RPC UWC Investor Presentation - uniwagon.com · 3 Notes: (1) As at 30.06.2016; (2) according to 6M...
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RPC UWC Investor Presentation VTB Capital Investment Forum “RUSSIA CALLING!” October 14, 2016
Transcript of RPC UWC Investor Presentation - uniwagon.com · 3 Notes: (1) As at 30.06.2016; (2) according to 6M...
RPC UWC Investor Presentation
VTB Capital Investment Forum “RUSSIA CALLING!”
October 14, 2016
2Leader in all directions
in freight car production
by innovative cars fleet
in the operating lease market
by fleet’s efficiency
by innovative car product range
No. 1
No. 1
No. 1
No. 1
TOP 5
3
Notes: (1) As at 30.06.2016; (2) according to 6M 2016 results, by ths t-km per 1 railcar
SERVIVE
PRODUCTION OPERATING LEASE
ENGINEERING OPERATION
> 50 partner service
centres in the CIS
> 200 patents in the
CIS
> 100 designers and
engineers
Annual production capacity:
22,000 railcars
90,000 tonnes of castings
18,000 railcars owned1
100% utilization ratio
16,900 railcars under operation1
2x times higher efficiency of cargo
transportation2
CLIENT
New
models
and p
roduction
technolo
gie
s
Market demand
Railcars and components sale Railcars lease
Transportation services
Railc
ars
lease
Repair
Railcars sale
Efficient vertically integrated business model
4Dynamic development
In total railcars production
In innovative railcars production
0%
58%
83% 85%
2012 2014 2015 1H 2016
%
1%
15%
41%47%
2012 2014 2015 1H 2016
%
Market share1 Operational results
Fleet owned and operated
1.3
9.6
6.8
2012 2014 2015 1H 2016
ths
railcars
12.4
5.92
5.7
19.0
27.2 28.6
2012 2014 2015 1H 2016
ths
railcars
2.2
17.1
23.5
2012 2014 2015 1H 2016
RU
B b
ln
42.1
0.8
3.6
5.0
2012 2014 2015 1H 2016RU
B b
ln
Production output
Financial results
Revenue
EBITDA
Notes: (1) According to “Industrial cargoes”, among railcar manufacturers in the CIS; (2) 1H 2015 results
17.02
7.0
+111%
production output CAGR for 2012-2015
+68%
railcar fleet CAGR for 2012-2015
+169%
revenue CAGR for 2012-2015
2.82
5Product line development
2013-15 2016 2017-18
20
Certi
fied
mo
dels
an
d m
od
ific
ati
on
s*
40
60
Mineral fertilizers hoppers 25 tf 120 m3
Chemical tankers 25 tf: methanol, ammonia, caustic
Container flat cars40 ft 25 tf
Solid-bottom gondolas25 tf 92 m3
Gondolas with unloading hatches 25 tf: 88 m3, 92 m3
Grain hoppers 25 tf: 101 m3, 120 m3
Cement hoppers25 tf 72 m3
Container flat car40 ft 23.5 tf
Mineral fertilizers hoppers 25 tf 101 m3
Timber flat cars40 ft 25 tf
Others
Others
Specialized railcars: box cars, flatcars and other
Articulated railcars
Railcars with 27 t per axle bogie
Chemical and LPG tank cars
Others
* Accrued
6Loading performance depends on rolling stock availability
120
130
140
150
160
170
180
190
200
янв фев мар апр май июн июл авг сен окт ноя дек
2003-2015
2015
2016
70
75
80
85
90
95
100
105
110
115
120
янв фев мар апр май июн июл авг сен окт ноя дек
2003-2015
2015
2016
In September 2016 car loadings totalled 102 million t (-1.4% compared with the same period last year)
Car loadings slightly dropped due to the insufficient number of gondolas: despite growing coal output (+10-15%), coal companies failed to perform their contractual shipments
There have been decreases in shipments of coal (-1,5%), construction cargoes (-2,2%), oil and petroleum products (-6,7%), cement (-3,4%), ferrous metals (-5,2%)
Shipments of iron and manganese ore (+2,2%), timber (+3.2%), fertilizers (+10.0%), coking coal (+11.1%) and non-ferrous ores (+5.6%) increased
In September 2016 the cargo turnover reached 194.7 billion t-km (+1.2%), a record high for that month
Cargo loading on RZD network, mln t
Cargo turnover on RZD network, bln t-km
-1.4%
+1.2%
September 2016 Fact vs PP vs PY
Coal 26.5 0.8% -1.5%
Oil and petroleum products 18.2 -9.5% -6.7%
Construction materials 13.2 -9.0% -2.2%
Iron and manganese ore 9.4 1.1% 2.2%
Ferrous metals 5.5 -6.8% -5.2%
Timber 3.2 -8.6% 3.2%
Fertilizers 4.4 0.0% 10.0%
Cement 2.8 -3.4% -3.4%
Non-ferrous ores 1.9 0.0% 5.6%
Ferrous scrap 1.4 7.7% 0.0%
