Ukrzaliznytsia subsidiaries report strong 9M15 combined result

The six regional railway operators that are subsidiaries of national railway monopoly Ukrzaliznytsia (UZ, RAILUA) reported a 25% yoy increase in their combined revenue to UAH 44.3 bln, we estimate, based on their individual financials disclosed last week. Their combined 9M15 EBITDA advanced 9% yoy to UAH 6.6 bln and combined bottom line amounted to UAH -0.15 bln (nearly the same as a year before). As we highlighted earlier, UZ’s IFRS-based revenue and EBITDA is usually very close to the sum of the respective indicators reported by its six regional divisions.

The 9M15 results imply that in 3Q15, UZ subsidiaries generated combined revenue of UAH 15.7 bln (+31% yoy), EBITDA of UAH 2.2 bln (+13% yoy) and net income of UAH 0.8 bln (compared to minor losses a year before).

Alexander Paraschiy: The local railway operators’ results are strong indeed, though they lag behind the company’s full-year 2015 financial plan that assumed an EBITDA of UAH 12.9 bln (or an increase of about 43% yoy). With no clear triggers for the increase in UZ’s P&L indicators in 4Q15, the company’s 2015 budgeted EBITDA number does not look realistic. We retain our negative long-term view on UZ’s sustainability as a going concern, though admit that its Eurobonds have some short-term upside potential, as soon as the monopoly completes their restructuring.