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Global Reach
30 Aug 2016

Results for the second quarter and six months ended 30 June 2016

RNS Number : 3615I

PJSC "TransContainer" ("TransContainer" or the "Company" together with its consolidated subsidiaries) today publishes its management report together with the reviewed interim condensed consolidated financial statements for the second quarter and six months ended 30 June 2016. The financial statements presented in this announcement have been prepared in accordance with the International Financial Reporting Standards ("IFRS"). To comply with the Russian regulatory disclosure requirements, the date of the results announcement has been changed to 29 August 2016.

 

Operating and financial review

 

Summary

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 at 30 June 2016, it owns and leases 23,633 flatcars and 66,120 ISO containers. TransContainer also owns a network of rail-side container terminals, located at 45 railway stations across Russia and operates one terminal in Slovakia under a long-term lease agreement. The Company's joint venture JSC KedenTransService ("KedenTransService", or "KDTS") also operates 19 inland rail-side terminals in Kazakhstan. TransContainer's sales network comprises about 120 sales outlets in Russia, along with additional outlets across the CIS, Europe and Asia.

 

In the second quarter of 2016, Russia's container market demonstrated a positive year-on-year dynamics, for the first time since the third quarter of 2014. The transportation volumes were up 13.2% year-on-year to 808 thousand twenty-foot equivalent units ("TEU"). This was driven by a 20.7% increase in domestic transportation, while international transportation was up 5.6% year-on-year on the back of growth in export and Freight passing from one country to another through a third country. Whether cargo is permitted to transit a certain country and under what terms is subject to trade agreements and treaties between countries. Direct transit is when foreign goods are shipped under tariff protection, without holding at a customs warehouse; indirect transit is when goods arrive at customs warehouses and are then transported abroad.
transit
segments.

 

For the first six months of 2016, the Russian rail container market grew by 6.1% year-on-year to 1,538 thousand TEU. In terms of segment breakdown for the six month period, domestic transportation volumes surged by 14.4% year-on-year and export transportation by 1.0% year-on-year, while Import-bound container traffic, as indicated in the respective waybill.
import transportation
volumes fell by 5.3% and transit was down 3.3% year-on-year.

 

In the second quarter of 2016 container volumes transported by the Company's flatcars and containers (including provision of the Company's containers on the third party flatcars) surged by 12.0% year-on-year to 382 thousand TEU, while for the first half of the 2016 transportation volumes increased by 4.5% year-on-year amounting to 725 thousand TEU.

 

The market recovery along with the continuing business optimization measures were the key factors for the improvement of TransContainer's financial performance in the reporting period. Adjusted revenue increased by 0.7% year-on-year for the first half of 2016 and by 10.7% year-on-year for the second quarter of 2016. Adjusted expenses were down 2.2% year-on-year for the first half of 2016, but increased by just 1.0% year-on-year for the second quarter of 2016. As a result, the EBITDA margin increased to 35.2% in the second quarter of 2016 and to 32.1% for the first half of 2016.

 

The summary of the Company's key financial metrics is given in the table below:

 

 

6M  2016

6M 2015

Year-on-year change

 

2Q 2016

2Q 2015

Year-on-year change

 

 

 

RUB mln

Percent

 

 

 

RUB mln

Percent

Total revenue

23,543

20,006

3,537

17.7%

 

12,484

9,911

2,573

26.0%

Adjusted revenue

9,957

9,887

70

0.7%

 

5,360

4,843

517

10.7%

Adjusted expenses

8,590

8,786

-196

-2.2%

 

4,557

4,512

45

1.0%

EBITDA

3,192

2,804

388

13.8%

 

1,885

1,182

703

59.5%

Adjusted EBITDA margin

32.1%

28.4%

4.0%

 

 

35.2%

24.4%

11.3%

 

Profit for the period

1,412

1,039

373

35.9%

 

956

343

613

178.7%

Adjusted net profit margin

14.2%

10.5%

3.7%

 

 

17.8%

7.1%

10.8%

 

 

As at 30 June 2016, the Company's total debt was RUB 5,445 million with net debt of only RUB 1,160 million.

 

Capital expenditure for the six months ended 30 June 2016 almost tripled as compared to the same period of 2015 and amounted to RUB 860 million, the money being spent on the acquisition of containers and investments in terminal infrastructure. In accordance with the Company's policy, all capital expenditure during the reporting period was financed by the Company's own cash flow.

 

Recent developments and outlook

In July and August of 2016, the Russian rail container market continued its robust growth. For the first eight months of 2016, the market is expected to expand by approximately 7.5% year-on-year. As a result, the Company's management anticipates the market growth in the upper single-digit range for the full year 2016, subject to any external economic and political effects. Nevertheless, the competitive situation in the container segment limits operators' ability to raise tariffs. With this in mind, the Company's management will focus on further business optimisation, as well as continuing improving management efficiency, asset utilisation and the quality of customer service.

 

The Company believes that the Russian container transportation market has now passed the bottom of the cycle and maintains its significant long-term growth potential driven by dynamics of industrial production, consumer demand and growth in rail cargo The use of containers for cargo transportation, supply and storage.
containerisation
.

 

Key operating results

Since the beginning of 2016, the Company has widened its range of rail transportation services by offering its own containers for transportation on third-party Cars for carrying cargo or passengers designated for railway transportation.
rolling stock
. The Company therefore will report transportation volumes including provision of its own containers on the third party flatcars starting from the second quarter of 2016.