Grain and milling products 1.9 18.8% 0.0%
Coke 1.0 -9.1% 11.1%
Other 10.6 -19.1% -15.9%
Total loading 102.0 -3.7% -1.4%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
7High levels of write-offs
In September 2016 the number of write-offs was 8.3 thousand railcars (whereof 6.1 thousand were gondolas):
Total write-offs for 9M 2016 amounted 89 thousand railcars (+16% YoY)
As at the beginning of October 2016, the size of out-of-service fleet reduced to 90.1 thousand units
September write-offs in the CIS stood at 12.6 thousand units
Out-of-service rolling stock in Russia as at the beginning of the month, thousand units
Railcar write-offs, thousand units
Jul. 16 Aug. 16 Sep. 16
Freight One -1.8 -3.8 -5.4
Federal Freight -1.0 -0.9 -1.1
RZD -0.5 -0.3 0.0
Rosagrotrans -0.1 -0.4 -0.2
Top 4 -3.4 -5.5 -6.7
Other -2.3 -3.0 -1.6
Total -5.7 -8.5 -8.3
1.2 1.7
1.5 1.9
2.1
1.7 2.3
1.9
2.2
2.0
4.8
3.7
7.0 7.9
6.0
13.6
4.7 6
.7
2.4 4
.2
2.4
6.1
10.9
4.2
4.3
4.0
3.0 4
.9 6.1
1.6
1.3 1.2
1.6 2.4
1.6 1.6
1.4 1.9
4.1
1.0
2.4
2.2
2.7
4.3 4
.6
3.0
3.5
2.5
2.0
2.7
6.0
3.0
5.0
7.2
7.8
5.2 6.5
2.7
3.6 2.2
2.1
1.6
1.8
1.9 3
.3 3.9
3.4 3.7
3.1
3.0 3.8
6.3
1.8
4.4
7.0
6.4
11.4 12.5
9.0
17.1
7.28.7
5.0
10.2
5.4
11.1
18.1
12.0
9.4 1
0.5
5.7
8.5
8.3
Jan-1
4
Feb-1
4
Mar-
14
Apr-
14
May-1
4
Jun-1
4
Jul-
14
Aug-1
4
Sep-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan-1
5
Feb-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-
15
Aug-1
5
Sep-1
5
Oct-
15
Nov-1
5
Dec-1
5
Jan-1
6
Feb-1
6
Mar-
16
Apr-
16
May-1
6
Jun-1
6
Jul-
16
Aug-1
6
Sep-1
6
полувагоны
прочие
73.8
76.4 80.3 85.1
94.1
96.4
98.9
101.6
103.9
110.0
114.9
115.4 123.1
123.4
129.8
129.9
131.6
126.1
128.2
127.6
119.2
119.6
116.8
118.5
117.0
118.9
114.9
106.6
100.4
98.7
95.3 99.4
93.1
90.1
Jan-1
4
Feb-1
4
Mar-
14
Apr-
14
May-1
4
Jun-1
4
Jul-
14
Aug-1
4
Sep-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan-1
5
Feb-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-
15
Aug-1
5
Sep-1
5
Oct-
15
Nov-1
5
Dec-1
5
Jan-1
6
Feb-1
6
Mar-
16
Apr-
16
May-1
6
Jun-1
6
Jul-
16
Aug-1
6
Sep-1
6
Oct-
16
Gondolas
Other
8In August 2016 railcar production increased by 1.5 times MoM
In August 2016, the CIS manufacturers sold 3,802 railcars, twice as many as in August 2015 and 1.5 times above the previous month's sales
Review of manufacturers:
UWC's share, despite the intense growth in the company’s production, reduced to 44% in the Russian Federation (to 43% in the CIS) in August due to a drastic increase in the competitors’ outputs
UVZ made 456 gondolas (12-196-02) with an axle load of 25 tf
Altaivagon has ramped up its output of solid-bottom gondolas 3 three times to stand at 300 units
Ruzkhimmash:
The plant continues making railcars equipped with 23.5 tfbogies
Ruzkhimmash is soon likely to start the production of 12-196-02 gondolas (UVZ design)
ZMK made innovative 25-tf grain hoppers (200 units)
Roslavl Car Repair Plant produced 3 timber platforms equipped with a 25-tf bogie of UVZ design
Ukraine’s production dropped twice to 61 railcars in August (whereof 50 hoppers with a body volume of 116 m3 were made by Kryukov Railway Car Building Works)
Other manufacturers:
RTH (Novozybkovsky Machine-Building Plant and Armavir Machine-Building Plant) - 146 units, a 1.5-time growth
Yaroslavsky Car Repairing Works (245 units -maintenance vehicles for RZD), a 6-fold increase
Barnaul Car-Repair Plant - 60 grain hoppers (production relaunched after a suspension in February)
Railcar production in the CIS, thousand units
3.802
0
1
2
3
4
5
6
7
8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014 2015 2016
Facility ProductsProduction inAugust, units
Marketshare in the CIS
TVSZ (UWC)Gondolas, grain hoppers, tank cars 25 tf
1,641 43%
UVZGondolas, grain hoppers 25 tf, tank cars 23.5 tf
589 15%
AltaivagonGondolas 25 tf, box cars andflat cars 23.5 tf
470 12%
RuzhimmashTank cars, car transporters and sugar hoppers 23.5 tf
240 7%
ZMKGrain hoppers 25 tf, flat cars23.5 tf
280 7%
Other plants in the CIS
Timber flat cars 25 tf, railcars 23.5 tf
394 10%
Total 3,802
