OREANDA-NEWS. FESCO Transportation Group (MOEX: FESH) provides a trading update with the operational and audited consolidated financial results for the twelve month period ended December 31, 2013.

Highlights:

• Strong container business growth across Group's divisions and service lines with intermodal transportation volumes up 17% YoY, import container handling at Vladivostok port up 10% YoY and number of block trains up 34% YoY

• Non-container business remained under pressure due to overall weakness in the rail transportation market and unfavorable situation for metallurgical export from Russian Far East ports

• Top line performance of the Group and Group EBITDA were negatively affected by the inherent volatility of the rail transportation market. Group EBITDA declined by 25% to USD 186m due to a significant drop in the Rail Division's EBITDA which was only partially offset by growth of the Port Division's EBITDA

• Pro-forma net debt decreased from USD 976m as of 31-Dec-2012 to USD 927m as of 31-Dec-2013

Group Operational Results

Group performance in FY2013 was affected by mixed results of Group' business divisions. Sustainable improvement in the Port Division's performance was offset by volatility and weak results of the Rail Division driven by overall weakness of general cargo rail market and the sharp decrease in gondola rates. In 2013, consolidated revenue of the Group declined by 4.8% YoY to USD 1,140m and consolidated EBITDA decreased by 24.7% YoY to USD 186m. Group EBITDA excluding one-off expenses1 amounted to USD 197m. EBITDA margin decreased by 4.3 pt to 16.3%.

USD millions

1Q 2013

2Q 2013

3Q 2013

4Q 2013

2013

2011

2013 vs 2012

Revenue(1)

275.3

282.3

292.0

290.4

1,140

1,197

-4.8%

EBITDA(1)

48.1

51.3

53.0

33.6

186

247

-24.7%

EBITDA margin(1)

17.5%

18.2%

18.2%

11.6%

16.3%

20.6%

-4.3 pt

Capital Expenditures

10.0

15.2

14

8.3

47.5

65.8

-27.8%

(1) On adjusted basis for consolidation of Vladivostok port in 1Q2012, disposal of vessels and non-recurring expenses 2013adj. revenue decreased by 3% and adj.EBITDA decreased by 33% y-o-y.

Divisional Financial Performance

Port Division

• EBITDA increased by 4% YoY to USD 89m driven by growth of container handling volumes and by consolidation of the Vladivostok Port (VMTP) starting from April 1, 2012. Port Division's EBITDA excluding one-offs amounted to USD 94m.

Rail Division

• FESCO outperformed the market due to an increased number of block trains operated by the Group (up 34% YoY to 1,136) and an increased fleet of fitting platforms of Russkaya Troyka and Transgarant in operation (up 9% YoY) in line with the Group's strategy to shift the focus in rail business towards containers

• However, the growth in container rail transportation volumes was not enough to offset the significant decline in gondola rates and the overall weakness of general cargo rail market. As a result, Rail Division's EBITDA decreased by 46% YoY to USD 90m and EBITDA margin declined by 12.1pt to 36.0%

Liner and Logistics Division

• EBITDA decreased by 17.5% YoY to USD 35.8m as a result of decreasing freight rates

Liner and Logistics Division

• EBITDA remained negative at USD 5.6m in 2013. Optimization of the fleet provided positive effect on the Division's EBITDA, which increased from negative USD 4.1m in 2Q2013 to negative USD 0.2m in 4Q2013

• In 2013, FESCO added four ice class general cargo vessels to its shipping fleet -Pevek, Posyet, Pioneer and Primor'ye. The first two vessels started servicing FESCO cabotage lines in 3Q2013. The remaining two vessels were deployed in 1Q2014

• As of December 31, 2013 the Group operated a fleet of 24 vessels deployed through the FESCO sea service lines and 4 ice-breakers leased-in under long-term contracts.

Bunkering

• In 2013, bunkering business generated USD 84m of revenue and USD 3m of EBITDA

USD millions

1Q 2013

2Q 2013

3Q 2013

4Q 2013

2013

2012

2013 vs 2012

Port

 　 　 　 　 　 　 　

Revenue(3)

46.8

51.6

51.3

50.4

200.1

177.9

+12.5%

EBITDA(3)

17.9

26.1

29.6

15.8

89.4

85.7

+4.3%

EBITDA margin(3)

38.2%

50.6%

57.7%

31.3%

44.7%

48.2%

-3.5 pt

Rail

 　 　 　 　 　 　 　

Revenue

74.6

66.3

57.4

52.4

250.7

347.0

-27.8%

EBITDA

28.4

24.6

20.4

16.9

90.3

167.8

-46.2%

EBITDA margin

38.1%

37.1%

35.5%

32.3%

36.0%

48.1%

-12.1 pt

Liner & Logistics

　 　 　 　 　 　 　

Revenue

158.2

169.3

168.7

175.6

671.8

623

+7.8%

EBITDA

8.8

8.7

8.8

9.5

35.8

43.4

-17.5%

EBITDA margin

5.6%

5.1%

5.2%

5.4%

5.3%

6.9%

-1.6 pt

Shipping

　 　 　 　 　 　 　

Revenue(4)

17.7

11.0

14.6

22.0

65.3

141.0

-53.7%

EBITDA(4)

0.2

-4.1

-1.5

-0.2

-5.6

-6.7

-

Bunkering

　 　 　 　 　 　 　

Revenue

-

12.1

34.5

37.0

83.6

-

-

EBITDA

-

0.9

1.6

0.7

3.2

-

-

EBITDA margin

-

7.4%

4.6%

1.9%

3.8%

-

-

(3) On adjusted basis for consolidation of Vladivostok port in 1Q2012 and non-recurring expenses 2013 Port Division's adj.EBITDA decreased by 4.5% y-o-y

(4) On adjusted basis for disposal of vessels and non-recurring expenses 2013 Shipping Division's adj.EBITDA decreased byUSD 1.9m

FESCO Consolidated Group Financial Performance

Pro-forma net debt decreased from USD 976m as of 31-Dec-2012 to USD 927m as of 31-Dec-2013:

• Consolidated debt includes USD 550m of 8.00% Senior Secured Notes due 2018 and USD 325m of 8.75% Senior Secured Notes due 2020, as well as RUB 5bn of bonds, the proceeds from which were used to refinance the Group's acquisition-related and pre-existing debt

• As of December 31, 2013, Pro-forma Net Debt / LTM adjusted EBITDA ratio was 4.7xUSD millions At 31 December, 2013

Pro-forma total Debt(2)

1,118

Cash

191

Pro-forma net Debt

927

Pro-forma net Debt/ LTM Adj. EBITDA

4.7

(2) Total borrowings include USD 550m 8.00% Senior Secured Notes due 2018 and USD 325m 8.75% Senior Secured Notes due 2020; RUB 5bln ruble bonds and exclude the USD 150m REPO loan secured by shares of TransContainer

Ruslan Alikhanov, FESCO President and CEO commented:

“In 2013, we continued progress to achieving our strategic objectives to improve our position as a leading player on the Russian transportation market. The new management team, which joined the company during this year, together with experienced FESCO staff, is now creating sound foundation for further development of the Group despite the challenging economic environment. In 2013, the Port Division became the core business of the Group and we also launched bunkering services in order to diversify our business and bring more stability”.