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28 Apr 2011

2010 Financial Results Announcement

JSC "TransContainer" (the "Company" together with its consolidated subsidiaries) (LSE: TRCN) today announces its financial results under IFRS for the year ended 31 December 2010.

RNS Number : 6724F
OJSC Transcontainer
28 April 2011
 

JSC TransContainer
 
Full Year 2010 Financial Results Announcement
 
JSC "TransContainer" (the "Company" together with its consolidated subsidiaries) (LSE: TRCN)  today announces its financial results under IFRS for the year ended 31 December 2010.
 
Summary
 
JSC "TransContainer" is the leading intermodal Transportation equipment for shipping cargo via various means of transport. Containers are durable enough for repeated use and can be stacked. Containers are divided into medium-duty (three- and five-tonne), which conform to former Soviet Union standards and are still used for shipments in Russia and the CIS, and ISO (20- and 40-foot) containers, which are used for Russian and international shipments. The universal standard unit TEU (twenty-foot equivalent unit) was introduced to measure transport flow volumes.
container
transportation company in Russia. As of December 31, 2010 the Company is estimated to own about 60% of the total Russia's A specialised type of rolling stock designed to carry ISO containers.
flatcar
fleet and to hold approximately 52% of all rail container transportation in Russia. It owns and operates more than 24,000 flatcars and approximately 60,000 containers. TransContainer also owns a network of rail-side container terminals located at 46 railway stations in Russia and operates one terminal in Slovakia under a long-term lease agreement. Company's sales network comprises approximately 150 sales outlets across Russia as well as presences in the CIS, Europe and Asia.
 
The Company's financial results for the year ended 31 December 2010 reflected the recovery in the rail container market in Russia which started in 2010, as well as results of the Company's measures aimed at the improvement of its financial and operational performance.
 
In 2010, the Company's total revenue increased by 39.2% to RUR 22,841 million; adjusted revenue increased by 24.4% to RUR 16,502 million; operating income increased by 25.0% to RUR 2,093 million; and EBITDA grew by 11.7% to RUR 4,427 million. Profit for 2010 increased by 57.6% from RUR 589 million for the year ended 31 December 2009 to RUR 928 million for the year ended 31 December 2010.  Total comprehensive income for 2010 grew by 58.7% from RUR 589 million for the year ended 31 December 2009 to RUR 935 million for the year ended 31 December 2010.
 
In 2010 the Company significantly improved its debt structure and reduced interest expenses. As of 31 December 2010 the share of long-term debt in the Company's total debt increased from 40.0% to 90.6%; net debt decreased by 4.2% from RUR 5,989 million as of 31 December 2009 to RUR 5,735 million as of 31 December 2010; and interest expenses for the year ended 31 December 2010 decreasedby 10.3% to RUR 848 million.
 
Capital expenditures increased by 30.4% to RUR 4,046 million from RUR 3,107 million in 2009, primarily due to the Company's investments in the modernization of its flatcar fleet and improvement in its fleet structure through the purchase of new 80' flatcars. In accordance with the Company's policy, the majority of capital expenditures in 2010 were financed by internally generated cash flow.
 
Outlook
 
In 2011, Russian GDP growth is forecasted to grow by a healthy 4.2% per annum, according to the Ministry of Economic Development of Russia, which is expected to drive rail container transportation market as well.  The Company's operating performance in the 1st quarter of 2011 supports management's expectations regarding a continuing market recovery.
 
If this recovery persists and trade grows, management currently expects the Company's revenue to grow in line with this recovery as well as with seasonality trends. The Company plans to continue to concentrate on improving both financial and operational efficiency, focusing on key operational metrics such as flatcar turnover and empty runs and pursuing a flexible pricing policy.
 
Description of Key Consolidated Statement of Comprehensive Income Items
 
The following table sets forth the Company's results for the years ended 31 December 2010 and 2009.
 