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
9Gondola surplus is at its lowest level
Disposal of oil tank cars, ths units
Though the active fleet shrank by 6% compared to September
2015, shipments by gondola car increased +5-10%
The increase was reached through maximizing the efficiency of
gondola operation. Further increases in shipments will lead to a
larger operated fleet
In July-September the surplus of gondolas stood at its lowest:
4-6 thousand units, as evidenced by a railcar shortage in
Kuzbass
Disposal of gondola fleet, ths units
A drop in the shipments of oil and petroleum products brought
about a 6% reduction of the active fleet compared to September
2015 and a larger surplus of oil tank cars (+8%)
27 thousand railcars (13% of the fleet) are idle, whereof 13
thousand units (6%) are out-of-service and 14 thousand units
represent the surplus
46
4
46
4
48
2 49
2
49
6
50
1
50
1
49
9
50
0
50
3
49
7
48
9
46
2
45
5
47
2
47
0
47
0
47
6
48
0
47
5
47
1
46
8
46
4
46
3
43
2 44
0
44
1
44
5
44
4
44
3
44
7
44
4
44
3
31 34
37
41
46
46
47
48
48
52
54
53
57
56
59
57
57 5
3 53
52
43
43
40
40
39
41
38
33
33
34 3
4
37
32
52 51
32
20
13 9 9
11
11
5
9
17
41
49
29
29
27
19
8
10
10
9
11
11
40 2
9
25
17
14
11 5 4
6
54
8
54
9
55
1
55
3
55
5
55
7
55
7
55
8
55
8
56
0
56
0
56
0
56
0
56
0
55
9
55
6
55
4
54
8
54
2
53
6
52
4
52
0
51
4
51
4
51
2
51
0
50
5
49
5
49
1
48
9
48
6
48
5
48
1
420
440
460
480
500
520
540
560
580
Jan-1
4
Feb-1
4
Mar-
14
Apr-
14
May-1
4
Jun-1
4
Jul-
14
Aug-1
4
Sep-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan-1
5
Feb-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-
15
Aug-1
5
Sep-1
5
Oct-
15
Nov-1
5
Dec-1
5
Jan-1
6
Feb-1
6
Mar-
16
Apr-
16
May-1
6
Jun-1
6
Jul-
16
Aug-1
6
Sep-1
6
Профицит
Неисправный парк
Активный парк
20
2
20
0
20
1
20
0
19
1
18
6 18
9
18
9
19
1
19
3 19
6
19
8
19
4
19
1
19
1
18
7
18
0
17
8
17
9
18
1
18
0
17
9
18
0 18
4
17
7
17
7
17
5
16
8
16
1
16
3 16
8
17
0
16
9
14
13 13
12
14
14
15
15
16 1
5
16 1
6
17
17 1
8
19
20
20 2
1 21
22
22 2
2
21
21
20
20
19
17 1
6
14
14
13
6
9 9
10
18
22 1
8
18 1
5
13
9 6
8
10 7
11
17
18 16 13
13
13 12 7
12
12
14
21
25
23
17 14
14
22
2
22
2
22
2
22
3
22
3
22
2
22
2
22
2
22
2
22
1
22
1
22
0
21
9
21
7
21
7
21
7
21
6
21
6
21
5
21
5
21
5
21
4
21
4
21
2
21
0
20
9
20
8
20
7
20
4
20
2
19
8
19
7
19
6
160
170
180
190
200
210
220
230
Jan-1
4
Feb-1
4
Mar-
14
Apr-
14
May-1
4
Jun-1
4
Jul-
14
Aug-1
4
Sep-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan-1
5
Feb-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-
15
Aug-1
5
Sep-1
5
Oct-
15
Nov-1
5
Dec-1
5
Jan-1
6
Feb-1
6
Mar-
16
Apr-
16
May-1
6
Jun-1
6
Jul-
16
Aug-1
6
Sep-1
6
Профицит
Неисправный
Активный
Surplus
Out-of-service fleet
Active fleet
Surplus
Out-of-service fleet
Active fleet
10Rail market recovery is accelerating
The gondola car market continues its recovery influenced by 4 key factors:
Stably high write offs - around 100 thousand railcars over 2015, some 89 thousand railcars during the 9 months of 2016
A large number of out-of-service railcars on the railway network – more than 90 thousand units against the standard of 70-75 thousand
Low railcar output – some 19 thousand units produced over the 8 months of 2016 (similar to the 2015 figures)
Industry experts (research agency INFOLine, the Institute of Natural Monopolies Research, investment banks) expect an increase in the daily rates for gondolas up to 800 RUB/day by the end of 2016
Gondola segment balance is changing
80.2 88.0 81.5 68.438.7
12.2 4.5 2.0 2.0 2.0 3.0 3.0 3.0 3.0 3.0
0.0 0.4 0.43.4
16.4
14.7 38.0 42.5 43.0 44.0 41.5 40.5 40.5 39.5 39.0
-45.9-25.0 -23.6 -27.4
-48.8
-100.6 -110.8-72.7
-36.7 -29.4 -30.4 -25.0 -19.4 -26.0 -17.6
2.37.8 11.7
2.33.6
2.02.5 2.5 3.0 4.0 5.0 6.0 6.0 7.0 8.0
1.021.09
1.151.21 1.22
1.141.08 1.05 1.06 1.07 1.09 1.11 1.13 1.15 1.17
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
-150
-100
-50
0
50
100
150
2010 2011 2012 2013 2014 2015 2016*2017*2018*2019*2020*2021*2022*2023*2024*Закупки (обычные), тыс Закупки (инновационные), тыс
Списание, тыс. Экспорт (обычн. и иннов.), тыс.
