Mostotrest PAO : PJSC Mostotrest announces 1H2015 operating and financial results

PJSC Mostotrest (Mostotrest, the Company or, together with its consolidated subsidiaries, the Group) publishes its operating and financial results for the first half of 2015(a).

Given the backdrop of a challenging market environment characterized among other things by rising costs for the industry, Mostotrest, the leading group of companies in the Russian infrastructure construction market, reported an increase in operating and decrease in financial results in 1H 2015.

Key Operating and Financial Results:

• Backlog(b) slightly increased from the beginning of the year and amounted to RUB353.6* billion, with additions totaling RUB52.9* billion(c);

• Revenue was down 1% to RUB52.0 billion on a like-for-like basis, driven by decrease in backlog utilization given the backdrop of the industry financing;
• Gross profit declined by 37% from RUB7.6 billion in 1H2014 to RUB4.8 billion in 1H2015. Gross margin fell from 14.4% in 1H2014 to 9.2% in the reporting period, due to an increased share of subcontracted volumes(d) and in-house volumes(e) negative dynamics outstripped decrease in cost of in-house volumes(f);
• EBITDA(g) was down 61% on a like-for-like basis, to RUB1.9 billion;
• Net profit was RUB104 million;
• RUB2.0 billion (33% of 2014 IFRS net profit) dividend was paid out for 2014;
• Capex down 40% on a like-for-like basis.

Mostotrest CEO Vladimir Vlasov comments on the results:

"As we expected at the beginning of 2015, the year to date has been challenging for the construction industry. There has been a significant reduction in new project tendering. In addition, financing of existing projects has been cut back, due to issues that include the failure to observe construction schedules and the abandonment of operations by financially distressed contractors. At the same time, the real costs for construction companies have outstripped deflators embedded in their contracts, driven by both direct and indirect cost growth, while bank financing became virtually unobtainable for the industry.

I am pleased to note that Mostotrest has been able to maintain its absolute leadership in the infrastructure construction market amid the generalized crisis. The Company continues to comply with construction timelines and quality standards, and customers continue to entrust us with new projects, which enabled Mostotrest to slightly increase its backlog to the beginning of this year. At the same time and similar to other construction players, the Company faced rising costs and suffered from funding cutbacks, which slightly affected revenue growth. In addition, Mostotrest subcontracted out significant volumes of non-core work in the reporting period. Also the Company continues to have to make provisions for doubtful receivables from subcontractors that are on the verge of bankruptcy.

In the current macroeconomic environment it is difficult to accurately predict how the second half performance will unfold. However, given that a number of ongoing projects are entering their main construction phases, we expect to increase volumes and participate in new tenders for federal highways, airports and Moscow City transport infrastructure development projects."