RUR million 2010  2009 Period on period change Period on period percent change
     
Revenue 22,841  16,400 6,441 39.3%
Operating expenses, net (20,748)  (14,726) (6,022) 40.9%
Operating income 2,093  1,674 419 25.0%
Interest expense (848)  (945) 97 (10.3)%
Interest income 15  35 (20) (57.1)%
Foreign exchange gain, net 16  4 12 300.0%
Other gains and losses 66  - 66 
Profit before income tax 1,342  768 574 74.7%
Income tax expense (414)  (179) (235) 131.3%
Profit for the year 928  589 339 57.6%
Other comprehensive income:     
Exchange difference on translating foreign operations 7  - 7 
Total comprehensive income for the year 935  589 346 58.7%
 
Non-IFRS financial information
 
Adjusted Revenue, Adjusted Operating Expenses, EBITDA, Adjusted EBITDA Margin and Adjusted Operating Margin are non-IFRS measures presented as supplemental measures of our operating performance. These supplemental measures have limitations as analytical tools, and investors should not consider any of them in isolation, or any combination of them, as a substitute for analysis of our results as reported under IFRS.
 
RUR million 2010  2009 Period on period change Period on period percent change
     
Adjusted Revenue1 16,502  13,262 3,240 24.4%
Adjusted operating expenses2, net 14,409  11,588 2,821 24.3%
EBITDA3 4,427  3,963 464 11.7%
Adjusted EB ITDA Margin4 27%  30%  
Net Debt5 5,735  5,989 (254) (4.2)%
Net Debt/ EBITDA 1.3  1.5  
1Adjusted Revenue is calculated as total revenue less third-party charges relating to integrated The process of organising a chain of delivery, and managing that chain in the broadest sense. This chain may encompass both deliveries of raw materials needed for production and management of material resources at an enterprise, delivery to warehouses and distribution centres, sorting, handling, and final distribution at the points of consumption. In the context of transportation services, the main service is that of delivering cargo across a delivery route.
logistics
services.
2 Adjusted Operating Expenses is calculated as operating expenses less third-party charges related to integrated logistics services.
3 EBITDA is defined as profit for the period before income tax, interest expense and depreciation and amortization.
4 Adjusted EBITDA Margin is defined as EBITDA divided by Adjusted Revenue.
5 Net Debt is calculated as Long-term debt, finance lease obligations and current portion of long-term debt less cash and cash equivalents and short-term investments.
 
Revenue
 
The following table set forth the breakdown of the total revenue for the years ended 31 December 2010 and 2009.
RUR million 2010 2009 Period on period change Period on period percent change
Integrated logistics services 10,794 5,347 5,447 101.9%
Rail-based container transportation  6,980 6,573 407 6.2%
Terminal services and agency fees 2,008 1,678 330 19.7%
Truck deliveries 1,513 1,559 (46) (3.0)%
A form of payment for sea transportation of cargo, or the use of a ship for a certain period of time. Freight payment is determined by the volume of cargo delivered to the destination
or by the volume of cargo loaded onto the ship.
Freight
forwarding and logistics services 1,192 880 312 35.5%
Bonded warehousing services 273 265 8 3.0%
Other 81 98 (17) (17.3)%
Total revenue 22,841 16,400 6,441 39.3%
 
 
Total revenue increased by RUR 6,441 million, or 39.3%, from RUR 16,400 for the year ended 31 December 2009 to RUR 2,841 million for the year ended 31 December 2010.  This increase was primarily due to higher demand for our key services resulting from improving overall economic conditions and consumer confidence.
 
The following table sets forth Adjusted Revenue for the years ended 31 December 2010 and 2009.
 
RUR million 2010 2009 Period on period change Period on period percent change
  Revenue 22,841 16,400 6,441 39.3%
  Less third-party charges relating to integrated logistics services  (6,339) (3,138) (3,201) 102.0%
  Adjusted Revenue 16,502 13,262 3,240 24.4%
     
 
 
Adjusted Revenue (as defined above) grew by 24.4% from RUR 13,262 million for the year ended 31 December 2009 to RUR 16,502 million for the year ended 31 December 2010, primarily due to an increase in rail container transportation volumes by the Company's fleet of 9.5%, from 1,098 thousand twenty-equivalent units (TEU) in 2009 to 1,202 thousand TEU in 2010, and to growth in terminal throughput of 6.8%, from 1,409 thousand TEU in 2009 to 1,505 thousand TEU in 2010, as well as to the effect of the Company's pricing policy.
 
