Ukrzaliznytsia revenue rises 11%, gross profit 12% in 9M17
Net revenue at Ukraine’s railway monopoly Ukrzaliznytsia (RAILUA) rose 11% yoy to UAH 55.52 bln in 9M17, according to consolidated abridged financials published on Nov. 10. The key revenue driver was proceeds from cargo transportation, which increased 8% yoy to UAH 43.19 bln, which was the result of freight rates growing 15% since a May 2016 hike and a 3.2% yoy increase in freight turnover (to 141.5 bln t*km). At the same time, the amount of goods shipped by the company decreased 1% yoy to 250.9 mmt in 9M17.
Better average freight rates allowed the company to boost its profit in 9M17: gross profit improved 8% yoy to UAH 4.58 bln and operating profit was UAH 3.48 bln (up from negative UAH 0.15 bln a year ago). Its bottom line also turned to positive UAH 0.08 bln from negative UAH 4.98 bln in 9M16.
Ukrzaliznytsia’s EBITDA, based on our calculations, improved 8% yoy to UAH 14.72 bln in 9M17, while operating cash flow before working capital changes advanced 9% yoy to UAH 15.11 bln. Its net debt decreased 10% YTD to UAH 30.94 bln as of end-9M17.
Alexander Paraschiy: The company’s 9M17 results imply worsening in its key operating indicators in 3Q17 (freight turnover fell 2% yoy and volume of goods shipped fell 6% yoy), which is a worrying signal. Also the company showed slightly worsened profits in the quarter (EBITDA fell 9% yoy), which was a result of sticky yoy freight rates and cost inflation. That will definitely change in 4Q17 as the company will enjoy a 15% increase in average freight rates as of November. That should allow Ukrzaliznytsia to slightly improve its annual EBITDA in 2017 from the previous year. All in all, we remain neutral on RAILUA bonds.