Cash Flow Analysis

Cash flow formation, RUB million
Indicator 2018 2017 Absolute change Change, %
Cash flow from operating activities 347,160 327,101 20,059 6.1
Cash flow used for acquisition of fixed assets, net −267,974 −306,199 38,225 −12.5
Free cash flow 79,186 20,902 58,284 3.8 times
Cash flow from other investment activities 101,551 32,027 69,524 3.2 times
Cash flow used in financial activities −167,520 −51,183 −116,337 3.3 times
Net cash flow 13,217 1,746 11,471 7.6 times
Change in cash and equivalents, resulting from currency exchange rate fluctuations 12,473 −170 12,643
Net increase in cash and equivalents 25,690 1,576 24,114 16.3 times

Operating Activities

The main source of the Group’s funds are cash flows generated by operating activities. Cash generated by operating activities for 2018 increased by 6.1% compared to 2017 and amounted to RUB 347,160 million. This was due to:

  • RUB 112,389 million increase in cash received from customers
  • RUB 102,341 million increase in payments to suppliers and contractors
  • RUB 9,301 million increase in the volume of insurance premium refunds, VAT and other taxes from the budget
  • RUB 8,533 million decrease in the amount of income tax paid
  • RUB 6,947 million increase in the amount of interest paid

Investment Activities

Factors resulting in the decrease in cash used in investment activities (by 39.3% as compared to 2017) are:

  • RUB 38,225 million reduction in the funds used for acquisition of fixed assets (net) in 2018
  • RUB 69,524 million change in cash generated from other investment activities, as a result of the following:
    • RUB 5,003 million increase in the net cash inflow from the purchase and sale of equity and debt securities as well as the placement/closure of deposits (as compared to 2017)
    • RUB 98,155 million decrease in funds invested in acquisition of a stake in subsidiaries and jointly run companies in 2018 compared to 2017, mainly caused by the acquisition of 57.41% of shares in the combined closed-end fund Gazprombank Finansovy in the amount of RUB 60,000 million in 2017 and the acquisition of a 25% share in the authorised capitals of Ust-Luga Oil and Sandmark Operations Limited, totalling RUB  38,160 million
    • RUB 25,067 million decrease in income from dividends received and other income from subsidiaries and jointly run businesses
    • the use of cash to acquire the share in NCSP (Omirico Limited) in the amount of RUB 49,319 million in 2018 listed in the consolidated cash flow statement exclusive of cash available from NCSP (Omirico Limited) and its subsidiaries, as of the acquisition date in the amount of RUB 32,018 million
    • cash inflow in 2018 as a result of the acquisition of 100% of the shares of CPC Company and CPC Investments Company in the amount of RUB 5,203 million
    • RUB 1,821 million reduction of the loaned amount (net), compared to 2017

Financial Activities

The outflow of funds in the amount of RUB 167,520 million from financial activities in 2018 against the outflow of RUB 51,183 million in 2017 was mainly caused by the following:

  • RUB 90,242 million increase in the funds raised, resulting from the issue of rouble bonds and raising loans totalling RUB 287,262 million during 2018 (as compared to RUB 197,020 million in 2017);
  • RUB 205,183 million increase in the sum used to repay bonds, credits and loans, as a result of the following:
    • during 2018, monthly payments and payments in advance were made to repay the loans under an agreement with the China Development Bank for a total amount of USD 4,651.1 million (RUB 276,187 million at the exchange rate of the Bank of Russia at the dates of transactions) as compared to monthly payments and payments in advance in the total amount of USD 2,467 million (RUB 144,864 million at the exchange rate of the Bank of Russia at the dates of transactions) for 2017
    • extinguishment of eurobonds totalling USD 1,050 million (RUB 66,293 million)

Calculating Cash Flow from Operating Activities Using the Indirect Method

In addition to the consolidated statement of cash flows prepared using the direct method and included in the consolidated financial statement by IFRS for 2018, calculation of cash flows from operating activities using the indirect method is given below.

