Pkp Cargo Spolka Akcyjna · GPW:PKP

Pkp Cargo Spolka Akcyjna — PKP Cargo — Q3 2014 Earnings Presentation

31 slides from Pkp Cargo Spolka Akcyjna's earnings presentation, Nov 13, 2014

1. Slide 1: Solid Results on Challenging Market

   Solid Results on Challenging Market PKP CARGO GROUP After Q3 2014 13th November 2014

2. Slide 2: Agenda

   Agenda Key events Operating data Financial data Summary 2

3. Slide 3: Transport: the economy's barometer

   Transport: the economy’s barometer – economic conditions determine the freight transport Macroeconomic environment  Slowing dynamics of GDP growth – subdued GDP growth in Poland economic activity affects carriage Growth in % yoy  Downward revision by the EC of its forecast about Poland’s GDP to 3.

4. Slide 4: Rail freight market in Poland

   Rail freight market in Poland – factors affecting carriers’ operations Macroeconomic environment  Railway network modernization: Commercial speed vs. freight volume lower speed = greater demand for resources  lower speed = short-term rise in carriers’ km/h mln t demand for rolling stock and worker

5. Slide 5: PKP CARGO – adaptation to market conditions

   PKP CARGO – adaptation to market conditions PKP CARGO’s activities New organizational structure of PKP CARGO more efficient management, better customer service  Flexibility, aligned commercial policy, diversified sources of incomes  Cost discipline  Merger of Company Divisions (10 into 7) – bette

6. Slide 6: Solid Results of PKP CARGO

   Solid Results of PKP CARGO 57% PLN 554 m PLN 359 m MARKET EBITDA OPERATING SHARE +9% CASH FLOW y/y by freight turnover for 9M 2014 17.5% for 9M 2014 margin REVENUE OPEX NET PROFIT 9M PLN 3 169 m PLN 2 887 m PLN 227 m -10% y/y in 9M 2014 -12% y/y in 9M 2014 +38% PLN 1 069 m PLN 956 m PLN 99 m Q3 -13%

7. Slide 7: Agenda

   Agenda Key events Operating data Financial data Summary 7

8. Slide 8: Freight volume and freight turnover

   FREIGHT VOLUME and FREIGHT TURNOVER – PKP CARGO Group will take over the majority of the market growth Freight Volume (ths tons) +8% +15% 59 735 55 180 In Q3 2014 PKP CARGO Group 29 693 took over 83% of the market growth 25 924 Market  +4,555 th tons (Q3 vs Q2) Q2 2014 Q3 2014 Q2 2014 Q3 2014 Marke

9. Slide 9: Share in the freight market

   SHARE IN THE FREIGHT MARKET – definite leader of the railway freight market PKP CARGO share PKP CARGO: a leader in the main freight (by freight volume on the railway freight market) categories* 50% 47% 47% 76% Timber and timber products 72% Hard coal Q1 2014 Q2 2014 Q3 2014 Comment Aggregates and 63

10. Slide 10: Hard coal

    HARD COAL – growth in domestic and transit freight PKP CARGO: freight turnover – coal III quarter of 2014 tkm million 2,953  Domestic freight of coal up by (+10% y/y), coke and 2,747 brown coal (+52% y.y) (by freight volume) 2,525 2,495 975 389 499 533  Decrease of hard coal export (-42.0% y/y) –

11. Slide 11: Aggregates and construction materials

    AGGREGATES AND CONSTRUCTION MATERIALS – major infrastructural investments PKP CARGO: freight turnover III quarter of 2014 – aggregates and construction materials tkm million  A new contract to transport cinder and clinker 1982 1 856 (approx. 2.2 million tons in 3 years) 1 615  A contract to delive

12. Slide 12: Metals, ores and scraps

    METALS, ORES AND SCRAPS – expected increased demand for steel products PKP CARGO: freight turnover III quarter of 2014 – metals, ores and scraps tkm million  Increasing import freight to steel works located in 1 194 southern Poland (metal ores) 962 912  Changes to the freight structure in ores 779

13. Slide 13: Intermodal

    INTERMODAL – growing share on the dynamically developing market PKP CARGO: freight turnover – intermodal III quarter of 2014 tkm million 464  Increased share of PKP CARGO in the intermodal 436 444 412 freight market to 53.2% (by freight turnover for Q2 2014)  Increase in intermodal freight in Pola

14. Slide 14: Perspectives on the railway freight market

    PERSPECTIVES ON THE RAILWAY FREIGHT MARKET Aggregates and 2015 Perspectives Estimated growth construction materials of the freight market in 2015 New road investments financed from the EU budget Increased investments in energy infrastructure Single-digit growth Further intensive renovations of railw

15. Slide 15: Modernization of railway lines – impact on PKP CARGO's business

    Modernization of railway lines – impact on PKP CARGO’s business Diagnosis Average commercial speed km/h  Unprecedented scale of works  PLN 7bn in 2014 and PLN 10bn in 2015 to modernize 28.0 the railway network 26.5 25.9 26.2  1.5 thousand kilometres of lines under modernization in 2014 24.2 EFFEC

