May 29, 2015
Results for the three-month period ended March 31, 2015
FESCO Transportation Group (MOEX: FESH) today announces its operational and consolidated financial results as per IFRS for three-month period ended March 31, 2015.
1Q 2015 Highlights:
- FESCO increased its market share on the export-import sea container service lines through Russian Far East up to 45.2%.
- FESCO remains the largest port operator in the Far East basin by import container handling with market share amounted to 37.8%
- The macroeconomic challenges put pressure on FESCO port container handling and export-import sea container transportation, however the intermodal and rail container transportation continued to grow
- Group EBITDA increased by 5.4% YoY as cost reductions mitigated the impact of the 15.8% YoY decline in revenue.
- Cost control measures led to significant reduction in operating and administrative costs
- Group EBITDA margin was up by 4pp to 18%. Port EBITDA margin up 13pp to record 58%
- FX initiatives were completed at Port with 81% of Port revenue denominated in USD to improve the FX revenue and cost structure
- CAPEX was down from $19.2m in 1Q2014 to $3.8m in 1Q2015
- Subsequent to quarter-end the group successfully completed the transaction for partial buy back of outstanding USD bonds and RUB bonds.
Operational overview
- In 1Q2015, import container cargo volumes turned into negative territory becoming the largest contributor to container volumes drop in the Far East market. In line with the market, the container handling at VMTP was 18% YoY down to 90.1 thousand TEU. Export-import sea container transportation was also down by 10% YoY to 84.8 thousand TEU
- The intermodal transportation and rail container transportation services continued to be in demand from our customers and increased by 2.7% to 57.5 thousand TEU and by 8.5% YoY to 76.2 thousand TEU respectively
- Non-container volumes in port were negatively influenced by drop in ferrous metals and declined by 32.5% YoY to 557.7 thousand tons. Rail cargo load declined by 4.1% YoY to 4.7 million tons
Financial overview
Group's financial results were affected by declining volumes and RUB depreciation, but cost-control measures and conversion of export-import tariffs in port from RUB to USD boosted the profitability.
- Group's consolidated revenue decreased by 15.8% YoY to $204.2m. Consolidated EBITDA increased by 5.4% to $36.9m
- In RUB terms revenue was up by 49,5% YoY to RUB 12,683m, while EBITDA was up by 87.5% YoY to RUB 2,301m
- CAPEX was cut back close to maintenance level and amounted to $3.8m (down 80.2% YoY)
Group Financial Results
| $ million |
1Q 2014 |
1Q 2015 |
YoY Dynamics |
| Revenue |
242.5 |
204.2 |
-15.8% |
| EBITDA* |
35.0 |
36.9 |
+5.4% |
| EBITDA margin |
14.4% |
18.1% |
+3.7 pp |
| CAPEX |
19.2 |
3.8 |
-80.2% |
| RUB million |
1Q 2014 |
1Q 2015 |
YoY Dynamics |
| Revenue |
8 484.9 |
12 682.5 |
+49.5% |
| EBITDA* |
1 226.8 |
2 300.7 |
+87.5% |
| EBITDA margin |
14.5% |
18.1% |
3.6 pp |
*) EBITDA is calculated as profit from operating activity adding back depreciation and amortization, impairment on tangible fixed assets and one-off expenses.
Divisional Performance
Port Division
- Container throughput in 1Q2015 decreased by 17.9% YoY to 90,117 TEU in line with negative market trends
- General cargo volumes decreased by 32.5% YoY to 557.7 thousand tons mainly due to decline in ferrous metals and chemicals
- Division's revenue decreased by 28.2% YoY to $31.9m on the back of weakening volumes. EBITDA declined by 7.0% YoY to $18.6m. The operational costs at port were reduced by 51%YoY impacted by RUB devaluation and cost reduction. EBITDA margin improved by 13.3 pp up to record 58.3%.
Rail Division
- Rail container transportation by Transgarant and Russkaya Troyka was up by 8.5% YoY to 76.2 thousand TEU significantly outperforming the rail container market which decreased by 7.7% in 1Q2015. Volumes growth was driven by stable demand for rail container transportation and the extension of Transgarant fleet of fitting platforms
- Transgarant rail cargo load declined by 4.1% YoY to 4.7 million tons due to drop in iron ore and construction materials transportation
- Rail Division's revenue in 1Q2015 amounted to $26.7m, a decrease of 40.1% YoY due to the effect of RUB devaluation and lower gondola rates
- Unfavourable market trends in combination with RUB devaluation resulted in EBITDA decreased by 63.2% YoY to $4.9m. EBITDA margin amounted to 18.4%, down by 11.4 pp
Liner and Logistics Division
- Intermodal freight transportation was up by 2.7% YoY to 57.5 thousand TEU
- Drop of import to Russia resulted in 10.2% YoY decrease of export-import sea container transportation volumes, which amounted to 84.8 thousand TEU in 1Q2015
- Domestic sea container transportation was up by 2.1% YoY to 13.1 thousand TEU
- The decrease of export-import volumes and negative dynamics of global freight rates resulted in the Division's revenue decrease of 29.1% YoY to $97.3m EBITDA amounted to $1m
Shipping Division
- Shipping Division's revenue was up by 41.9% YoY to $28.1m driven by positive result from icebreaking fleet and the new revenue stream from tanker operations for bunkering business. The Division's EBITDA was up almost three times to $12.5m due renewal of fleet and an effect of RUB devaluation on costs. EBITDA margin reached 44.5% in 1Q2015, up by 22.3 pp
Bunkering
- Bunkering revenue increased by 76.5% YoY to $51.9m due to volumes growth
- The Division's EBITDA amounted to $4.6m in 1Q2015. EBITDA margin was impacted by negative trend in oil prices and decreased by 4.0 pp to 8.9%
| $ millions |
1Q 2014 |
1Q 2015 |
Dynamics |
| Port |
|
|
|
| Revenue |
44.4 |
31.9 |
-28.2% |
| EBITDA |
20.0 |
18.6 |
-7.0% |
| EBITDA margin |
45.0% |
58.3% |
+13.3 pp |
| Rail |
|
|
|
| Revenue |
44.6 |
26.7 |
-40.1% |
| EBITDA |
13.3 |
4.9 |
-63.2% |
| EBITDA margin |
29.8% |
18.4% |
-11.4 pp |
| Liner & Logistics |
|
|
|
| Revenue |
137.3 |
97.3 |
-29.1% |
| EBITDA |
0 |
1.0 |
- |
| EBITDA margin |
0.0% |
1.0% |
+1.0 pp |
| Shipping |
|
|
|
| Revenue |
19.8 |
28.1 |
+41.9% |
| EBITDA |
4.4 |
12.5 |
+184.1% |
| EBITDA margin |
22.2% |
44.5% |
+22.3 pp |
| Bunkering |
|
|
|
| Revenue |
29.4 |
51.9 |
+76.5% |
| EBITDA |
3.8 |
4.6 |
+21.1% |
| EBITDA margin |
12.9% |
8.9% |
-4.0 pp |
EBITDA is calculated as Profit from operating activity adding back depreciation and amortization, Impairment on tangible fixed assets and one-off expenses
FESCO Consolidated Group Financial Position
Pro-forma net debt amounted to $897m as of 31-Mar-2015 (a decrease from $961m as of 31-Dec-2014).