When the indirect method is used, the net cash flow from operating activities is calculated by adjusting profit before tax for the following values:

  • Changes in inventories as well as receivables and payables pertaining to operating activities during the reporting period
  • Non-monetary transactions, such as depreciation and amortisation, outlay on valuation reserves, accrued unrealised foreign exchange gains and losses, interest receivable and payable, subsidiaries and jointly run companies’ profit share
  • Other items generating cash flows from investment and financial activities
Calculating Cash Flow from Operating Activities Using the Indirect Method, RUB million
Adjustments:
Operating activities 2017 2018
Profit before tax 242,167 277,711
Depreciation and amortisation 152,637 178,610
Loss from disposal of fixed assets 91 601
Financial income −109,177 −100,930
Financial expenses 124,809 122,234
Revaluation of the existing share in NCSP (Omirico Limited) to the fair value at the date of acquisition of the controlling stake and income from disposal of subsidiaries −25,371
Gain from disposal of subsidiaries −117
Share in the profit of subsidiaries and jointly run companies −15,847 −10,231
Other 14,080 −20,710
Operating profit before changes in working capital and reserves 408,643 421,914
Changes in operating assets and liabilities:
Changes in inventories 1,266 −3,082
VAT changes in receivables pertaining to operating activities and assets 11,885 −3,596
Changes in payables and accruals pertaining to operating activities 3,515 10,890
Changes in contractual obligations 17,752
Cash flows from operating activities before paying income tax and interest 425,309 443,878
Income tax payments −52,391 −43,858
Income tax refund 403 307
Interest paid −46,220 −53,167
Net cash flows from operating activities 327,101 347,160
Liquidity Analysis, RUB million
Indicator 31 December 2018 31 December 2017 Change, %
Current assets, including 407 071 457 864 −11,1
cash and equivalents 101 852 76 162 33,7
short-term deposits and bonds Short-term deposits and bonds mainly consist of deposits and bonds issued by lending institutions and companies rated Baa3 – Ba2 based on a classification aligned with Moody’s rating scale. This means, the Company’s short-term deposits and bonds are comprised of financial instruments of highly reliable or reliable lending institutions and companies 179 069 265 306 −32,5
Short-term liabilities 294 753 280 455 5,1
Net working capital 112 318 177 409 −36,7
Current ratio 1,4 1,6 х
Quick ratio Quick ratio = (Cash and equivalents + Short-term financial assets + Short-term receivables) / Current liabilities 1,1 1,4 х
Total debt / LTM EBITDA 1,4 1,7 х
Debt/equity 0,3 0,4 х

Given below is information on contractual maturity of financial liabilities, including interest payments calculated at the rates valid as at 31 December 2018 and 31 December 2017. The debt denominated in foreign currency is calculated at the exchange rate of the Bank of Russia as of 31 December 2018 and 31 December 2017 respectively.

Contractual maturity of financial liabilities, RUB millionIncluding interest payments calculated at the rates valid as at 31 December 2018 and 31 December 2017 respectively. The debt denominated in foreign currency is calculated at the exchange rate of the Bank of Russia as of 31 December 2018 and 31 December 2017 respectively, as of 31 December 2018
Indicator Cash Flow under Signed Contracts
Book Value Total 2019 2020 2021 2022 2023 Over 5 years
Loans and credits 672,992 871,741 136,262 87,287 89,861 81,941 88,666 387,724
Trade and other payables 66,018 66,087 64,599 1,118 253 113 4
Total 739,010 937,828 200,861 88,405 90,114 82,054 88,666 387,728
Contractual maturity of financial liabilities, RUB millionIncluding interest payments calculated at the rates valid as at 31 December 2018 and 31 December 2017 respectively. The debt denominated in foreign currency is calculated at the exchange rate of the Bank of Russia as of 31 December 2018 and 31 December 2017 respectively, as of 31 December 2017
Indicator Cash Flow under Signed Contracts
Book Value Total 2018 2019 2020 2021 2022 Over 5 years
Loans and credits 688,910 891,421 150,491 139,811 102,263 103,022 94,422 301,412
Trade and other payables 60,459 60,630 59,259 1,195 176
Total 749,369 952,051 209,750 141,006 102,439 103,022 94,422 301,412

The debt structure as at 31 December 2017 by maturity dates of non-convertible interest-bearing documentary bonds in the amount of RUB 12,264 thousand assumes the possible maturity date at the offer date (2018).

In 2018, Transneft attracted loans from large Russian banks in the amount of RUB 213 billion.

Transneft Group’s Debt Structure and Debt Value (Excluding NCSP Group)

Debt structure by types of borrowings, RUB billion
Debt structure by maturity dates, RUB billion
Debt structure by currency, %