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Strictly to the East

Domestic logistics companies have successfully reoriented cargo flows towards Asia
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Russian railway operators faced a readjustment of their logistics processes in 2022. Despite the difficulties, domestic companies were able to increase revenues and net profits by reorienting cargo traffic to the East.

In 2022, loading on the Russian Railways network fell by 3.8% year-on-year to 1.234 billion tons. However, against the background of the reorientation of freight flows, shipments to the East showed positive dynamics. Thus, loading on the Trans-Baikal Railway grew by 9.6%, the Far Eastern Railway - 7.2%, the East Siberian Railway - 2.2%, and the Krasnoyarsk Railway - 1%.

Last year the profit of 18 main freight car operators showed 2.3 times growth in comparison with the indicators of 2021, as it follows from the RAS statements of the companies, analyzed by RBC.

Alexei Bezborodov, the managing partner of Infra Projects LLC, is sure that Russian operators were able to respond effectively to the sudden changes in logistics in 2022, thus increasing their revenues.

The best financial results last year were achieved by Federal Freight Company, a subsidiary of Russian Railways, which was able to boost its net profit by 6.45 times to 41.26 billion rubles, followed by First Freight Company with the growth of 1.75 times to 38.38 billion rubles, Modum-Trans – 3.49 times to 24.19 billion rubles, and NefteTransService – 5.38 times to 14.9 billion rubles.

A representative of TransContainer (part of Delo Group) told 1520international that the operator's revenue in 2022 increased by 28% to 171.5 billion rubles against 134 billion a year earlier and its net profit grew by 6% to 17.05 billion rubles. The company said that the positive financial performance is due to the rapid response to changes and the rapid restructuring of the logistics towards the eastern direction and alternative routes. For example, one of TransContainer's measures was strengthening of the sea shoulder and the launch of services through the port of Novorossiysk in communication with Turkey (Istanbul, Mersin, Samsun) and India (Nava-Sheva and Mundra).

Dmitry Baranov, a leading expert of MC Finam Management, believes that the growth of financial performance of logistics companies in 2022 is due to favorable transportation tariffs, point regulation of the industry, as well as increased efficiency of market participants, including the sale of non-core assets.

Regarding forecasts for 2023, experts believe that the results will depend on the state of the Russian economy and the production in a number of industries, such as oil and coal mining, construction materials, metallurgy, wood processing, chemical (fertilizers) industry and agriculture (grain cargo). "If enough of these types of products are produced, they will need to be transported both domestically and for export – thus providing carriers with increased revenues," Dmitry Baranov told 1520international.

The Finam Management expert is convinced that the indicators of most carriers may grow in comparison with last year, but they are unlikely to exceed the peak values of previous years. Alexei Bezborodov believes that the drastic change in logistics last year allowed the companies which were able to adapt to the new conditions in a timely manner to receive high profits. At the moment the situation has become more stable, so the revenue and net profit of domestic operators in 2023 may go down, the expert concludes.


Alexander Solyanik

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