Market and business update, 2020 final dividend target re-affirmed
Globaltrans Investment PLC (the “Company” and together with its consolidated subsidiaries “Globaltrans” or the “Group”), (LSE/MOEX ticker: GLTR) today provides a market and business update and re-confirms its targeted 2020 final dividends.
Market dynamics in line with expectations
The freight rail transportation market rapidly recovered during the second half of 2020 following the weakness seen in the first six months. A pick-up in export and internal demand lead to both overall Russia’s freight rail turnover and volumes in the July-November 2020 period recovering, respectively, to about 100% and 99% of the levels for the same period the previous year. As expected, overall market-pricing conditions remained mixed across segments over the same period with further rate declines in the gondola segment and relatively stable railcar operators’ rates for tank cars.
Strong market outperformance, MMK and Metalloinvest contracts extended, one-year contract signed with EVRAZ
Globaltrans outperformed the overall market in 2020 by leveraging its powerful gondola operating model enabling efficient contracting and migration between cargo segments. The Group’s Freight Rail Turnover (excluding Engaged Fleet) rose 2.4% year on year in the January-November 2020 period compared to an overall market decline of 2.8% year on year.
The Group has again extended its service contract with Magnitogorsk Iron and Steel works (“MMK”), one of the world's largest steel producers and a leading Russian metals company, for a further two years with the contract now valid to the end of September 2024. The Group will continue to service 70% of the freight rail volumes of MMK.
The service contract with Metalloinvest, a leading global iron ore and HBI producer and supplier, was extended for a further one-year period although serviced volumes were reduced to 50% of the client’s freight rail needs, from 70% in 2020.
With demand for the Group’s services remaining robust, Globaltrans has already significantly increased business volumes with EVRAZ, one of the leading steel and coal producers, and now has a one-year contract with them. In addition, the Group is expanding business with other existing clients, including SDS-Ugol in particular. This will enable the gondola cars released from servicing Metalloinvest to be fully deployed.
The Group continued to develop and diversify its customer base and currently works with over 500 clients across Russia and the CIS countries, ranging from large industrial groups to more specialised companies.
No significant expansion CAPEX anticipated in 2021
As expected, Globaltrans’ Total CAPEX in the first eleven months of 2020 was limited, consisting primarily of maintenance CAPEX. The Group purchased 300 flat cars to support its growing niche segment for the rail transportation of petrochemicals and high-grade steel in specialised containers.
Considering the market environment, the Group currently envisages practically no expansion CAPEX in 2021. This, together with the ongoing decline in prices for key maintenance CAPEX items such as wheel pairs, will support the Group’s free cash flow generation. The scrappage of Globaltrans’ rolling stock is expected to be immaterial at the level of below 100 units during 2021. The Group currently expects its Total CAPEX (including maintenance) to remain low in 2021 in the range of RUB 6-7 billion.
Solid final 2020 dividend target re-affirmed
The combination of an efficient operational model, flexible expansion CAPEX, declining prices for spare parts along with moderate leverage provides a solid foundation for the payment of robust dividends to shareholders. Taking into account the Group’s recent performance which was in line with management expectations, Globaltrans re-affirms its intention to pay about RUB 5 billion in total final dividends in respect of the second half of 2020 (about RUB 28 per share/GDR). Dividend distribution remains the priority for the Company with the intention to distribute cash not used for business expansion, subject to leverage.
Changes following the United Kingdom’s exit from the European Union
The transitional period following the UK’s withdrawal from the European Union ends on 31 December 2020 at which point changes undertaken by the UK Takeover Panel earlier this year will come into effect. With regards to Globaltrans, which is organised under the laws of Cyprus which is within the EU, this means that from 1 January 2021 the UK Takeover Panel will no longer exercise shared jurisdiction over transactions involving the Company which would otherwise be subject to the Takeover Code, including takeover bids, merger transactions, or schemes of arrangement resulting in the change or consolidation of control over the Company.
Legislation in Cyprus regulating takeovers, including those requiring mandatory takeover offers in certain situations, will no longer be applicable to the Company from 1 January 2021 due to the fact that the London Stock Exchange (where the Company’s GDRs are admitted to trading) will no longer be a regulated market as defined in Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.
Mikhail Perestyuk / Daria Plotnikova
+357 25 328 860
For Russian media
+357 25 328 863
For international media
+44 7799 413351
Globaltrans Investment PLC (“Company”, together with its consolidated subsidiaries “Globaltrans” or the “Group”) is a leading freight rail transportation group with subsidiary operations across Russia, the CIS and the Baltic countries.
The Company was founded in 2004 by a group of entrepreneurs who combined their freight rail businesses under the single brand Globaltrans. These founders remain key shareholders of the Group.
