Macro Analysis /

Georgian Railway Dry cargo set to drive growth FY18 & 1Q19

    Lasha Kavtaradze
    Lasha Kavtaradze

    Head of Macroeconomic Analysis and Forecasting

    Giorgi Iremashvili
    Eva Bochorishvili
    Galt & Taggart
    24 July 2019
    Published by
    2018 turned out to be another challenging year for GR. The decline in freight transportation, particularly in liquid cargo, persisted in 2018, with the top line down 3.3% y/y to US$ 167.5mn. Freight transportation revenue (56.8% of total) was down 9.1% y/y to US$ 95.2mn, driven by significant drop in oil products transportation, while dry cargos going through Georgia increased for the first time in the last 4 years (up 7.5% y/y). Logistic service revenue was also down 5.7% y/y to US$ 27.7mn. Other revenue streams increased in 2018, namely freight car rental was up 49.6% y/y to US$ 10.0mn and passenger traffic was up 18.7% y/y to US$ 10.8mn. Due to significant drop in its main revenue line (freight) over the last 5 years, the company carried out impairment testing of its PPE. The recoverable value was based on its value in use and resulted in a recognition of GEL 691.4mn or US$ 272.8mn impairment loss in 2018. Significant drop in EBITDA caused the net debt-to-EBITDA ratio to reach 6.2x in 2018, far above the Eurobond incurrence covenant of 3.5x.