 

In the reporting quarter, container volumes transported by the Company's flatcars and containers (including provision of own containers on the third party flatcars) surged by 12.0% year-on-year to 382 thousand TEU. The key growth driver was domestic transportation, while transit volumes were down 29.0% year-on-year due to a reduced number of auto vehicles produced in Uzbekistan and Kazakhstan.

 

Transportation of containers using TransContainer's assets in 2Q 2016 (ISO Loaded + Empty), 000' TEU

 

2Q 2016

2Q 2015

                       Change

 

 

 

000' TEU

Percent

Domestic Routes

224.2

194.6

+29.6

+15.2%

Export

89.8

77.6

+12.3

+15.8%

Import

52.0

46.5

+5.5

+11.9%

Transit

16.0

22.5

-6.5

-29.0%

All Routes

382.0

341.2

+40.8

+12.0%

 

Container volumes transported by the Company's A specialised type of rolling stock designed to carry ISO containers.
flatcar
fleet in the second quarter of 2016 increased by 3.9% year-on-year to 354 thousand TEU from 341 thousand TEU a year earlier. The Company's revenue-generating1 container transportation volumes in Russia amounted to 291 thousand TEU in the second quarter of 2016, up 13.2% year-on-year.

For the first six months of 2016, container volumes transported by the Company's flatcar and container fleet, as described above, grew by 4.5% year-on-year to 724.6 thousand TEU, mainly as a result of an increase in domestic, export and import transportation. Transit volumes were down 36.3% year-on-year due to the same reason as discussed above.

 

Transportation of containers using TransContainer's assets in 1H 2016 (ISO Loaded + Empty), 000' TEU

 

1H 2016

1H 2015

Change

 

 

 

000' TEU

Percent

Domestic Routes

411.9

377.7

+34.2

+9.1%

Export

176.9

169.0

+7.9

+4.7%

Import

104.9

98.0

+6.8

+7.0%

Transit

31.0

48.7

-17.7

-36.3%

All Routes

724.6

693.3

+31.2

+4.5%

 

Container volumes transported by the Company's flatcar fleet in the first half of 2016 decreased by 3.0% year-on-year to 671 thousand TEU from 692 thousand TEU a year earlier. The Company's revenue-generating container transportation volumes in Russia amounted to 554 thousand TEU in the first half of 2016, up 6.8% year-on-year.

 

In the second quarter of 2016, the Company's throughput in the Russian rail 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
network increased by 5.8% to 312 thousand TEU, compared to 295 thousand TEU for the same period of 2015. For the first six months of 2016, the Company's container terminal throughput was down 0.4% to 578 thousand TEU compared to 581 thousand TEU for the first half of 2015. This resulted from a decrease in unloading of containers, which, in turn, associated with a slowdown in import transportation, as well as a decrease in marshalling of containers due to a higher share of block-train transportation.

 

In the second quarter of 2016, flatcar and container For containers - transporting an empty container on a flatcar, for flatcars – a flatcar run without container(s) or any non-container cargo.
empty run
ratios marginally deteriorated from 5.5% to 6.4% and from 31.3% to 32.3%, respectively, while turnover of flatcars and containers improved on the back of strong customer demand.

 

For the first half of 2016, empty run ratios for flatcars and containers were broadly flat. Turnover of flatcars improved from 15.2 days for the first six months of 2015 to 14.4 days for the first six months of 2016, while turnover of containers was still impacted by the results of the first quarter.

 

Turnovers and empty runs

 

2Q 2016

2Q 2015

1H 2016

1H 2015

Turnover of containers, days

32.2

33.8

37.4

35.7

Turnover of flatcars, days

13.1

15.4

14.4

15.2

 

 

 

 

 

Empty run2 for containers, %

32.3%

31.3%

30.8%

29.7%

Empty run for flatcars, %

6.4%

5.5%

7.0%

7.2%

 

 

Description of Key Consolidated Statement of Comprehensive Income Items

The following table sets out the Company's results for the six months and the three months ended 30 June 2016 and 2015.

 

Summary of the Company's key results for the six months and the three months ended 30 June 2016 and 30 June 2015

RUB million

1H 2016

1H 2015

Year-on-year change

RUB mln                %

 

2Q 2016

2Q 2015

Year-on-year change

RUB mln                %

Revenue

23,543

20,006

+3,537

+17.7%

 

12,484

9,911

+2,573

+26.0%

Other operating income

343

342

+1

+0.3%

 

198

210

-12

-5.7%

Operating expenses

-22,176

-18,905

-3,271

+17.3%

 

-11,665

-9,642

-2,023

+21.0%

Operating profit

1,710

1,443

+267

+18.5%

 

1,017

479

+538

+112.3%

Interest expense

-213

-269

+56

-20.8%

 

-95

-129

+34

-26.4%

Interest income

87

69

+18

+26.1%

 

45

41

+4

+9.8%

Foreign exchange gain, net

-136

-118

-18

+15.3%

 

-36

-175

+139

-79.4%

Share of result of associates and JVs

320

177

+143

+80.8%

 

263

150

+113

+75.3%

Other financial results, net

0

14

-14

-100.0%

 

0

14

-14

-100.0%

Profit before income tax

1,768

1,316

+452

+34.3%

 

1,194

380

+814

+214.2%

Income tax expense

-356

-277

-79

+28.5%

 

-229

-83

-146

+175.9%

Profit for the period

1,412

1,039

+373

+35.9%

 

965

297

+668

+224.9%

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (net of income tax)

-433

-158

-275

+174.1%

 

-161

-307

+146

-47.6%

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

979

881

+98

+11.1%

 

804

-10

+814

-8140.0%

           

 

 

Adjustments and additional financial information

The majority of the Company's services are provided with the use of third-party services. Accordingly, third-party charges for such services are presented within the Company's revenues and expenses. Such third-party charges include the value of rail infrastructure tariffs and the charges of the Company's other subcontractors and contracted partners involved in the process of providing the Company's services.

