modernised EPL9T train of Ukrainian Railways

Ukrainian Railways financial plan for 2024 approved

First modernised EPL9T train of Ukrainian Railways Alexander Kamyshin via Twitter

The Cabinet of Ministers of Ukraine approved the financial plan of Ukrainian Railways for 2024. It includes a wage increase for employees and investments in damaged infrastructure, but Ukrainian Railways cannot count on a significant budget from the state, as priorities lie in defence in the war with Russia.

“The Financial plan for 2024 does not provide for the attraction of funds from the state budget, the priority of which is the financing of the country’s defence capabilities”, said the chairman of the board of Ukrainian Railways (Ukrzaliznytsia), Yevhen Lyashchenko. “Our task will continue to be the stable provision of passenger and cargo transportation in wartime conditions and the financing of the necessary investments for the support and restoration of the railway infrastructure at the expense of our own funds and funds raised by international financial institutions.”

The financial plan also provides for an increase in the wages of railway workers. Their wage currently “does not correspond to their contribution to the defence capability and functioning of the economy of Ukraine, if compared with other industries”, said Lyashchenko.

Plan for break-even

During its preparation, the Ukrainian Prime Minister indicated that approval of the Financial plan with losses is impossible, said the head of Ukrainian Railways. “The government instructed us to develop a plan to break even. For this, it was necessary to find real sources of additional income. By the way, in May we submitted amendments to the financial plan, which already has even a small profit. Currently, UZ is unprofitable. According to our forecast, there will be a profit in nine months”, Yevhen Lyashchenko said in September to the news agency Interfax-Ukraine.

In general, losses are forecast at the level of 319 million euros (UAH 12.6 billion), according to the approved financial plan. They will be covered by a developed plan for breaking even. Development of capital investments is planned for 960 million euros (UAH 38 billion). These funds, in particular, will be directed to the restoration of infrastructure damaged by Russia and the construction of railway connections with EU countries.

In the approved financial plan, Ukrainian Railways is set to receive an income of 2.6 billion euros (UAH 103.2 billion). In particular, net income from the sale of products (goods, works and services) is planned in the amount of 2.5 billion euros (98.6 billion UAH). As an additional source of income, the railway company wants to increase the sale of scrap metal to recycle old wagons, and sell it on the European market where prices are higher, Lyashchenko said. For that, Ukrainian Railways proposed to allow the sale of part of the scrap to major global producers of steel products made with scraps under direct bilateral agreements without duty. The company did not announce yet whether this plan will go through.

The planned volume of payments to the State and local budgets in 2024 is 607 million euros (UAH 24 billion), which is 5 per cent more than expected in 2023. Total expenses are planned for 2.9 billion euros (UAH 115.8 billion). In particular, a 13 per cent increase in the cost of goods sold is expected, mainly due to the need to raise wages and increase electricity tariffs. The EBITDA – a measure of a company’s gross profit, without deducting the costs of interest, taxes, depreciation and amortisation – is planned at the level of 298 million euros (UAH 11.8 billion). The EBITDA profitability index will be 12 per cent.

Revenue from cargo transportation and passenger transport

Next year, revenue from cargo transportation is expected to be 2 billion euros (UAH 80.1 billion), and from passenger transportation 235 million euros (UAH 9.3 billion). The railway company is also planning to implement a 20 per cent increase in their freight tariffs starting January 2024, something shippers are not happy with.

To increase their export potential, Ukrainian Railways is looking for opportunities to expand railway corridors to Baltic ports. The ports of Lithuania have a significant idle potential and the organization of a competitive alternative route for the delivery of Ukrainian agricultural products and rolled metal to the Baltic seaports, as well as for the import of energy carriers to Ukraine can become a promising long-term strategy, the head of UZ said during a meeting with representatives of the Lithuanian Railways in August.

“The specified financial plan was formed and submitted for consideration back in the third quarter of this year when the work of the ports was completely blocked. We have already developed our break-even proposals. In particular, taking into account the trend of the previous two months of this year, a more optimistic re-forecast regarding cargo transportation was made”, said the head of Ukrainian Railways. “We also plan to unify tariffs: make them more transparent and bring them to the European model. We will continue our work on cost optimisation.”

Author: Esther Geerts

Former Editor

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