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.
approved, the company’s business plan looks already outdated.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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