 

Third-party charges other than ones related to integrated 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 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 are presented within revenues as a separate line item "Cargo transportation and handling services with involvement of third parties".

 

All third-party charges, including ones related to integrated freight forwarding and logistics services, are presented within expenses as "Third-party charges related to principal activities".

 

Summary of 3rd-party charges involved in TransContainer's revenues

Item

1H 2016

1H 2015

Year-on-year change

RUB mln            %

 

2Q 2016

2Q 2015

Year-on-year change

RUB mln            %

3rd-party charges related to integrated freight forwarding and logistics

11,178

8,989

+2,189

+24.4%

 

5,783

4,446

+1,337

+30.1%

3rd-party charges related to cargo transportation and handling services

2,408

1,130

1,278

+113.1%

 

1,341

622

719

+115.6%

Third-party charges related to principal activities

13,586

10,119

+3,467

+34.3%

 

7,124

5,068

+2,056

+40.6%

           

 

In order to enhance analysis, we apply adjustments to the components of the Company's revenues and expenses to derive the values that are net of the charges of third parties involved in Company's services.

 

 

Total revenue adjustments

Item

1H 2016

1H 2015

Year-on-year change

RUB mln            %

 

2Q 2016

2Q 2015

Year-on-year change

RUB mln            %

Total revenue

23,543

20,006

+3,537

+17.7%

 

12,484

9,911

+2,573

+26.0%

Third-party charges related to principal activities

-13,586

-10,119

-3,467

+34.3%

 

-7,124

-5,068

-2,056

+40.6%

Adjusted Revenue

9,957

9,887

+70

+0.7%

 

5,360

4,843

+517

+10.7%

           

 

Integrated freight forwarding and logistics services revenue adjustment

Item

1H 2016

1H 2015

Year-on-year change

RUB mln            %

 

2Q 2016

2Q 2015

Year-on-year change

RUB mln            %

Integrated freight forwarding and logistics services

17,357

15,151

+2,206

+14.6%

 

9,121

7,494

+1,627

+21.7%

 

3rd-party charges related to integrated freight forwarding and logistics

-11,178

-8,989

-2,189

+24.4%

 

-5,783

-4,446

-1,337

+30.1%

 

Adjusted integrated freight forwarding and logistics services

6,179

6,162

+17

+0.3%

 

3,338

3,048

+290

+9.5%

 

 

Operating expenses adjustment

Item

1H 2015

1H 2014

Year-on-year change

RUB mln            %

 

2Q 2015

2Q 2014

Year-on-year change

RUB mln          %

Total operating expenses

18,905

15,194

+3,711

+24.4%

 

9,580

8,164

+1,416

+17.3%

Third-party charges related to principal activities

-10,119

-7,465

-2,654

+35.6%

 

-5,068

-3,889

-1,179

+30.3%

Adjusted Revenue

8,786

7,729

+1,057

+13.7%

 

4,512

4,275

+237

+5.5%

 

Adjusted Revenue, Adjusted Operating Expenses, EBITDA, Adjusted EBITDA Margin and Adjusted Operating Margin are not recognised under IFRS as measures of financial performance, but are calculated on the basis of IFRS figures and are presented as supplemental indicators of the Company's 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.

 

RUB million

1H 2016

1H 2015

Year-on-year change

RUB mln            %

 

2Q 2016

2Q 2015

Year-on-year change

RUB mln            %

Adjusted Revenue1

9,957

9,887

+70

+0.7%

 

5,360

4,843

+517

+10.7%

Adjusted operating expenses2

8,590

8,786

-196

-2.2%

 

4,541

4,574

-33

-0.7%

EBITDA3

3,192

2,804

+388

+13.8%

 

1,885

1,182

+703

+59.5%

Adjusted EBITDA margin4

32.1%

28.4%

 

 

 

35.2%

24.4%

 

 

Total debt

5,443

5,953

-510

-8.6%

 

5,443

5,953

-510

-8.6%

Net debt5

1,158

2,904

-1,746

-60.1%

 

1,158

2,904

-1,746

-60.1%

Net debt/LTM EBITDA

0.17

0.45

 

 

 

0.17

0.45

 

 

 

Adjusted Revenue is calculated as total revenue less the Third-party charges related to principal activities.

2 Adjusted Operating Expenses are calculated as operating expenses less the Third-party charges related to principal activities.

3 EBITDA is defined as profit for the period before income tax, interest expense and depreciation and amortisation.

4 Adjusted EBITDA Margin is defined as EBITDA divided by Adjusted Revenue.

5 Net Debt is calculated as long-term debt, finance lease obligations, short-term debt and current portion of long-term debt less cash and cash equivalents and short-term investments.

 

Revenue

The following table sets out the breakdown of total revenue for the six months and the three months ended 30 June 2016 and 2015, respectively.