The following table set forth the relative contribution of the components of the Adjusted Revenue for the years ended 31 December 2010 and 2009.
 
 2010 2009 Period on period change
 share, % RUR mln share, % RUR mln RUR mln %
  Rail-based container transportation  42.3% 6,980 49.6% 6,573 407 6.2%
  Integrated logistics services 27.0% 4,455 16.7% 2,209 2,246 101.7%
  Terminal services and agency fees 12.2% 2,008 12.7% 1,678 330 19.7%
  Truck deliveries 9.2% 1,513 11.8% 1,559 (46) (3.0%)
  Freight forwarding and logistics services 7.2% 1,192 6.6% 880 312 35.5%
  Bonded warehousing services 1.7% 273 2.0% 265 8 3.0%
  Other 0.5% 81 0.7% 98 (17) (17.3%)
  Adjusted Revenue 100.0% 16,502 100.0% 13,262 3,240 24.4%
       
 
The relative contribution of integrated logistics services, net of third-party charges, relating to integrated logistics services, to the Company's Adjusted Revenue increased from 16.7% for the year ended 31 December 2009 to 27.0% for the year ended 31 December 2010, while the contribution of rail-based container transportation services decreased from 49.6% to 42.3%. The relative contribution of terminal services and agency fees remained almost unchanged at 12.2% for the year ended 31 December 2010 as compared to 12.7% for the year ended 31 December 2009, while the contribution of freight forwarding and logistics services grew from 6.6% to 7.2% and the contribution from truck deliveries decreased from 11.8% to 9.2%, respectively.
 
Integrated logistics services
 
Revenue from integrated logistics services increased by 101.9% from RUR 5,347 million for the year ended 31 December 2009 to RUR 10,794 million for the year ended 31 December 2010. Revenue from integrated logistics services, net of third-party charges relating to integrated logistics services, grew by 101.7% from RUR 2,209 million in 2009 to RUR 4,455 million in 2010.  This increase was primarily due to growing demand for integrated logistics services in Russia reflected in growth in container transportation volumes under integrated logistics contracts of 78.1% from 210 thousand loaded TEU for the year ended 31 December 2009 to 374 thousand loaded TEU for the year ended 31 December 2010. This increase resulted both from new customers' demand and from shift of existing customers' preferences towards using integrated logistics services rather than traditional terminal-to-terminal rail transportation. The revenue increase was also due to an increase in prices the Company charges for integrated logistics services.
 
Rail-based container transportation services
 
Revenue from rail-based container transportation increased by 6.2% from RUR 6,573 million for the year ended 31 December 2009 to RUR 6,980 million for the year ended 31 December 2010 despite a decrease in revenue-generating transportation volumes in terms of TEU under standard rail transportation agreements of 12.2%, which was compensated for by an increase in prices the Company charges for its rail-based container transportation services. The decrease in transportation volumes resulted primarily from customer demand shifting from more traditional terminal-to-terminal rail based container transportation to integrated logistics services.
 
Terminal services and agency fees
 
Revenue from terminal services, including agency fees, increased by RUR 330 million, or 19.7%, from RUR 1,678 million for the year ended 31 December 2009 to RUR 2,008 million for the year ended 31 December 2010.  Agency fees, which are charged for services the Company renders as an agent of Russian Railways, increased by 17.9% from RUR 1,367 million to RUR 1,612 million. This increase was primarily due to an increase in terminal throughput of 6.8% from 1,409 thousand TEU for the year ended 31 December 2009 to 1,505 thousand TEU for the year ended 31 December 2010, as well as due to an increase in prices and an increase in ancillary terminal services offered to customers.
 
