UNITED WAGON COMPANY / ANNUAL REPORT AND FINANCIAL STATEMENTS FOR 2019
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and Q uality Annual Report of Public Joint-Stock Company «Research and production corporation «United Wagon Company» for 2019 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Introduction About the Report
Public Joint Stock Company «Research and production corporation «United The Report of Public Joint Stock Company Research Directors, and approved by the Company’s Annual General Wagon Company» is the leader in freight car building in Russia,1 a global supplier and Production Corporation United Wagon Company Meeting of Shareholders. (hereinafter – PJSC «RPC UWC», RPC UWC, UWC, the of new-generation rolling stock, castings and components. The Group is an Company, or the Group) includes the performance results The text of the Annual Report may contain errors when integrated provider in the field of production, railcar lease and transportation of PJSC «RPC UWC» and its subsidiaries. PJSC «RPC calculating shares, percentages, and amounts due to services, and engineering and servicing of new-generation freight cars. UWC» is the parent company of the Group and presents rounding. The data presented in the Annual Report may consolidated information on the operating and financial differ slightly from previously published preliminary activities of the Group’s key assets in this Annual Report. operating and financial indicators. Among All annual reports are freight car global The Report is based on an analysis of operating data available on the Company’s producer freight car and consolidated financial indicators as per IFRS. The No. 1 in Russia TOP 3 manufacturers website information provided in the Report is confirmed by the Audit Commission, preliminarily approved by the Board of Contents
Introduction 2 Corporate Social Responsibility 84 Message from the Chairman of the Board of Directors 4 Message from the CEO 5 HR Management 86 Occupational Health and Safety 93 UWC Profile 6 Environmental Protection 95 Development of the Regions of Presence 98 About the Company 8 2019 Performance: Key Points 10 Corporate Governance 100 Business Model 12 Corporate Governance Principles and System 102 Strategic Report 14 General Meeting of Shareholders 103 Board of Directors 105 Market Overview 18 Management Board 111 Strategy Implementation 32 Corporate Secretary 114 Key Investment Appeal Factors 38 Audit 114 Operational Overview 40 Risk Management and Internal Control 116 Shareholders and Investors 130 Engineering and Innovation 42 Appendices 136 Production 52 Railcar Lease 66 Disclaimer 136 Operation 68 List of Subsidiaries Included in the Report Scope 137 Service 70 Auditor’s Report and Consolidated Financial Statement under IFRS 138 Investment Activities 74 Report on Compliance with Principles and Recommendations of the Corporate Governance Code 147 Financial Report 76 Glossary 180 Contact Information 183 Revenue 78 EBITDA 79 Net Profit/Loss 82 Financial Debt 83
1 As reported by INFOLine-Analytics, an information and analytics agency: https://infoline.spb.ru/news/?news=203409.
2 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 3 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Message from the Chairman Message from the CEO of the Board of Directors
Dear shareholders and investors, Dear partners, customers, and shareholders,
In 2019, United Wagon Company demonstrated strong growth in its main In the year of 2019, UWC railcar enterprises reached a 7-year record production production and financial indicators. The volume of production was up by 6.8% and volume — 21,000 cars were produced. According to the results of the past year, reached a historical high of 21,000 railcars. Proactive work with customers allowed the United Wagon Company Group remains the leader in railcar building among us not only to ensure revenue growth in the reporting year, but also to conclude CIS enterprises and maintains its position in the top 3 ranking of global freight car contracts that formed the basis of the sales plan for the near future. manufacturers, ahead of the largest companies in the USA and Europe and second only to Chinese manufacturers. An important milestone in the Company’s history One of the reporting period’s highlights was the restructuring of the Company’s this past year was the production of the 100,000th railcar since the launch of Tikhvin debt portfolio. The circulation period has been extended and a fixed annual Freight Car Building Plant in January 2012. Over the past 12 months, UWC has interest rate of 9.55% was set for a stock exchange bond loan in the amount of certified 8 railcar models and today has one of the most diversified portfolios in the RUB 15 billion. The new conditions help reduce debt servicing costs and improve Russian Federation — almost 70 modifications for all major product segments. the Company’s financial stability. At the end of 2019, the debt on UWC loans and bonds dropped by 24.1%, from RUB 92.5 to 70.2 billion. However, the freight market is entering another cycle of decline. Following a decrease in traffic growth, demand for freight cars is expected to fall. According to The Company’s long-term strategy is in the process of being shaped. The strategy our estimates, the production volume by domestic car builders will be reduced by is being developed with the participation of international company BCG, which is almost half by 2024. However, it is in such a market that strategically developing one of the “big three” management consulting companies. UWC’s key goal on the companies will prefer to buy rolling stock that works more efficiently, increases development horizon until 2025 is to maintain leadership in the railcar industry in profitability, and reduces operating costs. In this case, a new-generation railcar is the Russian Federation and boost the Company’s value for all shareholders. not just a profitable vehicle, but also an attractive investment target, which will again be in short supply when the market improves.
Our Company aims to use this window of opportunity and confidently go through the turbulent period by strengthening our competitive position in the specialised rolling stock segment, primarily container flat cars, mineral hoppers, oil and gas ALEXANDER SOKOLOV, tanks, and several of others. We are also relying on a line of articulated railcars, Chairman of the Board of Directors, a new product in the UWC portfolio with potentially high economic efficiency. PJSC «RPC UWC» These railcars allow for increasing the weight of a train’s cargo up to 40% without increasing its total length. The Company also plans to significantly increase exports of both railcars and their components, including to European countries.
