DGAP-News: Far Eastern Shipping Company: Trading update for

EquityStory.RS, LLC-News: Far Eastern Shipping Company / Key word(s): Miscellaneous Far Eastern Shipping Company: Trading update for the three month and nine month periods ended September 30, 2013 28.11.2013 / 09:54 --------------------------------------------------------------------- November 28, 2013 Trading update for the three month and nine month periods ended September 30, 2013 FESCO Transportation Group (MICEX-RTS: FESH) provides a trading update with consolidated financial and operational results for the three month and nine month periods ended September 30, 2013. Highlights: - Steady improvement in Company financial performance in 3Q2013 compared to 2Q and 1Q2013. The Port Division performed particularly strongly, recording its highest quarterly EBITDA for 3Q2013. In 9M2013, Port Division EBITDA increased by 11.0% y-o-y driven by growing volumes of container cargo handling - Rail container transportation volumes were up 5.7% in 9M2013 reaching 209.8 thousand TEUs. The volume growth was above market owing to an increased number of block trains operated by the Group and an increased fleet of fitting platforms. Nevertheless, Rail Division results continued to be depressed by decreased average income per railcar across the market, particularly for gondolas, and the overall weakness of rail market environment - Due to mixed divisional performance in 9M2013 consolidated Group revenue decreased by 4.8% to $849.6m and Group EBITDA decreased by 13.3% to $152.4m. Since the beginning of 2013, FESCO has acquired two ice-class fuel efficient vessels, and chartered in another two vessels of the same class, to strengthen positions on cabotage lines - FESCO launched two new regular sea container services from North America to St. Petersburg and Novorossiysk/Sochi Group Operational Results Port Division In 9M2013, import container cargo throughput grew to 152.6 thousand TEUs (up 9.1% y-o-y), export container cargo throughput grew to 118.5 thousand TEUs (up 1.5% y-o-y), and cabotage container cargo throughput decreased by 4.8% to 78.3 thousand TEUs. Cabotage cargo throughput volumes have shown positive trends during 2013 growing from 21.4 thousand TEUs in 1Q2013 to 26.4 thousand TEUs in 2Q2013 and 30.5 thousand TEUs in 3Q2013. Automobiles and transportation vehicles throughput increased by 9.7% amounting to 70.3 thousand units. Non-container cargo throughput (excluding vehicles) declined by 37.4% to 1.5 mln tons driven by the reduction in export volumes of ferrous metals and coke. Rail Division In 9M2013, rail container transportation volumes were up 5.7% y-o-y reaching 209.8 thousand TEUs. The volume growth was above market owing to an increased number of block trains operated by the Group and an increased fleet of fitting platforms. In 9M2013, the number of block trains increased by 39% y-o-y. The average number of block trains per week increased from 15 in 9M2012 to 21 in 9M2013. Rail cargo load decreased by 17.0% to 15.3 million tons owing to Russia's soft rail transportation market, as well as the reduction in the average transportation speed within the RZhD network. Rail cargo turnover grew by 10.2% y-o-y due to growth in the average transportation distance. Liner and Logistics and Shipping Divisions In 9M2013, intermodal freight transportation volumes rose by 18.7% y-o-y to 179.6 thousand TEUs. Bilateral sea container trade volumes reached 273.9 thousand TEUs, an increase of 7.0% y-o-y. The Group continues to add to the list of destinations serviced by its global network. In September and October 2013, FESCO launched two new regular sea container services from North America to St. Petersburg and Novorossiysk/Sochi. In 9M2013, the volume of domestic sea container transportation declined by 9.6% y-o-y to 46.3 thousand TEUs due increased competition. To strengthen its competitive positions, FESCO added four ice class general cargo vessels to its shipping fleet - Pevek and Posyet were acquired in 1H2013, and FESCO Pioneer and FESCO Partizan were chartered in during September 