DGAP-News: Far Eastern Shipping Company: Trading update for the three month and nine month periods ended September 30, 2013

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Far Eastern Shipping Company: Trading update for the three month and
nine month periods ended September 30, 2013

28.11.2013 / 09:54

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November 28, 2013

Trading update for the three month and nine month periods ended September
30, 2013

FESCO Transportation Group (MICEX-RTS: FESH) provides a trading update with
consolidated financial and operational results for the three month and 
nine month periods ended September 30, 2013.

Highlights:

  - Steady improvement in Company financial performance in 3Q2013 compared
    to 2Q and 1Q2013. The Port Division performed particularly strongly,
    recording its highest quarterly EBITDA for 3Q2013. In 9M2013, Port
    Division EBITDA increased by 11.0% y-o-y driven by growing volumes of
    container cargo handling

  - Rail container transportation volumes were up 5.7% in 9M2013 reaching
    209.8 thousand TEUs. The volume growth was above market owing to an
    increased number of block trains operated by the Group and an increased
    fleet of fitting platforms. Nevertheless, Rail Division results
    continued to be depressed by decreased average income per railcar
    across the market, particularly for gondolas, and the overall weakness
    of rail market environment

  - Due to mixed divisional performance in 9M2013 consolidated Group
    revenue decreased by 4.8% to $849.6m and Group EBITDA decreased by
    13.3% to $152.4m. Since the beginning of 2013, FESCO has acquired two
    ice-class  fuel efficient vessels, and chartered in another two vessels
    of the same class, to strengthen positions on cabotage lines

  - FESCO launched two new regular sea container services from North
    America to St. Petersburg and Novorossiysk/Sochi

Group Operational Results

Port Division

In 9M2013, import container cargo throughput grew to 152.6 thousand TEUs
(up 9.1% y-o-y), export container cargo throughput grew to 118.5 thousand
TEUs (up 1.5% y-o-y), and cabotage container cargo throughput decreased by
4.8% to 78.3 thousand TEUs. Cabotage cargo throughput volumes have shown
positive trends during 2013 growing from 21.4 thousand TEUs in 1Q2013 to
26.4 thousand TEUs in 2Q2013 and 30.5 thousand TEUs in 3Q2013.

Automobiles and transportation vehicles throughput increased by 9.7%
amounting to 70.3 thousand units. Non-container cargo throughput (excluding
vehicles) declined by 37.4% to 1.5 mln tons driven by the reduction in
export volumes of ferrous metals and coke.

Rail Division

In 9M2013, rail container transportation volumes were up 5.7% y-o-y
reaching 209.8 thousand TEUs. The volume growth was above market owing to
an increased number of block trains operated by the Group and an increased
fleet of fitting platforms. In 9M2013, the number of block trains increased
by 39% y-o-y. The average number of block trains per week increased from 15
in 9M2012 to 21 in 9M2013.

Rail cargo load decreased by 17.0% to 15.3 million tons owing to Russia's
soft rail transportation market, as well as the reduction in the average
transportation speed within the RZhD network.  Rail cargo turnover grew by
10.2% y-o-y due to growth in the average transportation distance.

Liner and Logistics and Shipping Divisions

In 9M2013, intermodal freight transportation  volumes rose by 18.7% y-o-y
to 179.6 thousand TEUs. Bilateral sea container trade volumes reached 273.9
thousand TEUs, an increase of 7.0% y-o-y. The Group continues to add to the
list of destinations serviced by its global network. In September and
October 2013, FESCO launched two new regular sea container services from
North America to St. Petersburg and Novorossiysk/Sochi.

In 9M2013, the volume of domestic sea container transportation declined by
9.6% y-o-y to 46.3 thousand TEUs due increased competition. To strengthen
its competitive positions, FESCO added four ice class general cargo vessels
to its shipping fleet - Pevek and Posyet were acquired in 1H2013, and FESCO
Pioneer and FESCO Partizan were chartered in during September 2013. The
first two vessels started servicing FESCO cabotage lines in the middle of
3Q2013, which drove part of our domestic sea container transportation
growth. FESCO Pioneer and FESCO Partizan will be deployed later in the
year.

As of September 30, 2013 the Group operated a fleet of 26 vessels deployed
through the FESCO sea service lines and 4 ice-breakers leased-in under
long-term contracts.

Group Financial Results

Revenue and EBITDA have continued to recover steadily each quarter during
2013 since 1Q2013's relatively weak performance.  Consolidated revenue
increased from $275.3m in 1Q2013 to $292.0m in 3Q2013. Consolidated EBITDA
grew from $48.1m in 1Q2013 to $53.0m in 3Q2013.