Парк, млн. (пр. шкала)
Source: INFOline
*forecast
Rate of return for gondolas continuously growing
Source: Industrial Cargoes, The Institute of Natural Monopolies Research (IPEM)
Production of standard railcars, ths units
Write-offs, ths units
Fleet, mln units (RHS)
Production of innovative railcars, ths units
Export, ths units
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mar-
08
Jun-0
8
Sep-0
8
Dec-0
8
Mar-
09
Jun-0
9
Sep-0
9
Dec-0
9
Mar-
10
Jun-1
0
Sep-1
0
Dec-1
0
Mar-
11
Jun-1
1
Sep-1
1
Dec-1
1
Mar-
12
Jun-1
2
Sep-1
2
Dec-1
2
Mar-
13
Jun-1
3
Sep-1
3
Dec-1
3
Mar-
14
Jun-1
4
Sep-1
4
Dec-1
4
Mar-
15
Jun-1
5
Sep-1
5
Dec-1
5
Mar-
16
Jun-1
6
Sep-1
6
775
Consensus forecast 800 RUB/day
by the end of 2016
Rapid recovery of daily rates due to fleet shortage
11Market switches to innovative railcars
Innovative railcars replacing old generation railcars
The lease rate for an innovative gondola is 50-75% above the market lease rate
Source: Industrial Cargoes
19%
81%100%
Source: Industrial Cargoes; Company`s data
In spite of overall railcar production slowdown, production of innovative railcars continues to grow, their share in the Russian plants’ output structure reached 100% in 2015 and still remains at this level
The UWC’s share in production of innovative railcars in 2016 approximated 80%
The strong demand is driven by high operational efficiency - two times higher cargo turnover in comparison with old generation railcars
Economic benefits and technological advantages of innovative railcars are highly appreciated in the market, as shown by higher lease rates offered by rolling stocks operators
1,000-1,100
1,200-1,300
0
200
400
600
800
1,000
1,200
1,400
1,600
Jan-1
4
Feb-1
4
Mar-
14
Apr-
14
May-1
4
Jun-1
4
Jul-
14
Aug-1
4
Sep-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan-1
5
Feb-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-
15
Aug-1
5
Sep-1
5
Oct-
15
Nov-1
5
Dec-1
5
Jan-1
6
Feb-1
6
Mar-
16
Apr-
16
May-1
6
Jun-1
6
Jul-
16
Aug-1
6
Sep-1
6
Рыночная ставка аренды
Ставка аренды ОВК
Доходность оперирования В1520
Gondola sales by Russian plants (ths units)
2.6
2.4 2.5
2.9
2.3
2.6
2.9
2.6 2
.8 2.9
2.4
2.1
1.2
1.4
1.9
1.2 1.2
1.1
1.6
0.7
1.6
1.1
1.6 1
.7
1.4
1.2
0.8
1.1
1.5
1.5
1.5 1.6
Jan-1
4
Feb-1
4
Mar-
14
Apr-
14
May-1
4
Jun-1
4
Jul-
14
Aug-1
4
Sep-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan-1
5
Feb-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-
15
Aug-1
5
Sep-1
5
Oct-
15
Nov-1
5
Dec-1
5
Jan-1
6
Feb-1
6
Mar-
16
Apr-
16
May-1
6
Jun-1
6
Jul-
16
Aug-1
6
750-800
Market lease rate
UWC lease rate
UWC operating rate
12UWC’s innovative railcars: excellent technical and economic characteristics
UWC’s innovative railcars have various operational advantages over their analogues which increase economic benefits derived by their owners and users
Technical characteristics Economic characteristics Cumulative effect
Axle load increasedfrom 23.5 to 25 t per axle (+6%)
Freight capacity increasedfrom 69-71 to 75-77 t (+8-10%)
15% less impact on the railway infrastructure
Standard service life increased to 32 years (by 1.5 times)
Standard intervals between repairs are 3-4 times higher (8 years or
800 ths km)
Service life of railcar components increased to
1,000,000 km
Tariff cost reduced by 10-15% per tonne of freight
Special empty run tariff system:savings up to 30%
Less frequentrenewal of fleet and rolling stock
Life-cycle costs cut by 3 times
Breakdowns are 15-20 times lessfrequent
930 RUB/dayextra savings
(+150% premium to the current market rate)
New generation railcars earn their owners and lessees extra daily
benefit compared to standard railcars
RUB 3.1 mlnextra savings made over a railcar’s lifecycle based on a discount rate of
12%
13Calculation of tariff effect: Example (Chelutai - Vanino)
With equal transportation cost per tonne, the gains from operating an innovative railcar are some 600 RUB higher than those from operating a railcar equipped with 18-100 bogie
The current lease rate for UWC’s innovative railcars with carrying capacity of up to 75 tonnes is RUB 1,000-1,100/day which implies considerable savings for the freight carrier and ensures the required return for the Company
Therefore, prices are formed subject to the results of comparison of a standard and innovative railcar in terms of their economic characteristics for a given route, carrier’s profit guaranteed
The example for Chelutai - Vanino route shows that the estimated lease rate for UWC's innovaitve railcars is 606 RUB/day higher, the transportation cost per tonne being equal
When concluding a contract, the effect is divided as agreed with the carrier
Subject to the technical and economic advantages of the innovative railcar, UWC offers a well-balanced rate exceeding the market average, with guaranteed considerable savings for the freight carrier
75
RZD tariff for empty run, RUB
Standard gondola UWC gondola
21,636 16,653
Lease rate, RUB/day 775 1,381
Turn around trip, days 18 days
Lease cost per railcar, RUB
13,950 24,854
RZD tariff for loaded run, RUB
45,565 46,701
Transportation costs, RUB
81,151 88,208
Load volume, t 69
Transportation cost per tonne, RUB 1,176 1,176
14Next-gen railcars’ supremacy
+10% payload
70
77
Payload, t
22
32
+45% useful life
Useful life, years
up to 20 times less breakings
24.9
1.1
Breakings per mln km
x3 times lower lifecycle cost
1,363
400
Discounted lifecycle cost, RUB ths
Old-gen railcars
Next-gen railcars
Old-gen railcars
Next-gen railcars
Old-gen railcars
Next-gen railcars
Old-gen railcars