2013. The first two vessels started servicing FESCO cabotage lines in the middle of 3Q2013, which drove part of our domestic sea container transportation growth. FESCO Pioneer and FESCO Partizan will be deployed later in the year. As of September 30, 2013 the Group operated a fleet of 26 vessels deployed through the FESCO sea service lines and 4 ice-breakers leased-in under long-term contracts. Group Financial Results Revenue and EBITDA have continued to recover steadily each quarter during 2013 since 1Q2013's relatively weak performance. Consolidated revenue increased from $275.3m in 1Q2013 to $292.0m in 3Q2013. Consolidated EBITDA grew from $48.1m in 1Q2013 to $53.0m in 3Q2013. In 9M2013, Group consolidated revenue declined by 4.8% y-o-y to $849.6m and Group consolidated EBITDA decreased by 13.3% y-o-y to $152.4m on the back of the challenging rail market environment in 2013. The Group's EBITDA margin decreased by 1.8 pt to 17.9%. EBITDA by division: - Port Division - In 2Q2013 and 3Q2013 the Port Division was the major contributor to the Group EBITDA. In 3Q2013, EBITDA margin increased compared to both 2Q2013 and 3Q2012 by 7.1pt and 2.3pt respectively. In 9M2013, EBITDA increased by 11.0% y-o-y driven by growing volumes of container cargo handling. EBITDA margin decreased from 51.2% in 9M2012 to 49.2% in 9M2013 due to the higher proportion of low margin cargo in the Group's cargo mix following the consolidation of VMTP in 1Q2012 - Rail Division - EBITDA decreased by 44.8% from $133.2m in 9M2012 to $73.5m in 9M2013. Although FESCO has outperformed the market in the container segment, which continued to grow during 2013, the decrease in general cargo volumes has negatively affected the divisional results along with the fall in average income per railcars seen across the market, particularly for gondolas. EBITDA margin decreased from 49.6% in 9M2012 to 37.0% in 9M2013 - Liner and Logistics Division - EBITDA decreased by 21.0% from $33.3m in 9M2012 to $26.3m in 9M2013 owing to decreasing freight rates - In the Shipping Division, EBITDA remains negative improving from negative $4.1m in 2Q2013 to negative $1.5m in 3Q2013 - Bunkering - Beginning 3Q2013, Bunkering is reported as a separate business segment with revenue of $34.5m and EBITDA of $1.6m in 3Q2013 Pro-forma net debt decreased in 3Q2013 versus 2Q2013 ($947m versus $959m): - Consolidated debt includes $550m of 8.00% Senior Secured Notes due 2018 and $325m of 8.75% Senior Secured Notes due 2020 in May 2013, as well as RUB 5bn (c. $153m) of bonds, the proceeds from which were used to refinance the Group's acquisition-related and pre-existing debt - As of September 30, 2013, Pro-forma Net Debt / LTM adjusted EBITDA ratio was 4.4x Ruslan Alikhanov, FESCO President and CEO commented: 'Our Port Division demonstrated outstanding performance during the reporting period recording a record high for quarterly EBITDA, thus becoming the major strategic contributor to Group EBITDA. Although the continuing weakness in the rail industry affected the Group's results, we continue to proactively address the unfavorable trends witnessed in the market, allowing the Group to outperform the market. In addition, we are actively considering certain areas for growth in ancillary businesses, such as bunkering'. FESCO Consolidated Group Financial Performance <pre> $ millions 1Q 2013 2Q 2013 3Q 2013 9M 2013 9M 2012 9M 2013 vs 9M 2012 Revenue(1) 275.3 282.3 292.0 849.6 892.1 -4.8% EBITDA(1) 48.1 51.3 53.0 152.4 175.8 -13.3% EBITDA margin(1) 17.5% 18.2% 18.2% 17.9% 19.7% -1.8 pt Capital 10.0 15.2 14 39.2 60.6 -35.3% Expenditures </pre> (1) On adjusted basis for consolidation of port in 1Q2012, disposal of vessels and non-recurring expenses the 9M2013 adj. revenue decreased by 3.5% and adj.EBITDA decreased by 29% y-o-y. FESCO Consolidated Group Financial Position <pre> $ millions At 30 September, 2013 Pro-forma total Debt(2) 1,103 Cash 156 Pro-forma net Debt 947 Pro-forma net Debt/ LTM Adj. EBITDA 4.4x </pre> (2)Total borrowings include the placement USD 550m 8.00% Senior Secured Notes due 2018 and USD 325m 8.75% Senior