Page 51 - bne IntelliNews Ukraine Country Report May 2017

presentation, Ukrzaliznytsia revealed its “hope” that the government would raise its freight rates by total 25% in the course of 2017, which would allow the company to more than double its CapEx program in 2017 to UAH27.4bn. While the Infrastructure Ministry agreed to adjust rates by about 25% since February, other regulators blocked that decision and so far there is no new clear plan for rate adjustments. The rate hike seems to be being blocked by the key customers of Ukrzaliznytsia (iron ore, steel, coal and grain companies), which is what we expected in December. On top of commercial lobbying against rate growth, there is also political tension between Ukrzaliznytsia's top management and the Infrastructure Ministry, which also may hinder any decision.
Net revenue at state monopoly Ukrainian Railway improved 21% y/y to UAH17.9bn in 1Q17, according to its April 27 regulatory filing. Revenue in its key segment, freight transportation, increased 22% y/y to UAH15.1bn on 10% higher turnover (58.0bn t*km) and 11% higher effective freight rate. Its passenger segment also improved as revenue rose 14% y/y to UAH1.4bn. An effective rate hike of 53% y/y outpaced declines in passenger turnover by 26% y/y. UZ’s EBITDA surged 3x y/y to UAH5.0bn and bottom line turned positive at UAH0.05bn in 1Q17 from negative UAH2.0bn a year before. It generated UAH3.6bn in operating cash flow (2.4x y/y growth) and increased CapEx almost 7x y/y to UAH1.3bn in 1Q17. Its net debt stood at UAH32.7bn at end-1Q17, roughly flat YTD. Surprisingly, the blockade of occupied Donbas (Ukraine's industrial hub), which lasted for more than half of 1Q17, did not cause UZ freight transportation to decline. In our view, the company’s good P&L in 1Q17 may have negative implications, as it may become a good argument for corporate opponents of a further hike in freight rates.
The management of Ukrainian Railway approved a modernisation strategy through 2021 with a total investment plan of between UAH130bn (€4.5bn) and UAH150bn (€5.2bn), the company said in a press release on April 26. The plan, which aims at making Ukrainian Railway "a leader in the transportation and logistics market not only in Ukraine, but also in Europe", will be presented to the Ukrainian government later this year, the release said. Proposed changes include creating separate divisions based on business activity, not based on regions as it is now. The company aims to improve the quality of freight and passenger services, capture more market share of container transportation in Ukraine and increase revenue from the passenger segment. Ukrainian Railway also plans to purchase 250 locomotives in five years.
9.2.4 Agriculture corporate news
Astarta’s 2016 profit skyrockets five-fold but no dividends have been recommended . The company reported on April 10 its audited 2016 results in its annual report, which are in line with its preliminary results published on February 24. Revenue advanced 17% y/y to €368.9mn, EBITDA rose 16% y/y to €152.1mn, and net debt decreased 16% y/y to €145.9mn in 2016. The company’s net profit jumped 5.2x y/y to EUR 82.6mn. Despite the increased profit, the Astarta board recommended paying no dividends for 2016. The company’s 2017 outlook summary lacked details, only stating that the company will focus on efficiency and innovations, and may consider investing into expanding its core business segments, if market conditions allow. Its 2016 revenue growth was driven by higher sugar sales (+15% y/y to EUR 174.5mn)
51 RUSSIA Country Report April 2017 www.intellinews.com