Russian Railways IFRS net profit down by 12% y/y in 2011.

By bne IntelliNews August 31, 2012
IFRS net profit of state-owned railways monopoly Russian Railways (RZD) declined by 12% y/y to RUB 183bn (USD 5.7mn) in 2011, the company announced. Revenues in 2011 went up to RUB 1.48tn. No other details were yet provided. In the meantime, it was also announced that RZD could place RUB 40bn-RUB 50bn worth of domestic bonds in fall 2012. Recently Fitch Ratings announced that 7% cargo rail transportation tariff indexation proposed by the government as of January 1 2013 will not be sufficient to finance the investment program of Russian Railways (RZD, BBB/Stable) in the absence of other financing sources or other support from the state as the only shareholder of the company. RZD itself proposed a 11% indexation. Fitch still expects subsidies and capital deposits from the state do support the operational activities and capital expenditures of RZD. The government also reviews additional way of support, such as state guarantees and investing reserves into long-term infrastructure projects. At the same time agency notes that partial privatization of the company (25% plus one share) planned for 2012-2013 is unlikely to affect the ratings of RZD. RZD in the coming 3-5 years plans to borrow RUB 60bn-RUB 80bn (USD 1.8bn - USD 2.4bn), PRIME reported citing a corporate finance rep of the company. This would include tapping the Eurobond market at least once a year, with the rest to be borrowed in RUB. To remind, RZD placed USD 1bn worth of 10-year Eurobonds yielding 5.7% annually in the end of March 2012. At the same time demand for the securities exceeded the amount proposed threefold. It is also noted that prior to the placement yield guidance was lowered from 5.875% to 5.75%, making it the lowest yield on 10-year Eurobonds from CIS issuers. Last month RZD placed 7-year RUB-denominated Eurobonds at 8.3%, demand almost twofold exceeding the amount proposed. This year the company is going to borrow about RUB 100bn, out of which 70% will account for RUB and 30% for foreign currencies.

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