt to EBITDA ratio was at 2.37x as of 31 December 2014 compared to the corresponding figure of 1.79x as of 31 December 2013. Higher level of the debt burden is also explained by growth of rouble equivalent of the Group’s debt obligations due to Russian Ruble devaluation in the second half of 2014. To manage FX risk, the Group consistently implements measures aimed at generating sufficient cash flows from operating activities nominated in foreign currencies to service its foreign currency debt. The cargo transit revenues denominated in CHF and investments in GEFCO SA denominated in EUR entirely cover the Group’s cash flows to service its non-ruble debt till maturity. Such approach minimizes currency risks of the Group despite high volatility of ruble exchange rate.

The EBITDA to Net Interest Expenses ratio (including capitalized interest expenses) amounted to 6.2x over the reporting period.

The Group’s capital investments for 2014 totaled to 461.8 billion rubles comparing to 548.7 billion rubles a year ago. RZD continues implementing 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 should be pointed out that due to optimization of structure and level of working capital net cash flow from operating activities boosted by 18.5% comparing to the year 2013 providing additional internal sources to finance investment program.


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. The Company is 100% owned by the Russian Government.



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