Truck deliveries
 
Revenue from truck deliveries decreased by RUR 46 million, or 3.0%, from RUR 1,559 million for the year ended 31 December 2009 to RUR 1,513 million for the year ended 31 December 2010. The decrease was primarily due to a decrease in container transportation volumes by own and outsourced truck fleet of 1.0% from 596 thousand TEU for 2009 to 590 thousand TEU in 2010, primarily due to changes in the logistic arrangements for a big customer.
 
Freight forwarding and logistics services
 
Revenue from freight forwarding and logistics services grew by RUR 312 million, or 35.5%, from RUR 880 million for the year ended 31 December 2009 to RUR 1,192 million for the year ended 31 December 2010. The increase was primarily due to an increase in revenue-generating rail container transportation volumes of 12.4% and an increase in the number of additional value-added services resulting from the overall increase in demand for container transportation volumes.
 
Bonded warehousing services
Revenue from bonded warehousing services increased by RUR 8 million, or 3.0%, from RUR 265 million for the year ended 31 December 2009 to RUR 273 million for the year ended 31 December 2010, primarily due to the launch of a new bonded warehouse at Trofimovsky-2 station  in Saratov region in November 2010.
 
Operating expenses
 
The following table set forth a breakdown of the Company's significant operating expenses for the years ended 31 December 2010 and 2009.
 
 2010 2009
 RUR mln Percent of operating expenses  Percent of total revenue RUR mln Percent of operating expenses  Percent of total revenue
Third-party charges relating to integrated logistics services 6,339 30.6% 27.8% 3,138 21.3% 19.1%
Freight and transportation services 4,534 21.9% 19.9% 3,832 26.0% 23.4%
Payroll and related charges 3,128 15.1% 13.7% 2,437 16.5% 14.9%
Depreciation and amortisation 2,237 10.8% 9.8% 2,250 15.3% 13.7%
Materials, repair and maintenance 1,887 9.1% 8.3% 1,182 8.0% 7.2%
Other expenses, net 2,623 12.6% 11.5% 1,887 12.8% 11.5%
Total operating expenses, net  20,748 100.0% 90.8% 14,726 100.0% 89.8%
 
 
TransContainer's total operating expenses grew by RUR 6,022 million, or 40.9%, from RUR 14,726 million for the year ended 31 December 2009 to RUR 20,748 million for the year ended 31 December 2010, primarily due to an increase in third-party charges relating to integrated logistics services.
 
As a percentage of the total revenue, total operating expenses increased from 89.8% for the year ended 31 December 2009 to 90.8% for the year ended 31 December 2010, primarily due to an increase in third-party charges relating to integrated logistics services. As percentage of total revenue, third-party charges relating to integrated logistics services increased from 19.1% in 2009 to 27.8% in 2010 and materials, repair and maintenance as a percentage of total revenue increased from 7.2% to 8.3%, while the other expense items either decreased or remained flat.
 
The following table set forth Adjusted Operating Expenses for the years ended 31 December 2010 and 2009.
 
RUR million 2010 2009 Period on period change Period on period percent change
  Total operating expenses, net 20,748 14,726 6,022  40.9%
  Third-party charges relating to integrated logistics services (6,339) (3,138) (3,201) 102.0%
  Adjusted operating expenses 14,409 11,588 2,821 24.3%
     
 
Adjusted operating expenses, as described above, increased by 24.3% from RUR 11,588 million for the year ended 31 December 2009 to RUR 14,409 million for the year ended 31 December 2010, primarily due to increases in freight and transportation costs, materials, repair and maintenance and payroll and related charges.
 
The following table sets forth a breakdown of Company's significant operating expenses, except for third-party charges relating to integrated logistics services, as well as their value as a percentage of Adjusted Operating Expenses for the years ended 31 December 2010 and 2009.
 
