OREANDA-NEWS. FESCO Transportation Group (MOEX: FESH) provides a trading update with the operational and consolidated financial results as per IFRS for three months and nine months periods ended September 30, 2014.

Highlights:

- In 3Q 2014, FESCO continued to increase container transportation and handling volumes across all divisions strengthening its leading position in the Russian Far East

- FESCO was #1 in the Far East by total container handling at sea port terminals with the market share of 31.9% and by import container handling with the market share of 40.5%

- FESCO remained the leader by volume on all export-import sea container service lines where the Group operates with the market share of 41%

- Container throughput at the Vladivostok port increased by 10.4% YoY in 3Q 2014 distinctly outperforming the Far East market, the fastest growing Russian sea basin

- Container transportation by the Rail Division accelerated growth to 21.4% YoY in 3Q 2014

- In 3Q 2014, Rail division showed the first load volume growth and an improvement of the financial performance on QoQ basis compared to 2Q2014 after a long decline since the beginning of 2013

- In the environment of RUB depreciation, FESCO is leveraging a sustainable trend of growing bulk and containerized cargo export across all steps of the transportation value chain

- Group results were positively impacted by growth of volumes across all division and negatively impacted by RUB devaluation, change of cargo mix in the port and continuous rail market weakness

- In 3Q 2014, Group's consolidated revenue in USD increased by 13.3% YoY to USD 331m. In RUB, Group's consolidated revenue grew by 25.2% YoY to RUB 11,961m

- In 3Q 2014, Group's EBITDA in USD increased by 4.0% YoY and reached USD 55.1m. On QoQ basis Group's EBITDA increased by 55.7% driven by significant performance improvement across divisions. In RUB, Group's EBITDA was up by 15.1%YoY and reached RUB 1,994m.

- EBITDA margin declined on YoY basis due to increasing share of less marginal export cargo and increased from 13.1% in 2Q 2014 to 16.6% in 3Q 2014.

Group Financial Results USD million

2Q 2014

3Q 2014

3Q 2013

YoY Dynamics

9M 2014

9M 2013

YoY Dynamics

Revenue

270.7

331.0

292.0

+13.3%

844.1

849.6

-0.6%

EBITDA

35.4

55.1

53.0

+4.0%

123.3

152.4

-19.1%

EBITDA margin

13.1%

16.6%

18.2%

-1.6 pt

14.6%

17.8%

-3.2 pt

Capital Expenditures

17.9

23.6

14.9

+58.2%

59.9

40.1

+49.4%

RUB million

2Q 2014

3Q 2014

3Q 2013

YoY Dynamics

9M 2014

9M 2013

YoY Dynamics

Revenue

9 462

11 961

9 557

+25.2%

29 908

26 861

+11.3%

EBITDA

1 238

1 994

1 732

+15.1%

4 387

4 818

-8.9%

EBITDA margin

13.1%

16.7%

18.1%

-1.4 pt

14.7%

17.8%

-3.1 pt

Divisional Performance Highlights

Port Division

- Container throughput in 3Q 2014 was up by 10.4% YoY driven mostly by import-export volumes as a result of continued growth of international trade between Russia and Asian countries and increasing containerization level in Russia

- Growth of general cargo volumes by 10.6% YoY driven primarily by an increase in throughput of ferrous metals and chemicals

- As a result of positive operational performance, revenue in RUB increased by 5.2% YoY in 3Q 2014. Revenue in USD decreased by 6.2% YoY due to RUB devaluation

- In 3Q 2014, EBITDA decreased by 4.5% YoY in RUB and by 14.4% YoY in USD due to RUB devaluation, certain one-offs and increase in operational expenses. EBITDA in RUB adjusted for one-offs increased by 4.8% YoY from RUB 905.6m in 3Q 2013 to RUB 949.3m in 3Q2014. EBITDA in USD adjusted for one-offs decreased by 5.9% YoY from USD 27.9m to USD 26.2m

- EBITDA margin decreased by 5.1pt from 58.6% in 3Q 2013 to 53.5% in 3Q 2014. EBITDA margin decreased due to one-offs and growing share of less marginal export of both bulk cargo and containers

Rail Division

- Rail container transportation was up by 21.4% YoY in 3Q 2014 due to increased demand for FESCO block train services and fitting platforms fleet size

- Rail cargo load was up by 2.0% YoY in 3Q 2014 outperforming the Russian rail market

- In Q3 2014, revenue grew by 4% QoQ in RUB and by 1% QoQ in USD driven by volume growth in rail container transportation. Revenue in USD decreased by 29.1% YoY to USD 40.7m over the same period due to continued decrease in gondola rates and ruble devaluation.

- In Q3 2014, EBITDA in RUB increased by 11% QoQ and EBITDA in USD increased by 8% QoQ to USD 12.1m. In 3Q 2014, EBITDA in USD decreased by 40.7% YoY (35.6% YoY decrease in RUB) due to declined gondola rates

Liner and Logistics Division

- Strong growth of export-import sea lines and intermodal transportation volumes driven mainly by the increase in export-import flows on the back of growing trade with Asia, and specifically with China

- In 3Q 2014, revenue in RUB was up by 12.9% YoY. Revenue in USD was up by 1.3% YoY due to negative effect of RUB devaluation on cabotage rates (denominated in RUB) and RUB-denominated component of intermodal rate.

- Division's EBITDA for 3Q 2014 increased two folds in USD from USD 8.8m in 3Q 2013 to USD 17.5m in 3Q 2014. EBITDA in RUB increased by 121% and EBITDA margin was up by 5.0pt.

Shipping Division

- Shipping Division demonstrated strong results due to replacement of old vessels with new more efficient ones, as well as positive results of icebreakers operations, profitable contracts with third parties and decreased administrative costs

- In 3Q 2014, revenue in USD increased by 68.6% YoY to USD 24.6m

- EBITDA turned from loss of USD 1.5m to profit of USD 5.1m and EBITDA margin reached 20.8%

Bunkering

- Bunkering business contributed USD 84.1m to the Group's revenue and USD 3.3m to the Group's EBITDA in 3Q 2014