Full Year 2013 Financial Results Announcement

Globaltrans Investment PLC (the “Company” and together with its consolidated subsidiaries “Globaltrans” or the “Group”), (LSE ticker: GLTR) today announces its financial and operational results[1] for the year ended 31 December 2013.

Certain financial information which is derived from the management accounts is marked in this announcement with an asterisk {*}. Information (non-GAAP and operational measures) requiring additional explanation or defining is marked with initial capital letters and the explanations or definitions thereto are provided at the end of this announcement.

The Group’s financial and operational results for the year ended 31 December 2013 include results of Ferrotrans (renamed from Metalloinvesttrans) which have been consolidated from 16 May 2012 and Steeltrans (renamed from MMK-Trans) which have been consolidated from 12 February 2013.

Financial highlights

  • Adjusted Revenue grew 6% year on year to USD 1,407.3 million*, reflecting a further increase in the Group’s average fleet size and a strong performance in the rail tank car segment;
  • Adjusted EBITDA was slightly down year on year at USD 652.7 million* (2012: USD 658.2 million*) with an Adjusted EBITDA Margin of 46%* (2012: 50%*) primarily reflecting soft market conditions in the gondola segment;
  • Cash generated from operations remained robust at USD 657.7 million (2012: 649.9 million) with the Group delivering Free Cash Flow[2] of USD 423.2 million*;
  • Profit for the year declined by USD 60.0 million or 19% year on year to USD 251.6 million mainly driven by depreciation and amortisation charges that rose by USD 75.5 million due to the consolidation of recent acquisitions and associated long-term service contracts;
  • The Group significantly deleveraged in the second half of 2013 and closed the year with Net Debt of USD 910.0 million* and a comfortable 1.4x* Net Debt to Adjusted EBITDA ratio. The Group’s Net Debt was reduced further to USD 748.6 million* at the end of February 2014;
  • The Group’s currency risk profile improved further with Russian Rouble-denominated borrowings representing 94% of the Group’s debt portfolio at the end of 2013 (2012 end: 91%);
  • The Board recommends a dividend of USD 110.8 million (62 US cents per ordinary share/GDR), flat in Russian Rouble terms[3] year on year. This represents a Dividend Pay-out Ratio of 61% compared to 48% in the previous year.

Operational highlights

  • The integration of the fleets of Ferrotrans and Steeltrans was successfully completed. The Group’s entire fleet of 40,000 universal gondola cars is now managed from a single dispatching centre, providing customers with a more reliable and efficient service offering. In addition, this central hub also enables the more efficient management of Empty Runs as well as maintenance and repair programmes;
  • Globaltrans continued its market outperformance, the Group’s Freight Rail Turnover (including Engaged Fleet) increased 13% year on year to 155.5 billion tonnes-km[4] in contrast to the overall market which slipped 1% year on year on the back of macroeconomic headwinds;
  • Market share gains were achieved with the Group’s Market Share rising to 8.3% from 6.6% in 2012;
  • Operational excellence continued with the Empty Run Ratio for gondola cars at a solid 38%, the lowest annual level in the last five years, meanwhile the Total Empty Run ratio improved to 53% (2012: 57%);
  • Average Price per Trip declined 6% year on year in Russian Rouble terms with Average Distance of Loaded Trip down 3% year on year;
  • Total Fleet size increased 6% year on year to 65,808 units at the end of 2013 with an average age of Owned Fleet of about 8 years.


Sergey Maltsev, CEO of Globaltrans Investment PLC, said:
“Globaltrans demonstrated a resilient performance in 2013 despite a difficult year for the freight rail transportation industry in Russia brought on by the slowdown in growth rates of the Russian economy.

The Group’s ability to deliver against this backdrop was the result of our robust business model, adaptable strategy and strong execution. Our business model focuses on the balance between our gondola and our rail tank cars being complementary through the different phases of the economic cycle. In addition, our strategy of selective acquisitions of suitable captive rail operators along with long-term service contracts and flawless execution provided us with above-market results in the gondola car segment.

All the above elements ensured that in 2013 our Group maintained high operational efficiency and won market share. Furthermore, Globaltrans’ strong cash flow enabled the Group to significantly deleverage the business and to propose an unchanged dividend year-on-year in Russian Rouble terms. This confirms Globaltrans’ commitment to delivering attractive shareholder returns throughout the economic cycle.

The quality of our service proposition combined with the efficiency of our operations generates strong customer loyalty. This is illustrated by two key developments already in 2014 that have seen the extension of our contract with Metalloinvest by another 19 months to the end of 2016 as well as an increase in the service volume under our long-term contract with MMK (valid to the end of February 2018) from 70% to 80% throughout 2014.

We believe that despite the current macroeconomic environment, the state of development of the Russian freight rail industry continues to offer growth opportunities for well-capitalised and efficient players like Globaltrans”.

Michael Zampelas, Independent Non-Executive Director and Chairman of the Board of Globaltrans Investment PLC, commented:
“It is encouraging to see that the Group was able to execute its strategic goals successfully and demonstrate the strength and flexibility of its business model within the overall context of a difficult freight rail market in 2013.

The Board will be continuing its prudent approach to capital allocation and organic CAPEX remains on hold while we focus on strengthening the Group's balance sheet yet further.