Next-gen railcars
Higher efficiency (+85%)
Doubled yields
241
446
Turnover per railcar, t-km per month
Old-gen railcars
Next-gen railcars
Old-gen railcars
Next-gen railcars
Yield, RUB/day
Source: Russian Railways, Company’s data
775
1,381
15Government support of innovative railcar production
Tariff discount for empty run
Notes: (1) According to OJSC «VRK-3», excluding VAT
Development of heavy haulage traffic in the
Eastern Polygon
Subsidy for purchase of
innovative rolling stock
Limited railcar lifetime
prolongation
Lower empty run tariff for innovative railcars due to their reduced impact on railroad infrastructure
Specifically, empty run tariff for innovative gondolas by TVSZ is 10-30% lower vs old generation railcars
RZD implements a large-scale project aimed to increase the working capacity of the Baikal-Amur mainline and the Trans-Siberian Railway (RUB 560 bln investments)
The innovative railcar fleet required to arrange heavy-haulage transportation in the Eastern Polygon amounts to 175,000 railcars
The Russian Government provides a number of subsidies for producers and buyers of rolling stock with improved technical characteristics
The subsidy currently amounts to RUB 300,000 per railcar
As from 01/01/2016, the railcar useful life extension shall be banned for 95% of the Russian fleet. Exceptions will be made for some special-purpose railcars (refrigerator cars, transporter cars and some tank cars for chemicals) and for railcars used in RZD's business activities (hopper-batchers and flat cars for track machines)
The ban spurred demand for rolling stock (mostly, innovative) and increased gains on railcar operation
Dmitry Medvedev’s visit to TVSZ
Vladimir Putin at launch of TVSZ
16UWC’s unique competitive advantages
Innovations and flexibility at every stage of business provide technical and economic base for UWC’s competitive advantages securing the company’s leadership in production and sales
Specializing in production of innovative railcars
In-house bogie
Diversified product portfolio
Own modern foundry
State-of-the-art and highly efficient production
In-house engineering bureau
Guaranteed distribution channel
Fleet growth potential
Focus on operational leasing
Diversified fleet
Wide network of innovative railcars service centers
Competitive advantages
Production advantages
Distribution advantages
UralVagonZavod
AltaiVagon
17Efficient strategy focused on growth
16,000railcars – production plan
for 2016
up to 60 railcar modifications by
2018
up to 22,000 railcars per year –
production capacity by2016
60service centers in the
mid-term
Main goals Key numbers
Development of new products with high-value-
added
Improving existing models
Increasing specialization of rolling stock
Expanding the range of railcar types manufactured
Customer base diversification
Focused work with “growth areas” in the market
Replacing inefficient railcars
Customizing railcars
Operating efficiency increase
Increasing production flexibility
Increasing production capacity
Cost reduction projects
Initiatives
Service centers network development
Widening network of service centers and expanding their geography
Raising service centers’ competence
18
Attachment I
1H 2016 Financial results
19UWC Financial Results: Revenue
The 1H 2016 revenue was RUB 23.5 billion, an 38% increase compared to the same period in 2015
The annual growth was due to the following factors:
More sales of railcars to third parties
Growing market prices of the products
Expanding fleet controlled by Vostok1520
Increasing operation rates
1
UWC Revenue
17.0
25.123.5
1H 2015 2H 2015 1H 2016
RU
B b
ln
+38% YOY
UWC Consolidated Revenue Reconciliation UWC Revenue Breakdown By Segment2
15.5
23.5
2.4
6.42.0
Production Distribution Operation Other Adjustments
and
eliminations
UWC Revenue
RU
B b
ln
-2.8
Source: Company’s IFRS statements
Note: (1) The Distribution division deals with operating lease of railcars; (2) Including adjustments and eliminations
77%66%
12%27%
10% 6%
0% 1%
1H 2015 1H 2016
Production Operation Distribution (Lease) Maintenance Other
20UWC Financial Results: EBITDA
UWC’s EBITDA In 1H 2016, the Company's EBITDA was RUB 5.0 billion, gaining 82% over the year
EBITDA was largely contributed by the Production and Sales divisions. The indicator showed growth in the reporting period due to the growing EBITDAs in the Production and Sales divisions
The EBITDA margin gained 5.2 pp to 21.4%
boosted by higher operation efficiency in all business segments
UWC’s Consolidated EBITDA Reconciliation EBITDA margin factor analysis
16.2% 21.4%7.6% 3.8%7.3%
2.8%3.8%
7.2%5.4%
13.5%9.8%8.9%
49.8% 42.5%
1H 2015 1H 2016
EBITDA margin Other SG&A
Rolling stock lease Empty run Personnel costs
Raw materials
As % of revenue
100% 100%
2.8
4.3
5.0
16.2% 17.0%21.4%
1H 2015 2H 2015 1H 2016
RU
B b
ln
EBITDA EBITDA margin
2.5
5.02.0
0.5 0.2
Production Distribution Operation Other Adjustments
and
eliminations
UWC EBITDA
RU
B b
ln
-0.1
Source: Company’s IFRS statements
+82% YOY
21
UWC’s Loss Before Income Tax In the reporting period, UWC had a much smaller loss before tax than in the preceding periods
The positive dynamics was due to the consolidated EBITDA gains. Furthermore, 2015 loss was materially contributed by exchange differences, which was not the case in 2016
The loss before tax mostly included non-monetary amortization expenses and interest expenses on borrowings and bonds
-5.3-4.8
-1.6
1H 2015 2H 2015 1H 2016
RU
B b
ln
UWC’s Loss Before Income Tax Reconciliation
5.0
-1.6
0.4
EBITDA Depreciation Fin.