Throughout its years of operation, the Company has pursued a prudent approach to investment, expanding its fleet both by means of organic growth and through the acquisition of other rail operators. Globaltrans’ total fleet is currently almost three times larger than it was at the time of the Company’s IPO in 2008.
The Group’s dividend policy establishes a transparent and straightforward approach to the payment of dividends and is supported by a long history of delivering attractive shareholder remuneration.
Globaltrans global depositary receipts have been traded on the Main Market of the London Stock Exchange (ticker symbol: GLTR) since May 2008 and on the Level One quotation list of the Moscow Exchange since October 2020 (ticker symbol: GLTR).
Due to its vast logistics capabilities, the Group is able to efficiently manage industrial cargo flows, transporting metallurgical cargoes, oil products and oil, coal, construction materials and petrochemicals.
Globaltrans has a total fleet of over 72 thousand units as of 30 June 2020, of which about 94% are owned by the Company. The core of the fleet is universal gondola cars used for a broad range of bulk cargoes (63% of total fleet) and tank cars for transporting oil products and oil (29% of total fleet). In addition, the Group operates specialised containers and the flat cars to transport them. Globaltrans also manages its own fleet of mainline locomotives with 75 units that provide traction for its block trains.
Globaltrans serves a broad range of clients in Russia and the CIS including some of Russia’s leading companies. The Group’s key service contracts include agreements with six blue-chip Russian companies: Metalloinvest, MMK, TMK Group and the ChelPipe Group in the metallurgical segment, and Rosneft and Gazprom Neft in the oil products and oil segment. In total, these contracts contributed about 64% of the Group’s Net Revenue from Operation of Rolling Stock in the first half of 2020. Globaltrans also works with the TAIF Group, UGMK-Trans, EVRAZ and other prominent companies.
The Group’s logistics management principally aims to provide reliable services, responding promptly and flexibly to customer needs, while achieving a good level of profitability for the business. The main component of the Group’s centralised logistics system is its single dispatching centre that monitors every aspect of Globaltrans’ fleet operation. By effectively managing shipments and routes, Globaltrans ensures high utilisation of its fleet and achieves maximum productivity and quality of service.
Additional information on Globaltrans is available at www.globaltrans.com.
Information contained in this announcement concerning Globaltrans Investment PLC, a company organised and existing under the laws of Cyprus (the “Company” and together with its consolidated subsidiaries “Globaltrans” or the “Group”) is for general information purposes only. The opinions presented herein are based on general information gathered at the time of writing and are subject to change without notice. The Company relies on information obtained from sources believed to be reliable but does not guarantee the accuracy or completeness of such information.
The information in this announcement is subject to verification, completion and change. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its shareholders, directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this announcement. None of the Company nor any of its shareholders, directors, officers or any other person accepts any liability whatsoever for any loss howsoever arising from any use of the contents of this announcement or otherwise arising in connection therewith.
This announcement is not an offer of securities for sale in the United States or in any other jurisdiction. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended.
This announcement does not constitute, and should not be construed as, a prospectus or offering document for securities of the Company. This announcement does not constitute or form part of, and should not be construed as an offer for sale or subscription of or a solicitation or invitation to subscribe for or purchase any securities of the Company in any jurisdiction, and nothing contained in this announcement shall form the basis of or be relied on in connection with any contract or commitment whatsoever; in particular it must not be used in making any investment decisions.
This announcement may contain forward-looking statements regarding future events or the future financial performance of Globatrans. You can identify forward looking statements by terms such as “expect”, “believe”, “estimate”, “anticipate”, “intend”, “will”, “could”, “may”, or “might”, the negative of such terms or other similar expressions. These forward-looking statements include matters that are not historical facts and statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, Globaltrans’ results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that Globatrans’ actual results of operations, financial condition, liquidity, prospects, growth, strategies and the development of the industry in which Globaltrans operates may differ materially from those described in or suggested by the forward-looking statements contained in this announcement. In addition, even if Globatrans’ results of operations, financial condition, liquidity, prospects, growth strategies and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in future periods. The Company does not intend to update this announcement or reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause actual results to differ materially from those contained in forward-looking statements of Globaltrans, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, market changes in the Russian freight rail market, as well as many of the risks specifically related to Globaltrans and its operations. No reliance may be placed for any purposes whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness.
 Global Depositary Receipt.
 Total fleet is defined as the fleet owned and leased in under finance and operating leases as at the end of reporting period. It includes railcars, locomotives and specialised containers, unless otherwise stated, and excludes Engaged Fleet.
 Net Revenue from Operation of Rolling Stock is a non-GAAP financial measure, derived from management accounts, describing the net revenue generated from freight rail transportation services which is adjusted for respective “pass through” loaded railway tariffs charged by RZD (included in the EU IFRS line item “Infrastructure and locomotive tariffs: loaded trips”).