Secured Notes due 2020 in May 2013; RUB 5bln rubl bonds in June 2013 and exclude the $149m REPO loan against the shares of TransContainer Divisional Financial Performance <pre> $ millions 1Q 2013 2Q2013 3Q 2013 9M 2013 9M 2012 9M 2013 vs 9M 2012 Port Revenue(3) 46.8 51.6 51.3 149.7 129.5 +15.6% EBITDA(3) 17.9 26.1 29.6 73.6 66.3 +11.0% EBITDA margin(3) 38.2% 50.6% 57.7% 49.2% 51.2% -2.0 pt Rail Revenue 74.6 66.3 57.4 198.4 268.6 -26.1% EBITDA 28.4 24.6 20.4 73.5 133.2 -44.8% EBITDA margin 38.1% 37.1% 35.5% 37.0% 49.6% -12.6 pt Liner & Logistics Revenue 158.2 169.3 168.7 496.2 453.5 +9.4% EBITDA 8.8 8.7 8.8 26.3 33.3 -21.0% EBITDA margin 5.6% 5.1% 5.2% 5.3% 7.3% -2.0 pt Shipping Revenue(4) 17.7 11.0 14.6 43.3 109.9 -60.6% EBITDA(4) 0.2 -4.1 -1.5 -5.3 -4.8 - Bunkering Revenue - 12.1 34.5 46.6 - - EBITDA - 0.9 1.6 2.5 - - EBITDA margin - 7.4% 4.6% 5.4% - - </pre> (3) On adjusted basis for consolidation of port in 1Q2012 and non-recurring expenses 9M2013 port adj.EBITDA decreased by 7% y-o-y with adj.EBITDA margin decreased to 49% (4) On adjusted basis for disposal of vessels and non-recurring expenses the 9M2013 shipping adj.EBITDA decreased by $3m FESCO operational results for 9M2013 <pre> 1Q2- 2Q2- 3Q2- 9M2- 9M2- 9m2013 vs 013 013 013 013 012 9m2012 Intermodal freight transportation* 57,1 59,9 62,4 179, 151, +18.7% (TEU) 95 92 05 592 362 Bilateral sea container trade (TEU) 85,3 95,8 92,6 273, 255, +7.0% 18 85 71 874 914 Domestic sea container trade (TEU) 12,8 16,0 17,3 46,2 51,1 -9.6% 61 10 93 64 96 Reefer transportation (TEU) 11,0 11,1 10,7 32,9 35,9 -8.3% 33 73 43 49 17 Ro-Ro transportation (TEU) 14,0 14,6 10,8 39,6 43,1 -8.3% 69 91 42 02 81 VMTP container throughput (TEU) 106, 117, 125, 349, 338, +3.1% 745 057 507 309 768 Import +9.1% Export 45,9 51,5 54,9 152, 139, +1.5% Cabotage 87 76 95 558 878 -4.8% 39,3 39,1 39,9 118, 116, 67 31 85 483 683 21,3 26,3 30,5 78,2 82,2 91 50 27 68 07 VMTP non-container cargo throughput 611 450 461 1,522 2,431 -37.4% (excluding vehicles) (thousand tons) Automobiles and transportation 21,5 26,3 22,3 70,2 64,0 +9.7% vehicles throughput (units) 43 79 47 69 48 Rail container transportation 64,1 72,2 73,4 209, 198, +5.7% («Russkaya Troyka» and 39 30 20 789 542 «Transgarant») (TEU) Rail cargo load (million tons) 5.06 5.14 5.12 15.32 18.45 -17.0% Rail cargo turnover (billion ton- 7.66 8.44 8.44 24.54 22.27 +10.2% kilometers) </pre> * - excluding transportation of empty COCs About FESCO FESCO is one of the leading privately-owned transportation and logistics companies in Russia with operations in ports, rail, integrated logistics and shipping business. Diversified but integrated asset portfolio enables FESCO to provide door-to-door logistics solutions and control almost all steps of the intermodal transportation value chain. The majority of FESCO's operations are located in the Russian Far East and the Group benefits from growing trade volumes between Russia and Asian countries. FESCO controls the Commercial Port of Vladivostok, which has throughput capacity of 3.9 million tons for general cargo and oil products, 150,000 vehicles and over 600,000 TEUs in containers. FESCO is one of Russia's top 10 private railcar operators providing services under the Transgarant (100%) and Russkaya Troika (50% JV with Russian Railways) brands. The Group owns a fleet of vessels mostly deployed through own line and logistics operations. In 2012, revenue of FESCO Group reached USD 1,197 million. IR contacts: Galina Shilina Director, Corporate Communications +7 (495) 926 80 00 ext.11007 gshilina@fesco.com Ekaterina Semenova IR manager +7 (495) 926 80 00 ext.11058 esemenova@fesco.com PR contact: Tatiana Vishnyakova Deputy Director, Corporate Communications +7 (495) 926 80 00 ext.11067 tvishnyakova@fesco.com End of Corporate News --------------------------------------------------------------------- 28.11.2013 Dissemination of a Corporate News, transmitted by EquityStory.RS, LLC - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. EquityStory.RS, LLC's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- 242091 28.11.2013