In 9M2013, Group consolidated revenue declined by 4.8% y-o-y to $849.6m and
Group consolidated EBITDA decreased by 13.3% y-o-y to $152.4m on the back
of the challenging rail market environment in 2013. The Group's EBITDA
margin decreased by 1.8 pt to 17.9%.

EBITDA by division:

  - Port Division 

      - In 2Q2013 and 3Q2013 the Port Division was the major contributor to
        the Group EBITDA. In 3Q2013, EBITDA margin increased compared to
        both 2Q2013 and 3Q2012 by 7.1pt and 2.3pt respectively. In 9M2013,
        EBITDA increased by 11.0% y-o-y driven by growing volumes of
        container cargo handling. EBITDA margin decreased from 51.2% in
        9M2012 to 49.2% in 9M2013 due to the higher proportion of low
        margin cargo in the Group's cargo mix following the consolidation
        of VMTP in 1Q2012

  - Rail Division 

      - EBITDA decreased by 44.8% from $133.2m in 9M2012 to $73.5m in
        9M2013. Although FESCO has outperformed the market in the container
        segment, which continued to grow during 2013, the decrease in
        general cargo volumes has negatively affected the divisional
        results along with the fall in average income per railcars seen
        across the market, particularly for gondolas. EBITDA margin
        decreased from 49.6% in 9M2012 to 37.0% in 9M2013

  - Liner and Logistics Division 

      - EBITDA decreased by 21.0% from $33.3m in 9M2012 to $26.3m in 9M2013
        owing to decreasing freight rates

  - In the Shipping Division, EBITDA remains negative improving from
    negative $4.1m in 2Q2013 to negative $1.5m in 3Q2013

  - Bunkering

      - Beginning 3Q2013, Bunkering is reported as a separate business
        segment with revenue of $34.5m and EBITDA of $1.6m in 3Q2013

Pro-forma net debt decreased in 3Q2013 versus 2Q2013 ($947m versus $959m):

  - Consolidated debt includes $550m of 8.00% Senior Secured Notes due 2018
    and $325m of 8.75% Senior Secured Notes due 2020 in May 2013, as well
    as RUB 5bn (c. $153m) of bonds, the proceeds from which were used to
    refinance the Group's acquisition-related and pre-existing debt

  - As of September 30, 2013, Pro-forma Net Debt / LTM adjusted EBITDA
    ratio was 4.4x

Ruslan Alikhanov, FESCO President and CEO commented:

'Our Port Division demonstrated outstanding performance during the
reporting period recording a record high for quarterly EBITDA, thus
becoming the major strategic contributor to Group EBITDA. Although the
continuing weakness in the rail industry affected the Group's results, we
continue to proactively address the unfavorable trends witnessed in the
market, allowing the Group to outperform the market. In addition, we are
actively considering certain areas for growth in ancillary businesses, such
as bunkering'.

FESCO Consolidated Group Financial Performance

<pre>

$ millions          1Q 2013 2Q 2013 3Q 2013 9M 2013 9M 2012 9M 2013 vs 9M
                                                            2012

Revenue(1)          275.3   282.3   292.0   849.6   892.1   -4.8%

EBITDA(1)           48.1    51.3    53.0    152.4   175.8   -13.3%

EBITDA margin(1)    17.5%   18.2%   18.2%   17.9%   19.7%   -1.8 pt

Capital             10.0    15.2    14      39.2    60.6    -35.3%
Expenditures



</pre>

(1) On adjusted basis for consolidation of port in 1Q2012, disposal of
    vessels  and non-recurring expenses  the 9M2013 adj. revenue decreased
    by 3.5% and adj.EBITDA decreased by 29% y-o-y.

FESCO Consolidated Group Financial Position

<pre>

$ millions                                            At 30 September, 2013

Pro-forma total Debt(2)                               1,103

Cash                                                  156

Pro-forma net Debt                                    947

Pro-forma net Debt/ LTM Adj. EBITDA                   4.4x



</pre>

(2)Total borrowings include the placement USD 550m 8.00% Senior Secured
Notes due 2018 and USD 325m 8.75% Senior Secured Notes due 2020 in May
2013; RUB 5bln rubl bonds in June 2013 and exclude the $149m REPO loan
against the shares of TransContainer

Divisional Financial Performance

<pre>

$ millions         1Q 2013  2Q2013 3Q 2013  9M 2013 9M 2012 9M 2013 vs 9M
                                                            2012

