The Cabinet of Ministers of Ukraine at a Wednesday meeting supported a bill of the Ministry of Infrastructure on the transfer of dividend payments for 2018-2019 by JSC Ukrzaliznytsia to no later than December 31, 2020 aiming at reducing the economic fallout from the coronavirus COVID-19 and the impact of lockdown on the financial and economic activities, the press service of the Ministry of Infrastructure has said.
According to an explanatory note to the bill, it is anticipated that the suspension of passenger traffic in Ukraine from March 18, 2020 will have a negative impact on the net profit of Ukrzaliznytsia in the amount of up to UAH 1 billion. At the same time, Ukrzaliznytsia was obliged to return significant amounts of funds for previously purchased tickets (almost UAH 300 million) to passengers.
In addition, a decrease in domestic production and the suspension of private shipping enterprises could result in the reduction in freight traffic in the first half of the year by 3-8% and will lead to a decrease in the volume of Ukrzaliznytsia earnings. In addition, due to the devaluation of the national currency in the first quarter of this year, FX losses in the amount of about UAH 5 billion are expected.
The document was agreed by the Ministry of Finance and the Ministry for Economic Development, Trade and Agriculture.
JSC Ukrzaliznytsia is technically ready for the resumption of passenger traffic until a predetermined date (from June 1, 2020), however, the launch date for passenger traffic on railway transport has not yet been changed.
Ukrzaliznytsia is technically ready to start passenger transporting, however, the government resolution regulates the date of June 1. The final decision will be made in the near future, based on the epidemic indicators of the regions and the decisions of the commissions on anthropogenic and environmental safety and emergency situations,” the press service of the Ministry of Infrastructure told Interfax-Ukraine.
As the agency was informed by the press service of Ukrzaliznytsia, according to Cabinet of Ministers of Ukraine resolution No. 392 dated May 20, 2020, after the decision of the regional commissions on anthropogenic and environmental safety and emergency situations on easing anti-epidemic measures in regions, the company will appoint trains in these regions, and will start selling tickets.
The Infrastructure Ministry confirmed that the sale of train tickets can be started in the near future in those regions where there will be a positive decision on easing anti-epidemic measures.
The ministry said that they plan to follow the previously developed algorithm for launching railway transportation in several stages, namely, from June 1, running up to 50% of suburban electric trains during rush hours, launching 42 pairs of trains of Intercity and Night Express categories. At the second stage, it is planned to launch all suburban electric trains during daylight hours and all passenger trains except seasonal ones. At the third stage, it is proposed to open an international railway service, as well as seasonal trains.
JSC Ukrzaliznytsia in January-March 2020 saw a loss of UAH 7 billion, according to materials of the Cabinet of Ministers posted on its website on Wednesday.
According to the document, since March 11, 2020, Ukrzaliznytsia has suspended economic activity, which negatively affects its financial and economic performance.
“According to the results of the first quarter of this year, the company saw losses of UAH 7 billion… At the same time, according to the company’s forecasts, due to the need to repay loans and interest on them (UAH 11 billion and UAH 3 billion, respectively), a shortage of funds by the end of the year may amount to UAH 16 billion,” the company said in an explanatory note.
According to the document, the reduction in production in Ukraine, the shutdown of enterprises-shippers and the negative situation on international markets led to a 4.8% decrease in total cargo turnover in the first quarter of 2020 compared to the same period last year.
In order to minimize the negative consequences, Ukrzaliznytsia is implementing a number of compensation measures: an idle time for staff, suspension of planned salary increases, restriction of procurement of material and technical resources and services (except for critical positions), and optimization of payments.
On this basis, the Infrastructure Ministry proposed that the basic standard for sending part of the profits allocated for the payment of dividends based on the results of economic activities in 2019 is set in the amount of 30% (currently – 90%) for Ukrzaliznytsia.
JSC Ukrzaliznytsia in January-March 2020 saw a loss of UAH 7 billion, according to materials of the Cabinet of Ministers posted on its website on Wednesday.