16. Slide 16: Modernization of railway lines – operations along lines under modernization

    Modernization of railway lines – impact on PKP CARGO’s business Operations along lines under modernization Diversions on line 6  Closures on short sections may cause several kilometres long diversions Example:  Line 6: works on Tłuszcz–Łochów section require Option 3 taking much longer routes  3

17. Slide 17: Agenda

    Agenda Key events Operating data Financial data Summary 17

18. Slide 18: Profitability growth, favourable cost to revenue ratio

    Profitability growth, favourable cost to revenue ratio Financial results of PKP CARGO Group in PLN m 9M 2013 9M 2014 % Q3 2013 Q3 2014 % Operating revenue 3,518 3,169 -10% 1,227 1,069 -13% Operating costs 3,292 2,887 -12% 1,127 956 -15% EBIT 226 282 25% 99 113 14% EBITDA 506 554 9% 194 203 5% Net pr

19. Slide 19: Consistent reduction of costs

    Consistent reduction of costs Operating costs 2 887 PLN m w 9M 2014 956 PLN m Q3 2014 Comment Other 21% Labour costs 37%  Further decrease of operating expenses (-12% y/y) Amortisation and  Improving cost efficiency indicators due to: depreciation 9%  lower rates for access to infrastructure Fuel

20. Slide 20: Strong balance sheet, many options to gain financing

    Strong balance sheet, many options to gain financing CAPEX Comment PLN m 9M 2013 9M 2014 % Maintenance  + PLN 359 million – cash on operating activity 171 301 76% (loco & wagons) Modernisation of  PLN 515 million – additional credit line at BGK 23 48 113% locomotives  PLN 115 million – refinancin

21. Slide 21: Thank you for your attention

    Agenda Key events Operating data Financial data Thank you for your attention. Summary 21

22. Slide 22: We deliver on our promises

    We deliver on our promises IPO declarations Performance . New management model Optimizing the Group's operations . Consolidation of divisions . Consolidation of rolling stock repair companies Expanding the logistic chain . New strategies for subsidiaries . Tender offer for purchase of a transhi

23. Slide 23: Our key challenges

    Our key challenges  Effective utilization of resources in the face of falling commercial speed  Flexibility in adjusting resources to changing market environment (commercial policy, revenue streams)  Optimization of employment size and structure (VLP possible)  New structure of sales department

24. Slide 24: Q&A Session

    24 Q&A Session LoG 2 IsTICS

25. Slide 25: Transport results

    Transport results Freight turnover (m tkm) Change Share Share 9M 2013 9M 2014 % 9M 2013 9M 2014 solid fuels 10 007 8 806 -12% 45% 42% including coal 8 930 7 767 -13% 40% 37% aggregates and construction materials 3 922 4 530 16% 18% 21% metals and ores 3 146 2 653 -16% 14% 13% chemicals 1265 1404 11%

26. Slide 26: Consolidated profit and loss statement

    Consolidated profit and loss statement PLN m 9M 2013 9M 2014 change % Sales revenue 3351,5 3100,4 -7% Revenue from the sales of goods and materials 140,9 39,6 -72% Other operating revenue 25,3 28,8 14% Total operating revenue 3517,8 3168,9 -10% Depreciation and impairments 280,3 272,1 -3% Consumptio

27. Slide 27: Consolidated statement of financial position

    Consolidated statement of financial position PLN m As at 31/12/2013 As at 30/09/2014 Tangible fixed assets 3855,4 3986,7 Intangible assets 61,4 55,1 Goodwill 2,7 2,7 Investment property 1,4 1,4 Investments measured using the equity method 38,2 34,3 Other non-current financial assets 6,1 6,1 Other no

28. Slide 28: Consolidated statement of financial position

    Consolidated statement of financial position PLN m As at 31/12/2013 As at 30/09/2014 Share capital 2 166,9 2 239,3 Supplementary capital 692,8 615,3 Other equity components -16,4 -17,5 Retained earnings / Uncovered losses 603,2 694,5 Equity attributable to shareholders of the parent company 3 446,5

29. Slide 29: Consolidated cash-flow statement

    Consolidated cash-flow statement PLN m 9M 2013 9M 2014 Gross profit/(loss)for the financial year 2,8 285,6 Adjustments: Depreciation of fixed assets 282,2 272,1 Impairment of fixed assets (1,9) - Profit on the sale of fixed assets and intangible assets 21,2 6,3 Profit (loss) on operating activities

30. Slide 30: Consolidated cash-flow statement

    Consolidated cash-flow statement PLN m 9M 2013 9M 2014 Expenditures in respect of purchase of fixed assets and intangible assets (300,9) (495,3) Proceeds from the sale of fixed assets and intangible assets 2,1 1,0 Proceeds from the sale of other financial assets 0,0 - Expenses for the acquisition of

31. Slide 31: Investor Relations contact

    For additional information on PKP CARGO please contact the Investor Relations Department: PKP CARGO S.A. Investor Relations Department ul. Grójecka 17 tel: +48 22 391 47 09 02-021 Warszawa e-mail: relacje.inwestorskie@pkp-CARGO.eu 31

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