income
Fin.
costs
FOREX Loss before
income tax
RU
B b
ln -2.3
-5.40.6
Loss Before Income Tax Dynamics Factor Analysis
-5.3
-1.6
-0.1
-0.8
Loss before
income tax
2015
EBITDA Depreciation Fin.
income
Fin.
costs
FOREX Loss before
income tax
2016
RU
B b
ln
2.2
2.3 0.1
UWC Financial Results:Loss Before Income Tax
Source: Company’s IFRS statements
22Production Division Financial Results
Production Division Revenue
Production Division EBITDA
The 1H 2016 Production revenue showed an annual growth of 3% to RUB 15.5 billion
Low revenue growth rates against the railcar production output was due to the fact that in 1H 2015 TVSZ sold 1,207 railcars to TH “UWC” for selling them further to customers, which is to take place in 3Q 2016. Therefore, the revenue from the sale of these railcars will only be recognised after they have been actually sold by TH “UWC”
Smaller revenue in the reporting period compared to the previous six months was due to the fact that in 2H 2015 some extra revenue was received from selling RAIL1520 railcars to third parties, due to the growing demand for new generation railcars
The production EBITDA grew 50% to RUB 2.5 billion
The segment’s EBITDA margin gained 4.9 pp to
15.8% owing to:
Enhanced production capacity
Measures taken to reduce the cost of production
15.0
17.0
15.5
1H 2015 2H 2015 1H 2016
RU
B b
ln
1.6
2.52.5
10.9%14.9%
15.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1H 2015 2H 2015 1H 2016
RU
B b
ln
EBITDA EBITDA margin
Source: Company’s IFRS statements
+3% YOY
+50% YOY
23
The the Sales revenue for railcar operating lease grew 7% YOY to RUB 2.4 billion as UWC’s leasing companies expanded their fleet
The segment’s EBITDA grew 30% to RUB 2 billion
The EBITDA margin gained 15 pp to 86.1%
compared to 1H 2015
In 2H 2015, the Company recorded an allowance for doubtful accounts, which affected the EBITDA dynamics and the margin. In 1H 2016, the Company reversed RUB 193 million from the allowance
Distribution Division Revenue
Distribution Division EBITDA
Distribution Division Financial Results
2.2 2.1
2.4
1H 2015 2H 2015 1H 2016
RU
B b
ln
1.6
1.2
2.0
71.1%
58.0%
86.1%
0.00
0.50
1.00
1.50
2.00
1H 2015 2H 2015 1H 2016
RU
B b
ln
EBITDA EBITDA margin
Source: Company’s IFRS statements
+7% YOY
+30% YOY
24Operation Division Financial Results
The revenue for the Operation division represented by transportation company Vostok1520 increased 211% YOY, brought on by a significant growth of the average size of the fleet under control (+148% YOY), higher railcar efficiency and operation rates
The segment showed positive EBITDA in the reporting period, a contrast to the last year’s negative performance, the margin growing to 7.8%. The positive dynamics was due to a higher yield per railcar and more turnaround of rolling stock
Operation Division Revenue
Operation Division EBITDA
2.1
4.1
6.4
1H 2015 2H 2015 1H 2016
RU
B b
ln
Source: Company’s IFRS statements
-82.1
47.2
502.8
1.1%
7.8%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
-90
10
110
210
310
410
510
1H 2015 2H 2015 1H 2016
RU
B m
ln
EBITDA EBITDA margin
+211% YOY
25
Source: Company’s management accounts
Notes: (1) Excluding investments in the acquisition of railcars by Distribution division; (2) Excluding VAT; (3) Excluding mergers and acquisitions
UWC Capital Expenditures1
1.8 1.82.7
0.7
0.2
1.8
4.2
1.5
0.04
0.3
0.22.0
3.6
7.1
2.4
2013 2014 2015 1H 2016
RU
B b
ln
Operational efficiency Product portfolio expansion
Other projects 2016E
There have been no material changes to the capital expenditures program since the end of 2015. A part of investments was carried forward to 2017, which resulted in a reduction of the 2016 plan
Most of the 2016 expenses were incurred in connection with the implementation of strategies aiming to expand the product assortment, and achieve a higher capacity, flexibility and operating efficiency of the production process
The share of costs in foreign currency is some 50%, with most of the costs related to purchases of product, plant and equipment abroad. The remaining 50% includes ruble-denominated costs of construction and installation
CAPEX Structure and Dynamics2,3
≈6.0
26UWC Debt Portfolio as at 30/06/2016
31%
32%
7%
30%
Production Distribution
Other Bonds
30%
19%17%
2%1%
2%
30%
Otkritie
Sberbank
VEB-EDB
Gazprombank
Rosnano
Inbank
Other
Bonds
By lender By segment
Principal Repayment Schedule1
15.0 15.0
8.4 6.9
3.7
10.7
7.3
23.4
13.7
21.9
7.8
3.0
2016 2017 2018 2019 2020 2021 2022 2023
RU
B b
ln
Bonds repayment Loans repayment
Debt Optimisation
Notes: (1) Excluding working capital loan in the amount of RUB 9 bln
Source: Company’s management accounts
In May 2016, UWC successfully completed its SPO raising a total of RUB 5.0 billion The investments will be used for the purposes of developing the business and reducing the debt
In the reporting period, as resolved by the bond holders, the maturity of UWC Finance’s Series 01 bonds for a total amount of RUB 15 billion was prolonged from 2016 to 2021