 

Revenue breakdown

RUB million

1H 2016

1H 2015

Year-on-year change

RUB mln            %

 

2Q 2016

2Q 2015

Year-on-year change

RUB mln            %

Integrated freight forwarding and logistics services

17,357

15,151

+2,206

+14.6%

 

9,121

7,494

+1,627

+21.7%

Rail-based container shipping services

2,015

2,129

-114

-5.4%

 

1,072

1,039

+33

+3.2%

Cargo transportation and handling services with involvement of third parties

2,408

1,130

+1,278

+113.1%

 

1,341

622

+719

+115.6%

Terminal services and agency fees

1,094

987

+107

+10.8%

 

586

480

+106

+22.1%

Truck deliveries

419

399

+20

+5.0%

 

237

207

+30

+14.5%

Other freight forwarding services

99

70

+29

+41.4%

 

55

15

+40

+266.7%

Bonded warehousing services

95

92

+3

+3.3%

 

46

40

+6

+15.0%

Other

56

48

+8

+16.7%

 

26

14

+12

+85.7%

Total revenue

23,543

20,006

+3,537

+17.7%

 

12,484

9,911

+2,573

+26.0%

 

Total revenue increased by RUB 3,537 million, or 17.7% year-on-year, to RUB 23,543 million for the six months ended 30 June 2016, from RUB 20,006million in the corresponding period of 2015. In the second quarter of 2016, total revenue increased by 26.0% year-on-year to RUB 12,484 million. This increase was primarily due to higher third-party charges accounted as a part of the Company's total revenue.

 

The following table sets out the components of the relative contribution to adjusted revenue for the six months ended 30 June 2016 and 2015, respectively.

 

Adjusted revenue breakdown

 

1H 2016

1H 2015

Year on year change

 

RUB mln

share, %

RUB mln

share, %

RUB mln

Percent

Adjusted integrated freight forwarding and logistics services

6,179

62.1%

6,162

62.3%

+17

+0.3%

Rail-based container shipping services

2,015

20.2%

2,129

21.5%

-114

-5.4%

Terminal services and agency fees

1,094

11.0%

987

10.0%

+107

+10.8%

Truck deliveries

419

4.2%

399

4.0%

+20

+5.0%

Other freight forwarding services

99

1.0%

70

0.7%

+29

+41.4%

Bonded warehousing services

95

1.0%

92

0.9%

+3

+3.3%

Other -

56

0.6%

48

0.5%

+8

+16.7%

Total adjusted revenue

9,957

100%

9,887

100%

+70

+0.7%

 

Adjusted revenue (as defined above) increased by 0.7% year-on-year to RUB 9,957 million for the first six months ended 30 June 2016, from RUB 9,887 million for the six months ended 30 June 2015, due to an increase in revenue from integrated freight forwarding and logistics services, terminal services and ancillary businesses, which was partially offset by a decrease in rail-based container shipping services.

 

Adjusted revenue increased by 10.7% year-on-year to RUB 5,360 million in the second quarter of 2016 from RUB 4,843 million in the second quarter of 2015, primarily due to the growing transportation and terminal handling volumes.

 

The following table sets out the components of relative contribution to adjusted revenue for the three months ended 30 June 2016 and 2015, respectively.

 

 

2Q 2016

2Q 2015

Year-on-year change

 

RUB mln

share, %

RUB mln

share, %

RUB mln

Percent

Adjusted integrated freight forwarding and logistics services

3,338

62.3%

3,048

62.9%

+290

+9.5%

Rail-based container shipping services

1,072

20.0%

1,039

21.5%

+33

+3.2%

Terminal services and agency fees

586

10.9%

480

9.9%

+106

+22.1%

Truck deliveries

237

4.4%

207

4.3%

+30

+14.5%

Other freight forwarding services

55

1.0%

15

0.3%

+40

+266.7%

Bonded warehousing services

46

0.9%

40

0.8%

+6

+15.0%

Other

26

0.5%

14

0.3%

+12

+85.7%

Total adjusted revenue

5,360

100%

4,843

100%

+517

+10.7%

 

In the second quarter and the first half of 2016, the main components of the Company's revenue fluctuated slightly around the levels acceptable for the Company's business model.

 

Integrated freight forwarding and logistics services

Revenue from integrated freight forwarding and logistics services increased by 14.6% year-on-year to RUB 17,357 million and by 21.7% year-on-year to RUB 9,121 for the six months and three months ended 30 June 2016, respectively.

 

Adjusted revenue from integrated freight forwarding and logistics services was up 0.3% year-on-year to RUB 6,179 million for the first half of 2016, reflecting weaker market performance in the first quarter of 2016. In the second quarter of 2016, this revenue item grew by 9.5% year-on-year to RUB 3,338 million mainly driven by an increase in revenue-generating transportation volumes and changes in transportation services structure.

 

Rail-based container transportation services

Revenue from rail-based container transportation was down 5.4% year-on-year to RUB 2,015 million for the six months ended 30 June 2016, from RUB 2,129 million for the same period of 2015. In the second quarter of 2016, revenue from rail-based container transportation increased by 3.2% year-on-year to RUB 1,072 million. Along with factors described above, these figures reflect the continuing shift of customers' preferences towards integrated logistics services.  

 

Terminal services and agency fees

Revenue from terminal services, including agency fees, increased by 10.8% year-on-year to RUB 1,094 million for the six months ended 30 June 2016 from RUB 987 million for the same period of 2015. In the second quarter of 2016, revenue from terminal services, including agency fees, increased by 22.1% year-on-year to RUB 586 million. This was primarily driven by higher transportation volumes in the first half of 2016 and the reporting quarter, respectively, as well by an increase in average tariffs for terminal services and agency fees.