 2010 2009
 RUR million Percent of Adjusted operating expenses RUR million Percent of Adjusted operating expenses
Freight and transportation services 4,534 31.5% 3,832 33.1%
Payroll and related charges 3,128 21.7% 2,437 21.0%
Depreciation and amortisation 2,237 15.5% 2,250 19.4%
Materials, repair and maintenance 1,887 13.1% 1,182 10.2%
Other expenses 2,623 18.2% 1,887 16.3%
Adjusted Operating Expenses 14,409 100.0% 11,588 100.0%
 
Freight and transportation services as a percentage of Adjusted Operating Expenses decreased from 33.1% in 2009 to 31.5% in 2010 and depreciation and amortization decreased from 19.4% to 15.5%, while materials, repair and maintenance grew from 10.2% to 13.1% and other expenses increased from 16.3% to 18.2%.
 
Third-party charges relating to integrated logistics services
 
Third-party charges relating to integrated logistics services  increased by RUR 3,201 million, or 102%, from RUR 3,138 million for the year ended 31 December 2009 to RUR 6,339 million for the year ended 31 December 2010, primarily due to an increase in transportation volumes under integrated logistics contracts of 78.1% from 210 thousand loaded TEU in 2009 to 374 thousand loaded TEU in 2010, as well as an increase in prices of our subcontractors (primarily Russian Railways tariffs ,which grew on average by 12.4% in 2010) and an increase in volumes of subcontractors' services resulting from the growing complexity of logistics chains and changes in regulation of Company's fleet operations in CIS countries.
 
Freight and transportation services
 
Expenses relating to freight and transportation services increased by RUR 702 million, or 18.3%, from RUR 3,832 million for the year ended 31 December 2009 to RUR 4,534 million for the year ended 31 December 2010. This increase was primarily due to an increase in rail-based transportation with usage of Company's own containers of 11.3% from 804 thousand TEU in 2009 to 895 thousand TEU in 2010, as well as an increase in tariffs charged for empty runs by Russian Railways, which increased in 2010 by 12.4% on average. This increase was partially offset by a decrease in the For containers - transporting an empty container on a flatcar, for flatcars – a flatcar run without container(s) or any non-container cargo.
empty run
ratio for containers from 41.4% in 2009 to 39.1% in 2010.
 
Payroll and related charges
 
Payroll and related charges increased by RUR 691 million, or 28.4%, from RUR 2,437 million for the year ended 31 December 2009 to RUR 3,128 million for the year ended 31 December 2010. This increase primarily resulted from the return to full-time employment of most of the employees who had temporarily transferred to part-time schedules during the economic downturn in 2009, which resulted in an increase in an average monthly salaries of 25.3% from RUR 28.8 thousand to RUR 36.1 thousand, as well as an increase in payroll tax payments by RUR 66.7 million due to changes in Russian tax legislation. This increase in payrolls and related charges was partially offset by a decrease in the average number of employees by 2.3% from 5,274 for the year ended 31 December 2009 to 5,150 for the year ended 31 December 2010.
 
Depreciation and amortization
 
Depreciation and amortization decreased marginally by RUR 13 million, or 0.6%, from RUR 2,250 million for the year ended 31 December 2009 to RUR 2,237 million for the year ended 31 December 2010. The decrease was primarily due to continuing usage of lifting equipment, IT and software fully depreciated in the previous year, as well as due to divestment of the A place equipped for the trans-shipment and storage of containers. A container terminal
typically includes one or more container yards. Rail-based container terminals are equipped with spur tracks for loading and unloading containers to/from railroad platforms (cars).
container terminal
in Novorossiysk, which was sold to optimise the Company's terminal network. This decrease was partially offset by acquisitions of new flatcars during this period and the retiring of flatcars inherited from Russian Railways.
 
Materials, repair and maintenance
 
Expenses related to materials, repair and maintenance increased by RUR 705 million, or 59.6%, from RUR 1,182 million for the year ended 31 December 2009 to RUR 1,887 million for the year ended 31 December 2010, primarily due to an increase in volumes of repairs of flatcars from 17,992 in 2009 to 19,526 in 2010 resulting from repairs of flatcars which the Company largely suspended during the global economic downturn in an effort to reduce operating costs, as well as due to an increase in the prices charged by repair workshops and costs of materials and the relative increase in more expensive scheduled depot and overhaul repairs in the overall repair structure.
 