Pro-forma total debt amounted to $1,122m as of 31-Mar-2015.
- As of March 31, 2015, consolidated debt includes $550m of 8.00% Senior Secured Notes due 2018 and $325m of 8.75% Senior Secured Notes due 2020, as well as RUB 5bn of bonds, the proceeds from which were used to refinance the Group's acquisition-related and pre-existing debt
- As of March 31, 2015, Pro-forma Net Debt / LTM adjusted EBITDA ratio was 5.0х
| $ millions |
At 31 March, 2015 |
| Pro-forma total Debt(2) |
1,122 |
| Cash |
225 |
| Pro-forma net Debt |
897 |
| Pro-forma net Debt/ LTM Adj. EBITDA |
5.0x |
(2)Total borrowings exclude the REPO loan secured by shares of TransContainer
Liability management initiatives:
- On March 26, 2015, holders of FESCO 5 bln RUB bonds series BO-02 approved the maturity extension to November, 2017 with 40% issue par value redemption in 2016
- On March 31, 2015, FESCO commenced a cash tender offer targeting its 2018 Notes and 2020 Notes and a public purchase offer for up to RUB 4bln in Rouble bonds series BO-02 at fixed price of 80%
- The Company purchased $128.9m par value 2018 Notes and $91.1m par value 2020 Notes. The transaction was settled on May 14, 2015. In addition, FESCO repurchased 2.992 mln RUB par value bonds series BO-02.
- The buyback transactions were financed by combination of own funds, bank loan, public debt and by the company's ultimate controlling party. FESCO placed RUB 5.002 million RUB bonds series BO-01 due 2018. The Group has also signed a repurchase agreement for USD 44m financing secured by its Senior Secured Notes with an international bank
FESCO operational results for 1Q 2015
| |
1Q 2014 |
1Q 2015 |
Dynamics |
| Intermodal freight transportation (TEU) |
55,995 |
57,525 |
+2.7% |
| Export-import sea container trade (TEU) |
94,475 |
84,797 |
-10.2% |
| Domestic sea container trade (TEU) |
12,828 |
13,092 |
+2.1% |
| VMTP container throughput(TEU) |
109,828 |
90,117 |
-17.9% |
| VMTP non-container cargo throughput (excluding vehicles) (thousand tons) |
826.7 |
557.7 |
-32.5% |
| Rail container transportation («RusskayaTroyka» and «Transgarant») ('000 TEU) |
70.2 |
76.2 |
+8.5% |
| Rail cargo load (million tons) |
4.9 |
4.7 |
-4.1% |
| Rail cargo turnover (billion ton-kilometers) |
7.6 |
9.6 |
+26.3% |
About FESCO
FESCO is one of the leading privately-owned transportation and logistics companies in Russia with operations in ports, rail, integrated logistics and shipping business. Diversified but integrated asset portfolio enables FESCO to provide door-to-door logistics solutions and control almost all steps of the intermodal transportation value chain. The majority of FESCO's operations are located in the Russian Far East and the Group benefits from growing trade volumes between Russia and Asian countries.
FESCO is the leader of container transportation through the Russian Far East via international sea container lines to/from Asian countries, domestic sea container lines and by rail. FESCO is the leading port container operator in the Far East region.
FESCO controls the Commercial Port of Vladivostok which has throughput capacity of 3.9 million tons of general cargo and oil products, 150,000 vehicles and over 600,000 TEU of containers. In 2014, total container throughput at the Commercial Port of Vladivostok reached 513,481 TEU FESCO is one of the major Russian private rail operators, providing services under "Transgarant" (100% subsidiary of FESCO) and "Russian Troika" (50% joint venture with JSC Russian Railways) brands. "Transgarant" operates a fleet of 17.8 thousand units of rolling stock, while "Russian Troika" operates a fleet of 1.6 thousand container platforms. FESCO has a fleet of 22 vessels, mostly deployed through own sea service lines, and 4 icebreakers leased under long-term contracts.
IR contacts:
Galina Shilina
IR Director
+7 (495) 926 80 00 ext.11007
gshilina@fesco.com
Ekaterina Semenova
IR manager
+7 (495) 926 80 00 ext.11058
esemenova@fesco.com
