PJSC “Research and production corporation “United Wagon Company” (UWC, the Company or the Holding) (MOEX: UWGN), the leader in innovative railcar building in the 1520 mm track gauge zone, reports its IFRS consolidated financial results for the 1H 2018.
Key indicators over the reporting period:
- UWC’s consolidated revenue grew 12% to RUB 32.2 billion compared to 1H 20171
- The Holding’s EBITDA declined by 19% to RUB 5.1 billion
- The Holding’s EBITDA rate excluding subsidies received in 1H 2017 fell by 13%
The consolidated revenue increased propped up by growing earnings from sale of railcars and their components, and larger sales of railcars to third parties (65% in 1H 2017 compared to 100%2 in the reporting period).
The earnings in the Production segment grew 11% to RUB 28.5 billion, as a result of higher railcar selling prices and increases in the sales of specialized, more expensive rolling stock, and components. In the reporting period, all revenue from railcar sales was generated by sales to third parties, while last year over the same reporting period, 35% of railcars were acquired by the Holding’s leasing subsidiary aiming to replace its older railcars sold earlier.
The Lease segment revenue grew 6% to RUB 3.4 billion despite the average fleet size shrinking from 17.5 thousand units to 13 thousand units over the 6 months year over year when the Company's own fleet underwent renovation. The positive dynamics was due to lease rates going up, in line with the market trend.
A decrease in the EBITDA rate was caused, on the one hand, by the cost of production growing and the share of the less profitable Production segment increasing in the consolidated results, and, on the other hand, the absence of subsidies in the reporting period. In 1H 2018, UWC has not received any governmental allowances under industry support projects, while in 1H 2017 it obtained a total of RUB 1.1 billion of subsidies, whereof RUB 0.5 billion were recognised in the consolidated cost of production. The Holding’s EBITDA rate without subsidies shrank by 13%.
The cost of production grew due to metal and component market prices rising and new specialised railcars developed for manufacture. The EBITDA rate in the Production segment fell by 44% to RUB 2.7 billion, and the EBITDA rate excluding subsidies reduced by 28%.
The Lease segment’s EBITDA rate stood at RUB 2.9 billion showing a 4% rise year over year due to railcars generating higher profitability and fleet maintenance costs falling.
The fall in the Holding’s EBITDA rate resulted in a larger net loss that equalled RUB 3.1 billion compared to RUB 2.9 billion in 1H 2017. At the same time, the Company managed to reduce its financial expenses by RUB 0.9 billion by changing most of its credit portfolio rates to floating ones, and, therefore, lowering its average loan interest rate.
The Company continued reducing its capital investments in line with its plans reported earlier. In 1H 2018 it invested a total of RUB 1 billion, whereof the larger part was directed to finance overhauls at TVSZ and broaden the product ranges of TikhvinSpetsMash and TikhivnChemMash. Over the year, the Company intends to deliver as much as RUB 2.6 billion of capital investments, a decrease of 28% compared to 2017.
Alexey Tsyplakov, UWC’s Deputy CEO, Finance and Economy, said, ‘The trends for growth observed in the railcar market together with the company's business developing successfully have materially contributed to our revenue. However, we have seen decreases in the EBITDA rate and profitability caused by the two following factors: the prices of key supplies rising, which affects prices of our finished products with a lag, and the launch of the development process regarding new railcar models, including those of the next-generation type, requiring extra operating expenditure. The management expects business profitability to go up as the Company builds up production of new types of rolling stock.’
1 The current financial statements include revised 1H 2017 financial results. For more information, see Note 5 of the financial statements
2 Excluding “MRC 1520” LLC