 

Truck deliveries  

Revenue from truck deliveries for the six months ended 30 June 2016 increased by RUB 20 million, or 5.0% year-on-year, to RUB 419 million, from RUB 399 million for the same period of 2015. This was mainly due to a 3.2% year-on-year increase in container transportation volumes by the Company's own and outsourced truck fleet to 186 thousand TEU in the first half of 2016 from 180 thousand TEU in corresponding period of 2015.

 

Revenue from truck deliveries in the second quarter of 2016 decreased by RUB 30 million, or 14.5% year-on-year, to RUB 237 million, from RUB 207 million in the corresponding period of 2015. In the second quarter of 2016, container transportation volumes by the Company's own and outsourced truck fleet decreased by 6.2% year-on-year to 101 thousand TEU, from 95 thousand TEU in the corresponding quarter of 2015.

 

Other freight forwarding and logistics services

Revenue from other freight forwarding and logistics services, which are freight forwarding and logistics services of a non-integrated nature, increased by 41.4% year-on-year to RUB 99 million in the first half of 2016, from RUB 70 million in the corresponding period of 2015. In the second quarter of 2016, revenues from other freight forwarding and logistics services more than tripled year-on-year to RUB 55 million on the back of market revival and resumed customers demand for added-value services.

 

Bonded warehousing services

Adjusted revenue from bonded warehousing services decreased by RUB 3 million, or 3.3% year-on-year, to RUB 95 million for the six months ended 30 June 2016, from RUB 92 million for the same period of 2015, reflecting import transportation volumes dynamics.

 

Revenue from bonded warehousing services increased in the second quarter of 2016 by RUB 6 million, or 15.0% year-on-year, to RUB 46 million for the reason stated above.

 

Operating expenses

The following tables provide a breakdown of the Company's operating expenses for the six months and three months ended 30 June 2016 and 2015, respectively.

 

 Operating expenses structure

 

1H 2016

1H 2015

 

 

RUB mln

% of operating expenses

% of total revenue

RUB mln

% of operating expenses

% of total revenue

 

Third-party charges related to principal activities

13,586

61.3%

57.7%

10,119

53.5%

50.6%

 

Freight and transportation services

2,757

12.4%

11.7%

2,910

15.4%

14.5%

 

Payroll and related charges

2,413

10.9%

10.2%

2,290

12.1%

11.4%

 

Depreciation and amortisation

1,211

5.5%

5.1%

1,219

6.4%

6.1%

 

Materials, repair and maintenance

1,064

4.8%

4.5%

1,021

5.4%

5.1%

 

Taxes other than income tax

289

1.3%

1.2%

260

1.4%

1.3%

 

Rent

162

0.7%

0.7%

393

2.1%

2.0%

 

Other expenses

694

3.1%

2.9%

693

3.7%

3.5%

 

Total operating expenses

22,176

100.0%

94.2%

18,905

100.0%

94.5%

 

 

 

 

2Q 2016

2Q 2015

 

RUB mln

% of operating expenses

% of total revenue

RUB mln

% of operating expenses

% of total revenue

Third-party charges related to principal activities

7,124

61.1%

57.1%

5,068

52.6%

51.1%

Freight and transportation services

1,498

12.8%

12.0%

1,610

16.7%

16.2%

Payroll and related charges

1,309

11.2%

10.5%

1,215

12.6%

12.3%

Depreciation and amortisation

596

5.1%

4.8%

687

7.1%

6.9%

Materials, repair and maintenance

634

5.4%

5.1%

535

5.5%

5.4%

Taxes other than income tax

125

1.1%

1.0%

122

1.3%

1.2%

Rent

73

0.6%

0.6%

199

2.1%

2.0%

Other expenses

306

2.6%

2.5%

206

2.1%

2.1%

Total operating expenses

11,665

100.0%

93.4%

9,642

100.0%

97.3%

 

TransContainer's total operating expenses increased by RUB 3,271 million, or 17.3% year-on-year, to RUB 22,176 million for the six months ended 30 June 2016, from RUB 18,905 million for the six months ended 30 June 2015. This was due to a significant increase in the third-party charges related to principal activities.

 

In the second quarter of 2016, the Company's total operating expenses grew by 21.0% year-on-year, or by RUB 2,023 million, to RUB 11,665 million for the reasons stated above.

 

Cost of third-party charges related to principal activities

Costs of third-party charges related to principal activities increased by 34.3% year-on-year to RUB 13,586 million for the six months ended 30 June 2016, from RUB 10,119 million for the same period of 2015. This was predominantly driven by a higher volume of outsourced transportation services involved in TransContainer's principal activities, including integrated logistics solutions, as well as cargo transportation and handling services (see also section Adjustments and additional financial information above).

 

For the same reason, the costs of integrated freight forwarding and logistics services increased in the second quarter of 2016 by 40.6% year-on-year to RUB 7,124 million, from RUB 5,068 million in the corresponding quarter of 2015.

 

Adjusted operating expenses

Adjusted operating expenses, as defined in section Adjustments and additional financial information above, decreased by 2.2% year-on-year to RUB 8,590 million for the six months ended 30 June 2016, from RUB 8,786 million in the same period of 2015, primarily due to a decrease in costs related to freight and transportation services and rent expenses. In the second quarter of 2016, adjusted operating expenses increased by just 1.0% year-on-year to RUB 4,557 million, from RUB 4,512 million in the second quarter of 2015, mainly due to a 22.9% increase in costs related to materials, repair and maintenance.