According to the document, since March 11, 2020, Ukrzaliznytsia has suspended economic activity, which negatively affects its financial and economic performance.
“According to the results of the first quarter of this year, the company saw losses of UAH 7 billion… At the same time, according to the company’s forecasts, due to the need to repay loans and interest on them (UAH 11 billion and UAH 3 billion, respectively), a shortage of funds by the end of the year may amount to UAH 16 billion,” the company said in an explanatory note.
According to the document, the reduction in production in Ukraine, the shutdown of enterprises-shippers and the negative situation on international markets led to a 4.8% decrease in total cargo turnover in the first quarter of 2020 compared to the same period last year.
In order to minimize the negative consequences, Ukrzaliznytsia is implementing a number of compensation measures: an idle time for staff, suspension of planned salary increases, restriction of procurement of material and technical resources and services (except for critical positions), and optimization of payments.
On this basis, the Infrastructure Ministry proposed that the basic standard for sending part of the profits allocated for the payment of dividends based on the results of economic activities in 2019 is set in the amount of 30% (currently – 90%) for Ukrzaliznytsia.
JSC Ukrzaliznytsia is interested in deepening its local content policy and plans to revise its investment program to support Ukrainian manufacturers.
The press service of Ukrzaliznytsia said that such plans were disclosed by member of the company’s board Frantisek Bures.
According to him, the company intends to reduce excess costs and non-core assets for this purpose. “This will free the required sources of funding and turn blocked assets into liquid ones. At the same time, the company’s investment program will be maximally refocused on cooperation with internal producers. Thus, the Ukrainian economy will receive not only the benefits of reliable logistics services provided by Ukrzaliznytsia, but also additional support,” the press service said in the statement, citing Bures.
Ukrzaliznytsia expressed the hope that as a result, the share of production of new locomotives, spare parts, key components, repair services and modernization projects on the basis of Ukrainian enterprises will increase. Deepening the level of the local content policy for investments will support the Ukrainian economy through employment growth, technological development and the introduction of innovative know-how.
Bures said that at present, the company makes extensive use of industrial products from internal manufacturers, in particular, welding structures, transformers, electric motors and equipment, gear structures and systems, axial pins and wheel sets, construction equipment, power electronics, control systems and radio engineering, traffic safety systems, airborne alarm and security systems, light and sound systems, fire protection systems, sensors, video and communication systems, cables and conditioning systems, accumulators and batteries, installation and commissioning works. The company also uses the testing and certification, warranty and after-sales services, and other services.
“Based on my long experience working with international and domestic manufacturers of rolling stock, I am absolutely convinced that Ukrainian manufacturers are able to meet the highest quality requirements,” he said.
Bures also said that in order to fulfill the order of President of Ukraine Volodymyr Zelensky regarding the promotion of investment and strengthening the protection of foreign investment in the country, the industry needs to get government’s strong support and clear rules of the game on the market. “It is necessary to adopt the national local content strategy for large national investment projects with transparent rules, calculations and a monitoring methodology. This will involve more foreign partners in investing in Ukraine, contributing to the creation of new jobs and the development of the national economy,” he said.
Ukraine’s Minister of Infrastructure Vladyslav Krykliy expects provision of financial support to Ukrzaliznytsia in the amount of UAH 4-5 billion from the funds received from Gazprom, he said in an exclusive interview with Interfax-Ukraine.
According to the minister, financial support on behalf of the state will be the most liquid aid for Ukrzaliznytsia in the current situation, taking into account the previously downgraded rating of the company by S&P Global Ratings to “CCC” with a negative outlook.
“Part of funds from Gazprom, which goes to Naftogaz, will be transferred to the budget in the form of dividends, we expect to receive a certain amount that will be provided to support Ukrzaliznytsia. But not just to close the current problems, but to order wagons, trains, etc. in the domestic market,” the minister emphasized.
Krykliy also said that the Ministry of Infrastructure plans to receive about UAH 4-5 billion of targeted financing for Ukrzaliznytsia.
“We expect that these funds will arrive this year, and will be distributed by the end of the year,” he stressed.