Other expenses
 
Other expenses are an aggregate of a number of expense items such as taxes other than income tax, rent, consulting expenses, fuel and energy and communication services. Other expenses increased by RUR 736 million, or 39.0%, from RUR 1,887 million for the year ended 31 December 2009 to RUR 2,623 million for the year ended 31 December 2010, primarily due to an increase in expenses related to taxes other than income tax resulting primarily from an increase in property tax payments due to acquisition of fixed assets, software and licenses as a result of an upgrade of Company's IT system and other expenses. This increase was partially offset by a decrease in expenses related to consulting services and charity.
 
Operating income
 
Operating income increased by RUR 419 million, or 25.0%, from RUR 1,647 million for the year ended 31 December 2009 to RUR 2,093 million for the year ended 31 December 2010, as a result factors discussed above.
 
Interest expense
 
Interest expense decreased by RUR 97 million, or 10.3%, from RUR 945 million for the year ended 31 December 2009 to RUR 848 million for the year ended 31 December 2010 as a result of Company's measures aimed at optimizing its debt structure and  reducing the cost of debt. In particular, in March 2010 the coupon rate of the Company's RUR 3,000 million non-convertible 5-year bond (the "RUR Bonds, Series 1") was decreased from 16.5% per annum to 9.5% per annum and, as a result of the issuance of a further RUR 3,000 million non-convertible amortizing 5-year bond with a coupon rate of 8.8% per annum, the Company refinanced more expensive bank debt with nominal interest rates ranging from 12.0% to 12.5% and finance lease obligations with effective interest rates at approximately 24.9%.  Moreover, in the first half of 2009, the Company had borrowed approximately RUR 3,000 million in short-term loans denominated in Roubles and US dollars with interest rates ranging from 13.5 percent to 18 percent per annum, which loans were repaid within the same year.
 
Interest income
 
Interest income decreased by RUR 20 million, or 57.1%, from RUR 35 million in the year ended 31 December 2009 to RUR 15 million in the year ended 31 December 2010 due to an overall decrease in the interest rates in Russia, as well as due to the promissory notes of Finans-Proekt becoming non-interest bearing during 2009.
 
Profit before income tax
 
Profit before income tax increased by RUR 574 million, or 74.7%, from RUR 768 million for the year ended 31 December 2009 to RUR 1,342 million for the year ended 31 December 2010. The increase was due to the factors discussed above.
 
Income tax expense
 
Income tax expense increased by RUR 236 million, or 132.6%, from RUR 178 million for the year ended 31 December 2009 to RUR 414 million for the year ended 31 December 2010, primarily due to increase in profit before income tax. The effective tax rate increased from 23.2% for the year ended 31 December 2009 to 30.1% for the year ended 31 December 2010, primarily due to a higher proportion of non-deductible expenses attributed to the profit before income tax. These non-deductible expenses were primarily related to post-employment benefits, non-recoverable VAT and changes in provisions for tax liabilities.
 
Total comprehensive income for the year
 
As a result of factors discussed above the profit for the year increased by RUR 339 million, or 57.6%, from RUR 589 million for the year ended 31 December 2009 to RUR 928 million for the ear ended 31 December 2010. Taking into account differences arising on translating foreign operations, the total comprehensive income for the year was RUR 935 million for the year ended 31 December 2010.
 
Liquidity and Capital Resources
 
As of 31 December 2010 the Company had cash and cash equivalents of RUR 1,291 million and Company's current assets exceeded its current liabilities by RUR 25 million.
 
The Company's business is asset and capital-intensive and requires substantial capital expenditures for, among other things, the purchase of flatcars and containers, the development of rail-side terminals and investment in the expansion and modernisation of its truck fleet. For the year ended 31 December 2010 Company's operations and a majority of its capital expenditures were financed from internally generated cash flows while bond issuance was used primarily for the purposes of the optimization of debt structure and reduction in the cost of debt.
 
