GR released 1H19 unaudited results together with Management Discussion and Analysis. Revenue was up 5.7% y/y to US$ 85.1mn supported by increased freight traffic. Operating expenses, which are mostly GEL-denominated, decreased 14.8% y/y to US$ 65.2mn (-6.6% y/y in GEL). Consequently, adjusted EBITDA improved and reached US$ 35.9mn (+25.4% y/y). Adjusted EBITDA margin also hiked to 42.2% from 35.6% a year ago. GEL’s 17% depreciation against dollar in 1H19 led to a non-cash FX loss of US$ 31.7mn, which dragged down net income to a negative US$ 15.3mn.
GR’s freight transportation revenue, traditionally the most important revenue category, was up for the first time in the last four years. Revenue stood at US$ 85.1mn up 5.7% y/y. Freight transportation revenue, up 15.4% y/y to US$ 54.1mn, had the largest positive impact on the overall revenue growth in 1H19. Freight handling revenue also increased 10.1% y/y to US$ 11.1mn, while logistic service revenue dropped 35.8% y/y to US$ 8.5mn. Passenger traffic revenue, mostly generated in GEL, also continued growing, up 9.2% y/y to US$ 4.2mn (+19.8% y/y in GEL). Other revenue was up 26.5% y/y to US$ 2.1mn driven by sale of scrap.
GR recognized significant impairment loss in 2018 as a result of impairment testing of its Property, Plant and Equipment (PPE). Due to 5 consecutive years of decline (cumulative drop of 56.1% in 2018 vs. in 2014) in its main revenue stream – freight transportation, GR assets’ value in use was re-assessed and was found to be US$ 272.8 (GEL 691.4mn) lower than the carrying amount. This led to a recognition of the large impairment loss in 2018.
1H19 operating expenses, which are mostly GEL-denominated, declined 14.8% y/y to US$ 65.2mn. This was mostly caused by significant drop in asset-base (PPE) and related reduction in depreciation expenses (down 36.4% y/y to US$ 15.3mn). On the other hand, employee benefits and electricity and other consumables expenses increased, 8.0% y/y and 7.1% y/y, respectively in GEL terms. However, they still reduced in dollar terms as GEL depreciated.