While the Group remains open to selective M&A opportunities that meet its strict investment criteria, in periods of sustained low investment activity the Board supports a Dividend Pay-out Ratio of not less than 50% of Imputed Consolidated Net Profit and in 2013 has recommended a dividend resulting in a Dividend Pay-out Ratio of 61%.

We believe this strikes the right balance between ensuring that we stay at the forefront of our industry and also appropriately remunerate our shareholders”.

Outlook and Priorities for 2014

The business conditions and pricing environment in the Russian rail freight industry at the beginning of 2014 remain difficult and will continue to depend on overall macro-economic and political developments. With approximately 85% of Russian freight turnover carried by rail (excluding pipeline traffic), any recovery in the economy will be positive for the freight rail transportation sector. Moreover, the recent Russian Rouble depreciation could potentially provide a stimulus for key export industries that, along with previously announced large infrastructure projects, could provide an improvement to the freight rail market in general.

Significant industry developments in 2014 include the freezing of RZD-regulated infrastructure and locomotive tariffs for Empty Runs, which removes inflationary pressure from the largest cost item of rail operators. In addition the anticipated new regulation on the accelerated retirement of old railcars would improve the market’s supply and demand balance and may create opportunities for organic growth.

Against this background the focus of Globaltrans’ management team in 2014 will be to:

  • Extract the benefits of the centralised management of the gondola car fleet and maintain high levels of operating efficiency;
  • Optimise costs with a focus on administration and unit costs in repair and maintenance;
  • Reduce Group debt further in order to help position the Group for future opportunistic growth; and
  • Continue to examine opportunities to create additional value via selective M&A and/or organic expansion.

As the vast majority of the Group’s revenues, costs, debt and CAPEX is denominated in Russian Roubles, the recent depreciation of the Russian Rouble vs. US Dollar exchange rate has had a broadly neutral effect on the Group’s results in Russian Roubles.

In terms of growth, the Russian freight rail market remains attractive. We believe the combination of a still fragmented industry in which a high share of railcars are controlled by captive rail operators will offer interesting prospects for a strong player with low leverage and robust free cash flow generation during the years to come.


Analyst and Investor Conference Call

An analyst and investor conference call will be hosted by Sergey Maltsev, Chief Executive Officer and Alexander Shenets, Chief Financial Officer.

Date: Monday, 31 March 2014
Time: 14.00 London / 9.00 New York (EDT) / 17.00 Moscow

To participate in the conference call please dial one of the following numbers and ask to be put through to the "Globaltrans" call:

UK toll free: 0808 109 0700
International: +44 (0) 20 3003 2666

As there will be simultaneous translation for the first part of the call (slide presentation), you should state whether you prefer to listen in English or Russian. During the Q&A session, all participants will hear both languages.

Webcast facility
There will also be a webcast of the call available through the Globaltrans website (www.globaltrans.com). Please note that this will be a listen-only facility.

Globaltrans Investor Relations

Mikhail Perestyuk / Alexander Maltsev
+357 25 503 153

For international media
StockWell Communications
Laura Gilbert / Zoë Watt
+44 20 7240 2486

Globaltrans is a leading private freight rail transportation group with operations in Russia, the CIS and the Baltic countries. The Group’s main business is the provision of freight rail transportation services. Globaltrans provides services to more than 650 customers and its key customers include a number of large Russian industrial groups in the metals and mining and the oil products and oil sectors.

The Group has a Total Fleet of about 66 thousand units of rolling stock with an average age of about eight years[15]. Universal gondola cars and rail tank cars constitute the backbone of the Group’s fleet. About 93% of the Total Fleet is owned by the Group. In 2013 the Group’s Freight Rail Turnover (including Engaged Fleet) was 155.5 billion tonnes-km. The Group’s Market Share was 8.3% of overall Russian freight rail transportation volumes in 2013.

Globaltrans' global depositary receipts (ticker symbol: GLTR) have been listed on the Main Market of the London Stock Exchange since May 2008. Globaltrans was the first freight rail transportation group with operations in Russia to have an international listing.

To learn more about Globaltrans, please visit www.globaltrans.com

Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of Globaltrans. 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. Globaltrans wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Globaltrans 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 Globaltrans, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries Globaltrans operates in, as well as many other risks specifically related to Globaltrans and its operations.

[1] The Group’s financial performance in 2013 was affected by a 3% depreciation in the average exchange rate of the Russian Rouble (Functional Currency of the Company, its Cyprus and Russian subsidiaries) against the US Dollar compared to 2012 (the Group’s financial information presentation currency). The 2013 period end exchange rate of the Russian Rouble against the US Dollar weakened by 8% compared to the end of 2012

[2] Free Cash Flow (a non-GAAP financial measure) is calculated as “Net cash from operating activities” (after changes in working capital and tax paid) less “Purchases of property, plant and equipment” (which includes maintenance CAPEX) and “Interest paid”.

[3] The proposed dividend amount in Russian Rouble terms equals RUB 3,943 million (calculated at the official USD/RUB FX rate of 35.58 as of 28 March 2014, the date of the Board decision on proposed dividends). This figure is 2% above RUB 3,865 million (USD 125.1 million calculated at the official USD/RUB FX rate of 30.89 as of the previous date of the Board decision on proposed dividends on 22 March 2013).

[4] The Group’s Freight Rail Turnover excluding Engaged Fleet increased 12% y-o-y to 131.0 bln tonnes-km in 2013.