Cash flows
 
The following table sets forth the principal components of the Company's consolidated cash flows for the years ended 31 December 2010 and 2009.
 
 2010 2009
Net cash provided by operating activities 3,631 2,168
Net cash used in investing activities (3,731) (3,048)
Net cash provided by financing activities  944 1,011
Net increase in cash and cash equivalents  844 131
Cash and cash equivalents at the end of the year 1,291 449
 
Cash flow provided by operating activities
 
Cash flow provided by operating activities increased by RUR 1,463 million, or 67.5%, from RUR 2,168 million for the year ended 31 December 2009 to RUR 3,631 million for the year ended 31 December 2010, primarily due to an increase in operating profit before working capital changes by RUR 653 million, from RUR 3,628 million to RUR 4,281 million resulting from improving operational and price environment, as well as due to changes in working capital resulting from an increase in trade payables and VAT payable due to overall growth in the Company's business, which was partially offset by an increase in trade and other payables. The cash flow provided by operating activities was also negatively affected by increase in income tax paid primarily due to an increase in profit before income tax.
 
Cash flow used in investing activities
 
Cash flow used in investing activities increased by RUR 683 million, or 22.5%, from RUR 3,048 for the year ended 31 December 2009 to RUR 3,731 million for the year ended 31 December 2010. This increase was primarily due to an increase in capital expenditures by RUR 939 million, from RUR 3,107 million to RUR 4,046 million. This increase was partially offset by an increase in proceeds from disposals of property, plant and equipment from RUR 135 million to RUR 230 million and by a decrease in purchase of intangible assets from RUR 66 million to RUR 18 million.
 
Cash flow provided by financing activities
 
Cash flow provided by financing activities decreased by RUR 67 million, or 6.6%, from RUR 1,011 million for the year ended 31 December 2010 to RUR 944 million for the year ended 31 December 2010, primarily due to a decrease in proceeds from short-term bank loans, as proceeds from the issuance of RUR bonds series 2 were used mainly for refinancing of bank loans and finance lease obligations.
 
Capital Expenditures
 
Capital expenditures increased by RUR 939 million, or 30.4%, from RUR 3,107 million for the year ended 31 December 2009 to RUR 4,046 million for the year ended 31 December 2010. The major portion of capital expenditures of approximately RUR 3,419 million was spent on the acquisition of flatcars, including the purchase of 1,328 units of 80' flatcars and 50 units of 40' flatcars from manufacturers, as well as the acquisition of 825 units of 40' flatcars at the total amount of RUR 889 million resulting from termination of an operating lease contract in June 2010.
 
The Company also continued spending for development and modernization of key terminals, such as Kleschikha, Kostarikha, Zabaikalsk, and Sverdlovsk-Tovarny. Other capital expenditure items also included investments in the renovation of the Company's office building and purchase of lifting equipment, as well as investments in the Company's newly established subsidiaries and joint ventures, such as  TransContainer Europe, TransContainer Slovakia, TransContainer Asia Pacific and Rail-Container.
 
Planned capital expenditures for 2011
 
The Company's capital expenditures programme is aimed at maintaining TransContainer's leadership in the container market, improving its positions in the foreign markets and optimising its asset structure and key operational metrics.
 
The total budget for purchase of property, plant and equipment for 2011 is planned for up to RUR 4.7 billion (excluding VAT), of which up to RUR 2.7 billion may be spent for the acquisition of new 80' flatcars; up to RUR 0.3 billion may be spent for the purchase primarily of 40' containers; and up to RUR 0.8 billion may be invested into upgrade and modernization of the Company's key rails-side terminals.
 
Capital resources
 
Since the Company's inception, operations and capital expenditures have been financed primarily from internally generated cash flow and proceeds from issuing domestic debt. As of 31 December 2010 the Company's financial indebtedness consisted of outstanding bonds and financial lease obligations in an aggregate principal amount of RUR 7,026 million, as compared to RUR 6,581 million as of 31 December 2009.  As of 31 December 2010 the Company's net debt was RUR 5,735 million.
 