Port

Revenue(3)         46.8     51.6   51.3     149.7   129.5   +15.6%

EBITDA(3)          17.9     26.1   29.6     73.6    66.3    +11.0%

EBITDA margin(3)   38.2%    50.6%  57.7%    49.2%   51.2%   -2.0 pt

Rail

Revenue            74.6     66.3   57.4     198.4   268.6   -26.1%

EBITDA             28.4     24.6   20.4     73.5    133.2   -44.8%

EBITDA margin      38.1%    37.1%  35.5%    37.0%   49.6%   -12.6 pt

Liner & Logistics

Revenue            158.2    169.3  168.7    496.2   453.5   +9.4%

EBITDA             8.8      8.7    8.8      26.3    33.3    -21.0%

EBITDA margin      5.6%     5.1%   5.2%     5.3%    7.3%    -2.0 pt

Shipping

Revenue(4)         17.7     11.0   14.6     43.3    109.9   -60.6%

EBITDA(4)          0.2      -4.1   -1.5     -5.3    -4.8    -

Bunkering

Revenue            -        12.1   34.5     46.6    -       -

EBITDA             -        0.9    1.6      2.5     -       -

EBITDA margin      -        7.4%   4.6%     5.4%    -       -



</pre>

(3) On adjusted basis for consolidation of port in 1Q2012 and non-recurring
expenses  9M2013 port adj.EBITDA decreased by 7% y-o-y with adj.EBITDA
margin decreased  to 49%

(4) On adjusted basis for disposal of vessels  and non-recurring expenses 
the 9M2013 shipping adj.EBITDA decreased by $3m

FESCO operational results for 9M2013

<pre>

                                     1Q2-  2Q2-  3Q2-  9M2-  9M2-  9m2013
vs
                                     013   013   013   013   012   9m2012

Intermodal freight transportation*   57,1  59,9  62,4  179,  151,    +18.7%
(TEU)                                  95    92    05   592   362

Bilateral sea container trade (TEU)  85,3  95,8  92,6  273,  255,     +7.0%
                                       18    85    71   874   914

Domestic sea container trade (TEU)   12,8  16,0  17,3  46,2  51,1     -9.6%
                                       61    10    93    64    96

Reefer transportation (TEU)          11,0  11,1  10,7  32,9  35,9     -8.3%
                                       33    73    43    49    17

Ro-Ro transportation (TEU)           14,0  14,6  10,8  39,6  43,1     -8.3%
                                       69    91    42    02    81

VMTP container throughput (TEU)      106,  117,  125,  349,  338,     +3.1%
                                      745   057   507   309   768
Import                                                                +9.1%
Export                               45,9  51,5  54,9  152,  139,     +1.5%
Cabotage                               87    76    95   558   878     -4.8%
                                     39,3  39,1  39,9  118,  116,
                                       67    31    85   483   683
                                     21,3  26,3  30,5  78,2  82,2
                                       91    50    27    68    07
VMTP non-container cargo throughput   611   450   461  1,522 2,431   -37.4%
(excluding vehicles) (thousand tons)

Automobiles and transportation       21,5  26,3  22,3  70,2  64,0     +9.7%
vehicles throughput (units)            43    79    47    69    48

Rail container transportation        64,1  72,2  73,4  209,  198,     +5.7%
(«Russkaya Troyka» and                 39    30    20   789   542
«Transgarant») (TEU)

Rail cargo load (million tons)       5.06  5.14  5.12  15.32 18.45   -17.0%

Rail cargo turnover (billion ton-    7.66  8.44  8.44  24.54 22.27   +10.2%
kilometers)



</pre>

* - excluding transportation of empty COCs

About FESCO

FESCO is one of the leading privately-owned transportation and logistics
companies in Russia with operations in ports, rail, integrated logistics
and shipping business. Diversified but integrated asset portfolio enables
FESCO to provide door-to-door logistics solutions and control almost all
steps of the intermodal transportation value chain.

The majority of FESCO's operations are located in the Russian Far East and
the Group benefits from growing trade volumes between Russia and Asian
countries.

FESCO controls the Commercial Port of Vladivostok, which has throughput
capacity of 3.9 million tons for general cargo and oil products, 150,000
vehicles and over 600,000 TEUs in containers. FESCO is one of Russia's top
10 private railcar operators providing services under the Transgarant
(100%) and Russkaya Troika (50% JV with Russian Railways) brands. The Group
owns a fleet of vessels mostly deployed through own line and logistics
operations. In 2012, revenue of FESCO Group reached USD 1,197 million.

IR contacts:

Galina Shilina
Director, Corporate Communications
+7 (495) 926 80 00 ext.11007
gshilina@fesco.com

Ekaterina Semenova
IR manager
+7 (495) 926 80 00 ext.11058
esemenova@fesco.com

PR contact:

Tatiana Vishnyakova
Deputy Director, Corporate Communications
+7 (495) 926 80 00 ext.11067
tvishnyakova@fesco.com 


End of Corporate News

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28.11.2013 Dissemination of a Corporate News, transmitted by
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