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Ukrzaliznytsia 2017 plan approved assuming 23% freight rate hike

Ukraine’s Cabinet of Ministers approved on Sept. 13 the business plan of railway monopoly Ukrzaliznytsia (RAILUA) for the year 2017, its website reported. The plan assumes that the company will boost its revenue 13% yoy to UAH 76.1 bln, while reduce its EBITDA 9% yoy to UAH 18.3 bln.


The key driver of revenue growth is projected to be freight transportation, which would result from 1.4% yoy higher volume of goods shipped and higher freight rates. In particular, the plan assumes a freight rate hike of 22.5% as of October 1, which will add UAH 2.9 bln to company revenue this year.


The plan also assumes a 2.3x yoy increase in capital investments by Ukrzaliznytisa to UAH 16.0 bln in 2017.


Alexander Paraschiy: So far, there is no information that the government has approved a resolution on a freight rate hike, but it has two more weeks to do so and publish the resolution on Oct. 1. Moreover, the Cabinet's approval of the business plan - which assumes the rate hike - leads us to expect it will be approved on time. Taking the rate hike as our base-case scenario, we maintain our neutral view on RAILUA Eurobonds.


Just approved, the company’s business plan looks already outdated. In particular, it does not look realistic that Ukrzaliznytsia will be able to allocate UAH 16 bln in capital expenditures this year. According to the company press release, it spent just UAH 5 bln on capital investments in 8M17, so it is unlikely to spend the leftover UAH 9 bln in the remaining four months.
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