Management of working capital

In accordance with its approved financial strategy, Russian Railways employs an aggressive model for the management of working capital, which involves reducing the financial cycle as much as possible in order to quickly release and spend funds on the financing of its current and investment activities.

Cash flow generated in the amount of RUB 18.9 bln

This model is marked by negative net working capital and means that the Company utilises its current liabilities as a source of investment activities.

In 2014, the Company’s negative net working capital totalled RUB (–125.4) bln. As a result of changes to the net working capital, a positive cash flow was generated in 2014 in the amount of RUB 18.9 bln.

Inventory management

The Company’s inventory was valued at RUB 69.0 bln as of 31 December 2014, down by RUB 14.1 bln from the start of the year.

Production process inventory declined versus 2013 by 3 days for materials and spare parts (from 54 days to 51 days) and by 1.5 days for fuel (from 27 days to 25.5 days).

Sales of 1.139 mln tonnes of scrap metal and the involvement of surplus materials and technical resources in economic turnover generated additional income of RUB 7.4 bln and savings of RUB 8.0 bln on the purchase of new material and technical resources.

Availability of inventories, RUB bln
Item Balance as of 31 Dec 2013 Balance as of 31 Dec 2014 Deviation +/-
Total inventories 83.1 69.0 –14.1
including:
Raw materials and supplies, similar assets 81.5 67.0 –14.5
Work in progress costs 0.8 1.0 +0.2
Finished products and goods for resale 0.2 0.4 +0.2
Shipped goods 0.0 0.0 0.0
Prepaid expenses 0.6 0.6 0.0

Accounts receivable

Total accounts receivable stood at RUB 157.2 bln at the end of the reporting year (an increase of almost 2 times, or RUB 78.0 bln, from the start of 2014).

Structure and dynamics of accounts receivable, RUB bln
Item Actual 31 Dec 2013 Actual 31 Dec 2014 Deviation +/- Deviation, times
Total buyers and customers (accounts receivable for sales), including: 23.3 82.7 +59.4 3.5 times
for transportation 2.3 34.8 +32.5 15.1 times
other buyers and customers 20.9 47.9 +27.0 2.3 times
Prepayments 10.3 8.7 –1.6 84%
Social insurance and security 0.3 0.4 +0.1 1.3 times
Taxes and fees 9.2 14.4 +5.2 1.6 times
including profit tax 6.8 14.1 +7.3 2 times
Wage settlements with personnel and other transactions with accountable persons 0.3 0.3 0.0 — 
Other debtors 13.9 16.2 +2.3 1.2 times
Total in current assets (according to balance sheet) 57.3 122.7 +65.4 2.1 times
Prepayments within non-current assets 21.9 20.9 –1.0 95%
Total prepayments 32.2 29.6 –2.6 92%
Debt on contributions to charter capital of S&A —  13.6 —  — 
TOTAL 79.2 157.2 +78.0 2.0 times
Turnover period of accounts receivable for sales, days
Indicator 2013 2014 +/— vs. 2013, days +/— vs. 2013, %
Turnover period of accounts receivable for sales, days 5.3 18.7 +13.4 3.5 times
for shipments 0.6 9.1 +8.5 15.2 times
for other sales 37 82.3 +45.3 2.2 times

The primary growth factors are:

As of the end of the reporting year, accounts receivable (including provisions for doubtful debts) from the provision of services to suburban passenger companies (including the debt of the Federal Railway Transport Agency) amounted to RUB 66.1 bln (RUB +13.5 bln compared to the start of the year), including:

The turnover period of accounts receivable for sales (transportation and other sales) amounted to 18.7 days, an increase of 13.4 days compared with 2013 (the growth was part of the financial plan approved by the Russian Railways Board of Directors).

Accounts receivable of Russian Railways as of 31 December 2014, RUB bln

Accounts receivable of Russian Railways as of 31 December 2014, RUB bln

In order to repay the overdue debt of Suburban Passenger Company, the action plan approved by the Russian Government to prevent the projected losses of Russian Railways in 2014–2015 provides for the settlement of debt owed to Russian Railways by suburban passenger companies for infrastructure and rolling stock lease services along with the restructuring of such debt over the course of ten years and the signing of the relevant agreements. This measure made it possible to restore the outstanding debt of Suburban Passenger Company and the Federal Railway Transportation Agency (a total of RUB 41.1 bln) in the provisions with the reflection of the proportionate positive financial result and also increase the current assets on the Company’s balance sheet.

Accounts payable

Accounts payable increased by RUB 7.1 bln (2%) in 2014 to RUB 305.6 bln.

Structure and dynamics of accounts payable, RUB bln
Item Actual on 31 December 2013 Actual on 31 December 2014 +/— vs. start of year % vs. start of year
Debt to suppliers and contractors 160.0 148.1 –11.9 93%
for investment activities 91.0 78.9 –12.1 87%
for operating activities 69.0 69.2 0.2 100%
Debt to personnel on wages and transactions with accountable persons 14.7 13.6 –1.1 93%
Debt for social insurance and security 8.0 8.4 0.4 105%
Debt to budget for taxes and fees 10.8 24.6 13.8 2.3 times
Prepayments received for other transactions 20.1 22.3 2.2 111%
Prepayment of shipments 71.7 78.1 6.4 109%
Other debt 11.7 10.6 –1.1 90%
TOTAL accounts payable 297.1 305.6 8.5 103%
Plus long-term debt (Blagosostoyanie Private Pension Fund) 1.4 0.0 –1.4
TOTAL 298.5 305.6 7.1 102%
Turnover period of accounts payable,days
Indicator 2013 2014 +/— vs. 2013 +/— vs. 2014, %
Turnover period 36.8 34.5 –2.3 94%
for operating activities 31.6 29.2 –2.4 92%
for investment activities 43.0 42.1 –0.9 98%

Accounts payable to suppliers and contractors totalled RUB 148.1 bln as of the end of 2014, including RUB 78.9 bln for investment activities and RUB 69.2 bln for current activities.

The turnover period for accounts payable to suppliers and contractors totalled 34.5 days for the Company as a whole in 2014, which is consistent with the standard settlement conditions for contracts of Russian Railways.

Overdue accounts payable to suppliers and contractors makes up less than 1% of total debt.