As of 31 December 2010 all of the Company's financial indebtedness was unsecured, except for the obligations under finance leases, which were secured by the lessors' title to the lease assets. The Company does not have any indebtedness denominated in currencies other than Russian Rouble, or any indebtedness bearing interest rates other than at fixed rates.
 
RUR bonds series 1
 
On 4 March 2008 the Company issued non-convertible five-year bonds for the total amount of RUR 3,000 million with RUR 1,000 par value. On 13 March 2009 the majority of the bondholders requested redemption of their bonds in accordance with the put option under the bonds. The Company redeemed the bonds and re-issued them on the same day. As at 31 December 2009 the coupon rate for the bonds was 16.5% per annum, with interest being paid semi-annually. On 12 March 2010 the coupon rate for the fifth and all subsequent coupon rates was reduced to 9.5%, in accordance with the terms of the initial bond offering. There are no further put options on the bonds until their maturity in February 2013, and accordingly these bonds as at 31 December 2010 have been classified as long-term borrowings. The bonds were classified as short-term borrowings at 31 December 2009.
 
RUR bonds series 2
 
On 10 June 2010 the Company issued non-convertible five-year bonds for the total amount of RUR 3,000 million with RUR 1,000 par value. The net proceeds from the issuance after the deduction of related offering costs amounted to RUR 2,975 million. The annual coupon rate of the bonds is 8.8% with interest paid semi-annually. The bonds, series 2 are required to be redeemed in four equal semi-annual installments during the fourth and the fifth year. As a result, these borrowings are classified as long-term borrowings as at 31 December 2010.
 
Working Capital
 
The Company's working capital is defined as the difference between its current assets and current liabilities. The table below sets forth the key components of TransContainer's working capital for the years ended 31 December 2010 and 2009.
 
 2010 2009
CURRENT ASSETS  
Inventory 179 134
Trade and other receivables 1,331 1,941
Prepayments and other current assets 2,869 2,263
Prepaid income tax 115 98
Short-term investments - 143
Cash and cash equivalents 1,291 449
Total current assets 5,785 5,028
  
CURRENT LIABILITIES  
Trade and other payables 3,965 3,172
Income tax payable 77 76
Taxes other than income tax payable 741 170
Provisions 34 -
Finance lease obligations, current maturities 545 793
Accrued expenses and other current liabilities 248 184
Deferred income 37 60
Current portion of long-term debt 113 3,153
Total current liabilities 5,760 7,608
  
Working Capital 25 (2,580)
 
Working capital increased by RUR 2,605 million from negative working capital of RUR 2,580 million to positive working capital of RUR 25 million between 31 December 2009 and 31 December 2010. This increase was primarily due to the reclassification of the RUR Bonds, Series 1 from short- to long-term debt.
 
TransContainer's management report and consolidated financial statements for the year ended 31 December 2010 can be viewed on the Company's corporate website.
 
 
28 April 2011
 
Transcontainer 
Andrey Zhemchugov, Director, Capital Markets and
Investor Relations
E-mail
Website +7 (499) 262 8506
 
ir(at)remove-this.trcont.ru
www.trcont.ru
 
 
College Hill
  
Tony Friend +44 (0)20 7457 2020
Leonid Fink
 
 
Legal Disclaimer
 
Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. You can identify forward-looking statements by terms such as 'expect', 'believe', 'anticipate', 'estimate', 'intend', 'will', 'could', 'may' or 'might', the negative of such terms or other similar expressions. JSC "TransContainer" wishes to caution you that these statements are only predictions and that actual events or results may differ materially. JSC "TransContainer" does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of JSC "TransContainer", including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries JSC "TransContainer" operates in, as well as many other risks specifically related to JSC "TransContainer" and its operations.

This information is provided by RNS
The company news service from the London Stock Exchange

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