While the Company continues collaborating with its current lenders, it is developing partnerships with other large Russian and international banks
Debt Portfolio Structure
RUB 100.5 bln
RUB 100.5 bln
27
Attachment II
1H 2016 Operational results
28
In 2Q 2016, the company produced 3.8 thousand railcars,an increase of 15% compared to 2Q 2015. The output in1H 2016 grew by 15% reaching 6.8 thousand railcars. Thepositive dynamics is attributed to greater capacity ofUWC's production facilities and growing demand
In 1H 2016, 70% of the railcars produced by UWC weresold to third parties. The demand from external customersincreased due to the railway market recovery andtechnical and economic advantages of new generationrailcars
The total number of certified models reached 24
Key events
UWC presented to the industry community a next-generation innovative bogie with an axle load of 27 tf,unique to the CIS
UWC launched serial production of a new caustic tank car,its barrel volume being 54.5 m3 and loading capacity of 73t (+10% compared to its analogues)
Production
3.33.0
3.8
2Q 2015 1Q 2016 2Q 2016
ths
railcars
Railcar production output1
70% of railcars were sold to third parties in 1H 2016
+15% YOY
Note: 1) Including production by TVSZ and TikhvinСhemMash
1516
20
22
24
30.06.2015 30.09.2015 31.12.2015 31.03.2016 30.06.2016
units
Certified railcar models
5.9
6.8
1H 2015 1H 2016
+15%
29
As at the end of the quarter, the size of thefleet owned and operated by UWC was 28.6thousand railcars, a 5% increase compared tothe start of 2016. UWC’s own fleet expanded13% to 18 thousand railcars
The number of new generation railcars in the fleet has been growing steadily. As at the end of 1H their share reached 72%
Key events
In 2Q, UWC and BUSINESS ALLIANCE, aleasing company, entered into variousagreements for the supply of 3.8 thousandnew generation gondolas
UWC and Logistics 1520 executed an agreement for the supply of up to 300 timber flat cars and 400 covered cars
UWC and railway operator Locotrans entered into a contract for the supply of 150 timber flat cars with loading capacity of 74 t
In July 2016, TikhvinChemMash supplied abatch of tank cars for transportation of causticsoda and other chemicals to Khimprom, a largeRussian company producing bulk chemicals
In July 2016, UWC and United Grain Companysigned a supply contract for 1.5 thousand grainhoppers with body space of 120 m3
Distribution
27.228.6
31.12.2015 30.06.2016
ths
railcars
16.0
18.0
31.12.2015 30.06.2016
ths
railcars
63%10%
0.02%
27%
New generation
gondolas
New generation
hoppers
New generation
flatcars
Standard
railcars
Fleet ownedby UWC’s subsidiaries2
Fleet owned and under control by railcar type
28%
38%
35%
New generation
railcars leased by
third parties
Standard railcars
leased by third
parties
Railcars leased by
Vostok1520
Notes:
1) Including the fleet controlled by Vostok1520 and the UWC’s own fleet leased to third parties: 11.7 thousand railcars;
2) The following companies included: RAIL1520, RAIL1520 SERVICE, RAIL1520 LEASING, MRC1520 and TH “UWC”
+5%
+13%
Fleet owned and operated1 Fleet owned and operated by railcar type
30Operation
The growth of the cargo base in 1H 2016 triggered the demand for gondolas. Cargo shippers seeking to optimize theirtransportation costs ensured steady demand for new generation railcars, their strong economic and operational characteristicshighly appreciated
As a result, Vostok1520’s daily average fleet grew 124% year-over-year in 2Q
During the quarter and the year, the railcar capacity grew due to a certain acceleration in the railcar turnaround time achievedthrough increasing the number of block trains shipments
Operation of the highly efficient Vostok1520’s fleet raised carloads by 149% over the year
With a larger volume of freight shipped to the Far East, the quarterly turnover went up 187% year-over-year
In 1H 2016, Vostok1520 raised its share in export coal haulage to 11.6%, an increase of more than 3 times in a year
8.7
23.8 25.1
2Q 2015 1Q 2016 2Q 2016
bln
tkm
Freight turnover
12.8
15.8 16.4
2Q 2015 1Q 2016 2Q 2016
ths
tkm
/railcar
per
day
Capacity
Average capacity on the RZD network
+28% YOY
+187% YOY
7.5
16.5 16.9
2Q 2015 1Q 2016 2Q 2016
ths
railcars
Average operated fleet
+124% YOY
2.3
5.5 5.6
2Q 2015 1Q 2016 2Q 2016
mln
t
Freight carried
+149% YOY
12.3
16.1
1H 2015 1H 2016
3.9
11.1
1H 2015 1H 2016
15.0
48.9
1H 2015 1H 2016
+31%
+185% +228%
6.7
16.7
1H 2015 1H 2016
+148%
31Service Centre Network Expansion
Statistics for current uncoupling repairs (CUR)1 UWC’s network of service and training centres
Service centres
2.3CUR of the TVSZ-made gondola per 1 mln km
28.2CUR of the standard gondola per 1 mlnkm
54
6
service centres
training centres
The frequency of current uncoupling repairs of new generation gondolas was up to 12 times below the network’s average due to high operational efficiency of UWC’s new generation railcars
