Key Financial Results

In 2013 the Company’s business activities were carried out in more complicated economic conditions than in 2012.

Considerable deterioration of the macroeconomic situation in the country was recorded, which resulted in significant decline of GDP growth, and, more importantly, an essential decrease in the industrial-production growth was seen in 2013. Forecast of changes in these parameters has been consistently adjusted since September 2012. GDP growth slowed to 1.3% compared with 3.4% in 2012. Industrial-production growth, which determines the volume of rail transport activities, was only 0.4% in 2013 compared with 2.6% in 2012.

Due to changes in macroscenarios, the Company was forced to repeatedly adjust the plan on the transportation dynamics. While the initial loading plan assumed the 3.3% growth compared with 2012 report, due to the circumstances prevailing in the end of the year, the loading reduction in 2013 was 2.8%

After assessing the extent of the adverse effects of the economic crisis in December 2012, the company commenced the timely development of preventative anti-crisis measures and maintained stable railway transport operations.

All the parameters of the company operations were repeatedly discussed at the meetings of the Board of Directors of Russian Railways and in the interested federal executive bodies. The loss of revenues of Russian Railways resulting from the original plan was RUB 137.5 billion.

To ensure financial balance in the face of revenue reduction and tax liability increases (rise of insurance payments and cancellation of property tax exemption) and also the review of the forecasts of the Ministry of Economic Development of Russia, the original plan of transportation expenses was adjusted and reduced by RUB 98.8 billion.

Alongside the reduction in expenses dependent on the transportation volumes, the primary measures included: optimisation of process flows, conservation of fixed assets, optimisation of outsourced fleet activities, negotiations with suppliers and contractors to alter their pricing policy, and the introduction of a part-time schedule.

Thus, thanks to continuous work on expense management, and also due to the fulfillment of the shareholder’s order (the Russian Federation) on cutting costs, the growth of the specific transportation cost was only 0.4%, which was significantly lower than the average annual inflation rate in the country as a whole (6.8%). The rate of efficiency growth in 2013 was 104.3%, taking into account the fact that across in the country, labour efficiency grew by 1.5%.

Considering this in the context of the conditions for state regulation of railway cargo transportation rates, the company ensured profitable activities in the year’s results and generated a net profit of RUB 740.4 million. At the same time, it established the sources of funding for an investment budge of RUB 467.2 billion, which is more than twice the volume of depreciation in 2013.