 

The following tables provide a breakdown of the Company's adjusted operating expenses for the six months and three months ended 30 June 2016 and 2015, respectively.

 

Adjusted operating expenses structure and dynamics for the six months ended 30 June 2016 and 2015

 

1H 2016                            1H 2015

Year-on-year change

 

RUB mln

%

RUB mln

%

RUB mln

Percent change

Freight and transportation services

2,757

32.1%

2,910

33.1%

-153

-5.3%

Payroll and related charges

2,413

28.1%

2,290

26.1%

+123

+5.4%

Depreciation and amortisation

1,211

14.1%

1,219

13.9%

-8

-0.7%

Materials, repair and maintenance

1,064

12.4%

1,021

11.6%

+43

+4.2%

Taxes other than income tax

289

3.4%

260

3.0%

+29

+11.2%

Rent

162

1.9%

393

4.5%

-231

-58.8%

Other expenses

694

8.1%

693

7.9%

+1

+0.1%

Adjusted operating expenses

8,590

100.0%

8,786

100.0%

-196

-2.2%

 

Adjusted operating expenses structure and dynamics for the three months ended 30 June 2016 and 2015

 

2Q 2016                            2Q 2015

Year-on-year change

 

 

RUB mln

%

RUB mln

%

RUB mln

Percent change

 

Freight and transportation services

1,498

32.9%

1,486

32.9%

+12

+0.8%

 

Payroll and related charges

1,309

28.7%

1,215

26.9%

+94

+7.7%

 

Depreciation and amortisation

596

13.1%

611

13.5%

-15

-2.5%

 

Materials, repair and maintenance

634

13.9%

516

11.4%

+118

+22.9%

 

Taxes other than income tax

125

2.7%

123

2.7%

+2

+1.6%

 

Rent

73

1.6%

199

4.4%

-126

-63.3%

 

Other expenses

322

7.1%

362

8.0%

-40

-11.0%

 

Adjusted operating expenses

4,557

100.0%

4,512

100.0%

+45

+1.0%

 

 

Freight and transportation services

Expenses related to freight and transportation services decreased by RUB 153 million, or 5.3% year-on-year, to RUB 2,757 million for the six months ended 30 June 2016. This was primarily a result of a 2.3% year-on-year decrease in the transportation volume of the Company's empty containers, as well as due to a decline in flatcar empty run ratio from 7.2% to 7.0%.

 

Expenses related to freight and transportation services grew by 1.0% year-on-year, or RUB 12 million, to RUB 1,498 million in the second quarter of 2016 on the back of a 3.7% increase in transportation of the Company's empty containers amid the resumed market growth.   

 

Payroll and related charges

Payroll and related charges increased by RUB 123 million, or 5.4% year-on-year, to RUB 2,413 million for the six months ended 30 June 2016, from RUB 2,290 million for the same period of 2015, primarily due to base salary indexing and performance-linked payments. This increase was partially offset by a 6.4% year-on-year decrease in TransContainer's average headcount from 3,897 to 3,648.

 

For the reasons stated above, in the second quarter of 2016, payroll and related charges grew by 7.7% year-on-year, or RUB 94million, to RUB 1,309 million. 

 

Depreciation and amortisation

Depreciation and amortisation decreased just by RUB 9 million, or 0.7% year-on-year, to RUB 1,211 million in the first half of 2016, from RUB 1,219 million for the corresponding period of 2015.

 

In the second quarter of 2016, depreciation and amortisation decreased by 2.5% year-on-year, or RUB 15 million, to RUB 596 million.

 

A decrease in amortisation charges resulted mainly from a decrease in the Company's own flatcar fleet.

 

Materials, repair and maintenance

Expenses related to materials, repair and maintenance were up by 4.2% year-on-year to RUB 1,064 million for the first six months of 2016 from RUB 1,021 million for the same period of 2015. This was in line with a 6.7% increase in a number of flatcar repairs, which grew in the second quarter of 2016.

 

In the second quarter of 2016, expenses related to materials, repair and maintenance were up 22.9% year-on-year to RUB 634 million, largely due to a 17.5% increase in the number of flatcar repairs resulted from more intense utilisation of flatcar fleet amid growing market.

 

Тахes other than income tax

Taxes other than income tax were up 11.2% year-on-year to RUB 289 million for the six months ended 30 June 2016 from RUB 260 million in the corresponding period of 2015, primarily due to the VAT settlement dynamics.

 

For the same reasons, in the second quarter of 2016, taxes other than income tax increased by 1.6% year-on-year to RUB 125 million.

 

Rent

Rent expenses fell by RUB 231 million, or by 58.8% year-on-year, to RUB 162 million for the six months ended 30 June 2016 period from RUB 393 million for the corresponding period of 2015. This was largely due the flatcar operating lease contracts terminated in the third quarter of 2015.

 

For the same reason, rent expenses decreased by 63.3% year-on-year to RUB 73 million in the second quarter of 2016.

 

Other operating expenses

Other operating expenses are an aggregate of various expense items such as security, consulting expenses, fuel and energy, licences and software, communication services, loss of sale of fixed assets, etc. In the first half of 2016, other expenses remained on the level of the corresponding period of 2015, increasing only by 0.1% year-on-year to RUB 694 million from RUB 693 million in the first half of 2015. In the second quarter of 2016, other operating expenses decreased by RUB 40 million, or 11.0% year-on-year, reflecting the Company's cost control improvements.