The Holding has an expanded service centre networkoperating at railcar repair shops in the CIS. As at theend of the reporting period, the UWC’s service centrenetwork comprised a total of 54 centres. 3 newservice centres were launched in 2Q 2016
Note: 1) Current uncoupling repairs based on 1H 2016 statistics
Railcar repair shop
32
Attachment IV
Financial statements
33UWC’s Profit and Loss Statement
RUB ths 1H 2015 1H 2016
Revenue 17,028,353 23,533,250
Cost of sales, incl. (15,456,078) (20,394,802)
Raw materials (8,473,007) (9,991,968)
Empty run (924,158) (3,173,304)
Depreciation and amortization (2,413,735) (2,282,473)
Payroll and social funds (1,665,043) 2,094,337
Operating lease (651,132) (1,684,266)
Property tax (321,863) (328,057)
Maintenance and repairs (144,869) (172,600)
Other (862,271) (667,797)
Gross profit 1,572,275 3,138,448
Selling, general and administrative expenses (1,270,824) (668,530)
Share of profit / (loss) of associates and joint ventures (2,622) 89,772
Other operating income 31,302 187,021
Operating profit 330,131 2,746,711
Finance income 585,927 448,202
Finance costs (4,626,139) (5,448,202)
Foreign exchange (loss)/income (1,584,576) 610,198
Loss before income tax (5,294,657) (1,643,091)
Income tax benefit 150,729 (351,511)
Net profit/(loss) for the year (5,143,928) (1,994,602)
Source: Company’s IFRS statements
34UWC Balance Sheet 1/2
RUB ths 31.12.2015 30.06.2016
ASSETS
Non-current assets
Property, plant and equipment 71,428,836 71,428,023
Prepayments for non-current assets 1,029,400 1,538,752
Intangible assets 5,021,518 5,282,076
Goodwill 8,971,232 8,971,232
Deferred tax assets 2,643,706 2,482,881
Investment in joint ventures 752,501 1,207,844
Loans receivable 1,353,829 2,365,202
Finance lease receivables 243,665 233,961
Cash restricted 1,781,709 1,781,709
Total non-current assets 93,226,396 95,291,680
Current assets
Inventories 8,524,986 14,601,431
Trade and other accounts receivables 4,020,587 1,804,473
Loans receivable 5,187,614 81,642
Bank deposits - 10,008,314
Prepayments for suppliers and other assets 1,566,070 1,426,802
VAT receivable 4,150,385 5,146,158
Cash and cash equivalents 3,207,466 1,768,842
Total current assets 26,657,108 34,837,662
TOTAL ASSETS 119,883,504 130,129,342
35UWC Balance Sheet 2/2
RUB ths 31.12.2015 30.06.2016
EQUITY AND LIABILITIES
Share capital issued 105,556 113,424
Additional paid-in capital 16,158,720 21,178,905
Accumulated loss (14,644,817) (16,639,419)
Non-controlling interests 652 -
Total equity 1,620,111 4,652,910
Non-current liabilities
Borrowings 55,835,462 50,693,073
Bonds – non-current portion 15,000,000 30,000,000
Deferred tax liabilities 915,953 972,657
Other liabilities 190,300 219,605
Total non-current liabilities 71,941,715 81,885,335
Current liabilities
Borrowings 15,286,129 20,311,994
Trade and other payables 12,697,270 14,523,766
Advances received and other current liabilities 4,231,504 7,927,184
Finance lease – current portion 2,825 2,719
Bonds – current portion 14,103,950 825,434
Total current liabilities 46,321,678 43,591,097
TOTAL LIABILITIES 118,263,393 125,476,432
TOTAL EQUITY AND LIABILITIES 119,883,504 130,129,342
Source: Company’s IFRS statements
36UWC Cash Flow Statement
RUB ths 1H 2015 1H 2016
Operating activities
Loss before tax (5,294,657) (1,643,091)
Depreciation and amortization 2,521,256 2,298,887
Non-operating foreign exchange (gain)/loss, net 1,584,576 (610,198)
Finance costs/(income), net 4,054,305 5,000,000
Other (1,860) (285,779)
Working capital changes 6,575,468 1,550,797
Cash from / (used in) operations 9,439,088 6,310,616
Income tax paid (39,806) (254,222)
Finance costs paid (4,293,625) (5,007,285)
Net cash generated by operating activities 5,105,657 1,049,109
Investing activities
Payments for property, plant, equipment and intangible assets, net (4,200,824) (3,885,167)
Loans granted (14,151,247) (1,093,983)
Short-term deposits - (10,000,000)
Cash proceeds from redemption of loans granted 13,767,918 4,991,293
Interest received 583,832 531,363
Net cash outflow on acquisition of subsidiaries and joint ventures (199,010) (365,571)
Net cash used in investing activities (4,199,331) (9,822,065)
Financing activities
Shareholder’s capital contribution, net 3,735,459 5,028,053
Proceeds from borrowings and issuance of bonds 4,029,645 2,813,043
Repayment of borrowings (5,163,879) (2,081,892)
Purchase/(sale) of own bonds (2,748,991) 1,683,800
Other (10,838) (660)
Net cash used in financing activities (158,604) 7,442,344
Net cash flow 747,722 (1,330,612)
Source: Company’s IFRS statements
37
Научно-производственная корпорация
«Объединенная Вагонная Компания»
115184, Россия, г. Москва,
ул. Новокузнецкая, д. 7/11, стр. 1
Тел./факс: +7 (499) 999 15 20
Investor Relations
+7 (499) 999 15 20
http://www.uniwagon.com/
Contacts
Research and Production Company “United Wagon Company”
Russia, 115184, Moscow,
ul.Novokuznetskaya, d. 7/11, str. 1
Phone: +7 (499) 999 15 20
Fax: +7 (499) 999 15 21
