FESCO Transportation Group (MOEX: FESH) provides a trading update with the operational and consolidated financial results as per IFRS for the three month period ended March 31, 2014.
Highlights:
- In the short term, the slowdown of economy growth and overall volatile macroeconomic environment caused weakness in the sectors where the Group operates
- The Group’s revenue declined by 11.9% YoY mostly due to ruble devaluation, which contributed to more than half of the decrease, and continued rail market weakness
- Significant increase in export volumes in 1Q2014 is seen as a sustained trend for the year
- The Group’s EBITDA was impacted by mixed divisional profitability and increase in export volumes. EBITDA growth in Port, Bunkering and Shipping Divisions was offset by the results of Rail Division and LLD
- 1Q2014 Group’s consolidated EBITDA excluding
one-offs amounted to $34.5m - Despite the market volatility the Group continued to make selective capital investments, mostly in Ports Division, in line with its long term strategy
Group Financial Results
Group performance
$ millions | 1Q 2013 | 1Q 2014 | Dynamics |
Revenue | 275.3 | 242.5 | -11.9% |
EBITDA | 48.1 | 32.8 | -31.7% |
EBITDA Margin | 17.5% | 13.5% | -4.0 pt |
Capital Expenditures | 10.0 | 18.4 | +84.0% |
Divisional Performance Highlights
Port Division
- Growth of import container handling (+8% YoY) is above the market (+2% YoY)
- Strong increase in general cargo throughput volumes (up 35% YoY)
- Revenue declined by 5% YoY due to ruble devaluation. Excluding the impact of FX rate fluctuation, there was a
single-digit revenue growth in 1Q2014 - Ongoing focus on optimization of the cost structure in addition to a natural FX hedge on the cost side led to an improvement in EBITDA margin by 5 pt
Rail Division
- Rail container transportation up 9.5% YoY to 70 thousand TEU due to the increased fleet of fitting platforms
- Number of container block trains increased by 10% from 248 to 274
Single-digit decrease innon-container cargo load due to decline in coal transportation volumes- Revenue decreased by 40%, EBITDA decreased by 53% due to continued decrease in rates and ruble devaluation
Liner and Logistics Division
- Strong growth of
export-import sea lines container transportation volumes (up 11% YoY) and improving performance in domestic sea lines container transportation volumes (flat YoY) - Zero EBITDA is comparable to 1Q2012 result (historically low results in 1Q due to seasonality factors). The decrease of EBITDA in 1Q2014 vs. 1Q2013 was mainly driven by the reduction of freight rates
Shipping Division
- Revenue and EBITDA growth due to acquisition of new
fuel-efficient vessels earlier in 2013, positive result from icebreakers and profitable contract with the third party
Bunkering
- Successful ramp up of the bunkering business launched in 2Q2013 resulted in $29m contribution to the Group’s revenue and $4m contribution to the Group’s EBITDA with attractive further growth potential
$ millions | 1Q 2013 | 1Q 2014 | Dynamics |
Port | |||
Revenue | 46.8 | 44.4 | -5.2% |
EBITDA | 17.8 | 19.3 | +7.8% |
EBITDA margin | 38.2% | 43.5% | +5.3 pt |
Rail | |||
Revenue | 74.6 | 44.6 | -40.3% |
EBITDA | 28.4 | 13.3 | -53.2% |
EBITDA margin | 38.1% | 29.8% | -8.3 pt |
Liner & Logistics | |||
Revenue | 158.3 | 137.3 | -13.2% |
EBITDA | 8.8 | 0.0 | -99.9% |
EBITDA margin | 5.6% | 0.0% | -5.6 pt |
Shipping | |||
Revenue | 17.7 | 19.8 | +11.8% |
EBITDA | 0.2 | 4.4 |
|
EBITDA margin | 1.1% | 22.2% | +21.1 pt |
Bunkering | |||
Revenue | — | 29.4 | — |
EBITDA | — | 3.8 | — |
EBITDA margin | — | 12.9% | — |
FESCO Consolidated Group Financial Position
- 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 andpre-existing debt - As of March 31, 2014,
Pro-forma Net Debt / LTM adjusted EBITDA ratio was 5.0x
$ millions | At 31 March, 2014 |
Pro-Forma Total Debt(1) | 1,236.4 |
Cash | 347.8 |
Pro-forma net Debt | 888.6 |
Pro-forma net Debt/ LTM Adj. EBITDA | 5.0 |
(1)Total borrowings include USD 550m 8.00% Senior Secured Notes due 2018 and USD 325m 8.75% Senior Secured Notes due 2020; RUB 5bln ruble bonds and exclude the $150m REPO loan secured by shares of TransContainer
FESCO operational results for 1Q2014
1Q 2013 | 1Q 2014 | Dynamics | |
Intermodal freight transportation* (TEU) | 57,195 | 55,995 | -2.1% |
Export-import sea container trade (TEU) | 85,318 | 94,475 | +10.7% |
Domestic sea container trade (TEU) | 12,861 | 12,828 | -0.3% |
VMTP container throughput (TEU)
— Import — Export — Cabotage | 106,745
45,987 39,367 21,391 | 109.828
49,565 38,031 22,232 | +2.9%
+7.8% -3.4% +3.9% |
VMTP non-container cargo throughput (excluding vehicles) (thousand tons) | 611 | 827 | +35.3% |
Automobiles and transportation vehicles throughput (units) | 21,543 | 15,329 | -28.8% |
Rail container transportation («Russkaya Troyka» and «Transgarant») (TEU) | 64,129 | 70,219 | +9.5% |
Rail cargo load (million tons) | 5.1 | 4.9 | -3.9% |
Rail cargo turnover (billion ton-kilometers) | 7.7 | 7.6 | -1.3% |
- excluding transportation of empty carrier owned containers (COC)