Combined EBITDA of Ukrzaliznytsia units ups 8%, loss swells 14x in 1H15

The subsidiaries of Ukraine’s railway monopoly Ukrzaliznytsia (UZ, RAILUA) reported their individual 1H15 financials this week. Based on their accounts, UZ’s combined revenue rose 23% yoy to UAH 28.65 bln, while combined EBITDA increased 8% yoy to UAH 4.40 bln. The combined financial statistics for net revenue and EBITDA of the six local railways is a very good approximation of respective Ukrzaliznytsia’s IFRS financial indicators, as we discovered before.

Net revenue at the monopoly’s most distressed unit, Donetska Railway (operating in the war-afflicted Donetsk and Luhansk regions), plummeted 57% yoy to UAH 1.73 bln while EBITDA was negative at UAH -180 mln in 1H15. Donetska’s net loss amounted to UAH 1,202 mln. This brought net loss of the six subsidiaries (which isn’t a good approximation for UZ bottom line) to UAH 941 mln, up 13.6x yoy.

Ukrzaliznytsia’s budgeted net loss for 2015 is UAH 47.9 mln, while its has planned its CapEx program at UAH 2.1 bln this year.

Alexander Paraschiy: It looks like gradual increases in freight rates implemented over 1H15 did not help UZ to improve its operating profit as it was eaten away by increased fuel costs and war-related losses. The monopoly’s tiny CapEx budget (compared to UAH 7.15 bln spent in 2013) says much about its ability to generate cash flow this year. This supports our view that UZ will have to perform a distressed restructuring of most of its debt, including USD 500 mln in Eurobonds that mature in 2018.