 

Interest expense

Interest expenses decreased by RUB 56 million, or 20.8% year-on-year, to RUB 213 million for the first six months of 2016 from RUB 269 million for the same period of 2015, mainly due to the redemption of series 2 bonds in June 2015.

 

For the same reason, interest expense in the second quarter of 2016 decreased by RUB 34 million, or 26.4% year-on-year, to RUB 95 million from 129 million in the corresponding period of 2015.

 

Interest income

Interest income increased by RUB 18 million, or 26.1% year-on-year, to RUB 87 million for the first half of 2016 from RUB 69 million for the corresponding period of 2015, mainly due to an increase in the Company's cash balances.

 

Interest income in the second quarter of 2016 decreased by RUB 4 million, or 9.8% year-on-year, to RUB 45 million.

 

Profit before income tax

Profit before income tax increased by RUB 432 million, or by 34.3% year-on-year, to RUB 1,768 million for the six months ended 30 June 2016 from RUB 1,443 million for the six months ended 30 June 2015.

 

In the second quarter of 2016, profit before income tax increased by RUB 752 million, or by 170.1% year-on-year, to RUB 1,194 million from RUB 442 million in the corresponding period of 2015, as a result of the factors discussed above.

 

Income tax expenses

Income tax expenses grew by RUB 79 million, or 28.5% year-on-year, to RUB 356 million for the first six months of 2016 from RUB 277 million for the same period of 2015, primarily due to an increase in taxable profit.

 

For the same reasons, income tax expenses decreased by RUB 139 million, or by 140.4% year-on-year, to RUB 238 million in the second quarter of 2016 from RUB 99 million in the corresponding quarter of 2015.

 

The effective tax rate for the six months ended 30 June 2016 decreased to 20.1% compared to 21.0% in the same period of 2015, while it was 19.9% in the reporting quarter compared to 22.4% in the second quarter of 2015.

 

Total profit and comprehensive income for the period

As a result of the factors discussed above, the profit for the six months ended 30 June 2016 increased by RUB 373 million, or 35.9% year-on-year, to RUB 1,412 million compared to RUB 1,039 million for the same period of 2015. Taking into account the exchange differences relating to foreign operations and other effects, the total comprehensive income for the reporting period was up 11.1% and amounted to RUB 979 million, compared to RUB 881 million for the first six months of 2015.

 

The profit for the three months ended 30 June 2016 increased by RUB 613 million, or 178.7% year-on-year, to RUB 956 million from RUB 343 million for the same period of 2015. Taking into account the exchange differences relating to foreign operations and other effects, the Company generated the total comprehensive profit of RUB 795 million in the second quarter of 2016 compared to the total comprehensive profit of RUB 36 million in the second quarter of 2015. 

 

Liquidity and Capital Resources

As of 30 June 2016, the Company's net cash and cash equivalents amounted to RUB 4,076 million, while its current assets exceeded current liabilities by RUB 1,610 million.

 

The Company's business is asset and capital-intensive and requires substantial capital expenditure for the purchase of flatcars and containers, the development of rail-side terminals and investment in the expanding and modernising its lifting equipment and truck fleet, amongst other things. During the reporting period, the Company's operations and its capital expenditures were financed from internally generated cash flows.

 

Cash flows

The following table sets out the principal components of the Company's consolidated cash flows for the six months ended 30 June 2016 and 2015, respectively.

 

RUB million

1H 2016

1H 2015

Net cash provided by operating activities

2,929

2,225

Net cash used in investing activities

-774

-180

Net cash used in/ provided by financing activities

-13

-815

Net increase in cash and cash equivalents

2,142

1,230

Foreign exchange effect on cash and cash equivalents

-176

-91

Net cash and cash equivalents at the end of the period

4,076

3,043

Cash flow generated by operating activities

Cash flow generated by operating activities grew by RUB 704 million, or 31.6% year-on-year, to RUB 2,929 million for the six months ended 30 June 2016 from RUB 2,225 million for the same period of 2015, mainly due to an increase in operating profit.

 

Cash flow used in investing activities

Cash flow used in investing activities increased by RUB 594 million, or 330.0% year-on-year, to RUB 774 million for the six months ended 30 June 2016 from RUB 180 million for the same period of 2015. This was primarily due to an increase in capital expenditures from RUB 291 million to RUB 860 million. 

 

Cash flow used in financing activities

Cash flow used by financing activities amounted to RUB 13 million and was represented by a net redemption of short-term borrowings and financial lease payments, while a RUB 815 cash flow used in financing activities for the first half of 2015 resulted mainly from a principal repayment of the Company's short-term part of bonds.

 

Capital Expenditure

For the first half of 2016, capital expenditure increased by RUB 569 million, or 195.5% year-on-year, to RUB 860 million from RUB 291 million a year earlier. The majority of the capital expenditure was incurred for the reconstruction and expansion of container terminals in Krasnoyarsk, Yekaterinburg, Irkutsk and Moscow, as well as for the acquisition of ISO containers.

 

Planned capital expenditure for 2016

The Company's capital expenditure programme is aimed at maintaining TransContainer's position as a market leader in the Russian container sector, improving its position in the foreign market, as well as optimising its asset structure and key operational metrics.

