Ukrzaliznytsia 1H14 EBITDA falls 17% yoy, FCF stays positive

Ukrainian railroad monopoly Ukrzaliznytsia’s (RAILUA) top line slid just 2% yoy to UAH 23.4 bln in 1H14, while EBITDA for the same period plunged 17% yoy and 25% h/h to 4.5 bln UAH, according to its 2014 operational performance report and 1H14 financial statements, as reported by the Interfax-Ukraine news agency on March 13. Its net loss was UAH 8.2 bln in 1H14 compared to a tiny net income of UAH 0.5 bln in the same year-ago period, which was mainly driven by a non-cash ForEx loss of UAH 7.2 bln.



Net debt in hryvnia terms surged 41% during 1H14 to UAH 27.6 bln, pushing the net debt-to-EBITDA ratio to 2.6x from 2.2x in the same year-ago period (vs. covenant of 3x), out of which 36% is short-term debt. As of June 2014, 63% of UZ’s total debt of UAH 29 bln was denominated in USD, 2% was in EUR, and the balance is hryvnia-denominated debt. Interestingly, 39% of Ukrzaliznytsia’s total borrowings were from Russian lenders.



The company managed to control its cash burn, having squeezed CapEx by 35% yoy to UAH 1.7 bln, and thus reported free cash flow (FCF) of UAH 1.7 bln during the period. The company offered its operating figures for the year, as total cargo transportation volume decreased 12% yoy to 390 mmt in 2014, and decreased 22% h/h to 184 mmt in 2H14, mainly due to the Crimean annexation and warfare in Donbas.



Roman Topolyuk: The negative consequences of the war in Ukraine’s east for the company’s cargo turnaround and EBITDA generated will be reflected in its financials for 2H14 and 2014 (which haven’t been released yet), possibly bringing Ukrzaliznytsia’s net debt-to-EBITDA closer to the covenant. Positively for the company, 37% of its gross debt is hryvnia-denominated, which is a natural hedge against local currency devaluation.



Another positive development that will help the company is a rather steep increase in cargo transportation rates (by 30% for all types of cargo in January 2015, except for coal, whose rates will increase in two stages, by 10% in February and by 18.2% in April). There are rumors on the market that a second significant rate increase is being considered by the government. Once that occurs, it will mend the debt profile of the company.

Источник: Конкорд Капитал