OREANDA-NEWS. December 16, 2013. The interim consolidated financial statements of Russian Railways and its subsidiaries ("Group") prepared in accordance with International Financial Reporting Standards comprise the financial results of over 192 of its subsidiaries.

The Group’s total revenues for the six months ended 30 June 2013 increased by 13.4% year-on-year to 841.8 billion rubles from (742.5 billion rubles for the six months ended 30 June 2012).

The relative increase in revenue was mainly explained by consolidation of logistic operator GEFCO in the first half of 2013. Thus, logistics revenues amounted to 85.7 billion ruble vs. 3.5 billion rubles a year ago (this segment includes GEFCO, RZD Logistics and other integrated logistic services). Passenger transportation segment showed 10.2% growth of revenues thanks to tariffs indexation and higher volume of passenger transportation over the period. At the same time cargo revenues grew by 0.53% comparing to a year ago to 564 billion rubles. Relatively weak performance of this segment is explained by unfavorable market conditions, lower cargo turnover and higher share of low-yield cargos in freight turnover.

Operating costs increased by 19.7% over the reporting period to 794.2 billion rubles. Major driver of costs’ growth was consolidation of GEFCO with total operating costs amounting to 81 billion rubles over the period, while the biggest part of those expenses corresponds to purchased freight forwarding and logistic services from the third parties.

In addition growth of operating expenses was explained by increase of depreciation and amortization costs by13.7% (from 90.3 billion rubles to 102.7 billion rubles) related to new assets commissioned at the end of 2012. Growth of the staff costs by 7.85% is related to consolidation of GEFCO (which added 11 billion rubles to this item over the reporting period) and salaries indexation by 7.2% during the period from June 30, 2012 to June 30, 2013 in accordance with the Labor contract of RZD for 2011-2013. Additional factor of operating costs growth was increase of property tax resulted from the new property taxation rules enhanced in Russia starting 2013, which gradually reduce certain tax privileges with regard to infrastructure assets. This change in tax regulation added 5.1 billion rubles to the operating costs over the reporting period.

The Group generated EBITDA of 181 billion rubles comparing to 204 billion rubles a year ago.

EBITDA margin amounted to 23.2% (27.6% for the first half of 2012) that reflects a negative effect of weak market conditions in the first half of 2013. Due to consolidation of GEFCO in consolidated financials of RZD Group in 1 half 2013 the Company calculates EBITDA margin based on the revenue adjusted by purchased freight forwarding and logistic services from the third parties as a part of integrated logistics.

The Group’s net profit reduced from 73 billion rubles in the first half of 2012 to 31.7 billion rubles in the first half of 2013 mainly due to unfavorable market conditions over the reporting period, which had a negative effect on rail cargo transportation volume and on yield of rail transportation services with higher share of low-margin cargos. Additional effect came from the line of interest expenses, which grew by 8.2 billion rubles due to higher level of debt.

The Net Debt to EBITDA ratio for the last 12 months ended 30 June 2013 was 1.82x compared to the corresponding figure of 1.05x as of 31 December 2012. Higher level of this ratio is explained by reduction of EBITDA and increasing level of debt as starting from 2013 RZD finances its infrastructure projects with a payback period from 15 to 30 years by infrastructure CPI-linked rouble bonds with matching maturities. Previously RZD could not use external borrowings to finance these long-term projects as there have been no financial instruments with corresponding tenors.

With issuance of infrastructure bonds RZD managed to extend average duration of its credit portfolio from 4.9 years (as of the end 2012) to more than 7 years as of June 30, 2013. Infrastructure bonds programme is implemented in line with existing financial policy of Russian Railways which assumes not more than 2.5x Net Debt to EBITDA ratio. EBITDA to Net Interest Expenses ratio (including capitalized interest expenses) has increased to 15x comparing to 13x at the end of 2012 as a result of lower costs of borrowings thanks to optimization of the debt structure.

The amount of the Group’s capital investments for the 6 months ended 30 June 2013 has increased to 263.7 billion rubles comparing to 214.9 billion rubles a year ago.

JSCo Russian Railways was created on October 1st, 2003 pursuant to Decree of the Russian Government № 585 "On foundation of Open joint Stock Company "Russian railways" dated 18 September 2003. The Company is 100% owned by the Russian Government.