 

The total capital expenditure in 2016 is budgeted at RUB 3.8 billion (excluding VAT), however, the actual amount of capital expenditure is subject to the market conditions. The rest of 2016 CAPEX programme is expected to be focused on the acquisition of ISO containers and improvements of the terminal infrastructure.

 

Capital resources

The Company's operations and capital expenditure have historically been financed from internally generated cash flow and proceeds from issuing domestic debt. As of 30 June 2016, the Company's financial indebtedness consisted of one outstanding bond issue, financial lease obligations and other borrowings in an aggregate amount of RUB 5,445 million, compared to RUB 5,953 million as of 30 June 2015. As of 30 June 2016, the Company's net debt was RUB 1,160 million.

 

As of 30 June 2016, the major portion 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's debt is rouble-denominated and has a fixed interest rate.

 

RUB-denominated bonds series 4

On 1 February 2013, the Company issued non-convertible five-year bonds for a total amount of RUB 5,000 million at a par value of RUB 1,000 each. Net proceeds from the issuance after the deduction of related offering costs amounted to RUB 4,988 million. The annual coupon rate of the bonds for five years is 8.35% with interest paid semi-annually.

 

The series 4 bonds will be redeemed in four equal semi-annual instalments within the fourth and fifth years. As a result, these bonds are classified as of two portions: the long-term one with the carrying value amounted to RUB 2,495 million, and the short-term one with the carrying value amounted to RUB 2,675 million.  

 

The amount of accrued interest is RUB 175 million and has been included as short-term debt in the interim condensed consolidated statement of financial position.

 

Other borrowings

During the year ended 31 December 2011, the Company borrowed funds from LLC TrustUnion AM for the principal amount of RUB 514 million at an interest rate of 9.5% per annum with a five-year maturity. The funds were borrowed to finance the acquisition of the Company's ordinary shares for a share option plan for the Company's management. The outstanding debt of RUB 134 million as at 30 June 2016 was fully repaid in July of 2016.

 

Working Capital

The Company's working capital is defined as the difference between its current assets and current liabilities. The table below sets out the key components of TransContainer's working capital for the six months ended 30 June 2016.

 

 RUB million

30 June 2016

31 December 2015

Current assets

 

 

Inventory

274

315

Trade and other receivables

1,350

1,392

Prepayments and other current assets

3,286

3,527

Prepaid income tax

60

84

Short-term investments

209

7

Cash and cash equivalents

4,076

2,110

Non-current Assets classified as held for sale

0

0

Total current assets

9,255

7,435

 

 

 

Current liabilities

 

 

Trade and other payables

3,825

3,405

Short-term debt and current portion of long-term debt

2,809

1,893

Income tax payable

137

99

Taxes other than income tax payable

309

634

Provisions

0

12

Finance lease obligations, current maturities

18

18

Dividends payable

0

0

Accrued and other current liabilities

547

686

Deferred income

0

0

Total current liabilities

7,645

6,747

 

 

 

Working capital

1,610

688

Working capital increased by RUB 922 million to RUB 1,610 million as at 30 June 2016 from RUB 688 million as at 31 December 2015.

 

Downloads

The consolidated financial statements for the second quarter and the six months ended 30 June 2016 are available via the National Storage Mechanism at: http://www.hemscott.com/nsm.do  or at the Company's website  http://www.trcont.ru.

 

 

Conference call

TransContainer will host an analyst conference call on Wednesday, 31 August 2016 at 14:00 UK time / 16:00 Moscow time. Dial in details are as follows:

UK Free Call Dial In

0800 694 0257

Russia Dial In (from a landline)

810 8002 0972 044

Conference ID

68270105#

A replay of the call will be available until 30 September 2016 using the following details:

UK Free Call Dial In

0800 953 1533

Russia Dial In

8 499 677 1064

Replay Access Code

68270105#

  

 

Enquiries:

 

TransContainer

 

Andrey Zhemchugov, Director, Capital Markets and Investor Relations

+7 495 637 9178
+7 495 609 6062

E-mail

ir@trcont.ru

Website

www.trcont.ru

Instinctif Partners

 

Galyna Kulachek/ Catherine Hems

+44 (0)20 7457 2020

 

 

 

    

 

About TransContainer

 

TransContainer (LSE ticker: TRCN) 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. It is the market leader in Russia by A specialised type of rolling stock designed to carry ISO containers.
flatcar
fleet size, container transportation by rail and rail-side 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
throughput. As of 30 June 2016, it owns a network of 45 rail-side container terminals in Russia, 19 rail-side terminals in Kazakhstan (through its joint venture company KedenTransService) and operates one terminal in Slovakia. Company's sales network comprises about 120 sales offices across Russia as well as presence in the CIS, Europe and Asia. TransContainer is listed at Moscow Exchange and LSE. Company's major shareholder with 50% +2 shares is United Transportation and 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
Company, established by Russian Railways, Belorussian Railway and Kazakhstan Temir Zholy.

 

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. PJSC "TransContainer" wishes to caution you that these statements are only predictions and that actual events or results may differ materially. PJSC "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 PJSC "TransContainer", including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries PJSC "TransContainer" operates in, as well as many other risks specifically related to PJSC "TransContainer" and its operations

 

 

 


1 Transportation of clients' containers by the Company's Cars for carrying cargo or passengers designated for railway transportation.
rolling stock
and own loaded containers by its own and third-party flatcars

 

2 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 is calculated as an average empty run in kilometres divided by an average total run in kilometres

This information is provided by RNSThe company news service from the London Stock Exchange  END

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