Along with improving labour productivity, optimising production costs, maintaining strict financial discipline, and maintaining high product quality, this will enable the Company to maintain its market share and develop technological leadership.
Our achievements to date testify to the high qualifications, professional skills, and commitment of the Company’s personnel. The more than 11,000 UWC employees are undoubtedly the key link in the Company’s future success. I would like to thank them for their efforts and hard work and look forward to further support and dedication in implementing our Company’s development strategy.
TIMOFEY KHRYAPOV, CEO and Chairman of the Management Board, PJSC «RPC UWC»
4 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 5 UWC Profile servicing of new-generation freightservicing of cars. and railcar lease services, andengineering production,provider inthefieldof transportation in the1520space. The railway Group isanintegrated Wagon Company» istheleader infreight carbuilding «Research andproduction corporation «United 100,000 railcar UWC produced its 2019 Performance: Model Business Company About the th 10 12 8 68 UWC’s product range freight railcars in modifications of models and 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
About the Company UWC develops, manufactures, sells, leases and UWC’s history from its The new-generation rolling stock is Principles and Values first steps to sustainable maintains freight cars with improved technical leadership is available on characterised by improved loading capacity, and economic characteristics. It is the leading the Company website longer service life, operational reliability and Leadership freight car producer in Russia and the CIS, and lower life cycle cost, representing its economic To become the best in all areas of also provides transport services using cars benefits compared to railcars mounted on old operations, to set the rate and new designed in-house. generation bogies. industrial standard for business and production technologies.
Sustainable development
Areas of Activity To make well-considered decisions in economic and social areas, as well as in the area of environmental protection, the safety of production and products. ENGINEERING PRODUCTION LEASING OPERATION SERVICE Honesty The Company develops UWC includes modern The group of leasing The Group includes UNICON UWC has established an and integrity freight cars and components enterprises for producing companies belonging to 1520, which specialises in extensive service network with improved technical and new-generation freight cars the RAIL1520 brand is one organising transport services that provides warranty and To be devoted to the idea of economic characteristics of all types, railcar casting and of the largest companies in and multimodal logistics post-warranty service for its respect and integrity, first of all in for Russian and foreign other components. In total, the Russian market. With of bulk freight, including in-house-produced freight treatment of own employees, as markets at its own design the Group’s enterprises are significant positions in terms hazardous goods. Its fleet cars. The head service centre is well as the customers, partners bureau, All-Union Research capable of producing up to of the size of its fleet of railcars is formed primarily of tank TAP “Titran-Express”, which is and suppliers of the Company. and Development Centre for 22,000 railcars per year. with improved technical and containers for transporting responsible for performing any The Company’s reputation is of key Transportation Technology economic characteristics, the chemical and petrochemical kind of repairs on the Group’s importance of us. (VNICTT). UWC focuses on group is one of the top 10 cargoes and liquefied entire range of freight cars. customers’ needs and the Russian companies specialising hydrocarbon gases and latest development trends in rolling stock leasing. container flat cars with a high Staff in the cargo transportation load capacity, including those market. produced by UWC, as well as To attract gifted and talented tank cars. 12 thousand employees making every effort for wheelsets made their development in the Company; +20% y-o-y to create a favourable environment in order that the contribution of 1,202 No.1 16 thousand 1,098 each employee makes a positive patents in Russia and producer of freight railcars in ownership and tank containers in thousand impact on the business growth. cars in Russia financial leasing operation 1.5 abroad railcars repaired at +41% y-o-y +34.5% y-o-y TAP “Titran-Express” Focus on innovation
21 thousand 98.6% 494.8 thousand To develop constantly in an 99 certificates of conformity for railcars produced of the fleet — new-generation tonnes of cargo transported 144 effort to make efficient use of the railcars and components in 2019 railcars +62% y-o-y storage facilities for spare parts resources; to maintain the high and components created technological level of production +19% y-o-y +6.8% y-o-y +12 p. p. and the team expertise as a crucial Read more on page 42 Read more on page 52 Read more on page 66 Read more on page 68 Read more on page 70 competitive advantage.
8 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 9 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
2019 Performance: Key Points
Q1 Q3
RPC «United Wagon Company» and the railway used to transport products from Phosphorit (part of MCC RPC UWC transferred its 30,000th new-generation RPC UWC and TEXOL Group, one of the largest transportation company VTG Rail Russia, member of the EuroChem). model 12-9853 gondola car with unloading hatches railway operators and owners of a fleet of freight VTG AG Group, Europe’s leading lessor of freight rolling manufactured by Tikhvin Freight Car Building cars in Kazakhstan, signed a contract to supply 400 stock, signed a contract to supply 150 flat cars on bogies Eurosib SPB Transport Systems and RPC «United Wagon Plant into the ownership of State Transport Leasing articulated tank cars for transporting LPG. with a 25 tf axle load to transport lumber. Company» signed a contract to produce and deliver 400 Company. new-generation container flat cars. The State Transport Leasing Company and RPC RPC UWC and the TEXOL Group, one of the largest RPC «United Wagon Company» and Deutsche Bahn UWC signed a contract to supply 25,000 freight cars, railway operators and owners of a fleet of freight cars in The chemical company Shchekinoazot purchased 100 signed a contract to deliver 110 articulated flat cars including 20,000 gondolas with unloading hatches Kazakhstan, signed a contract to supply 400 articulated methanol tank cars from RPC «United Wagon Company» to transport large-tonnage containers for a 1,435-mm and 5,000 hopper cars to transport grain and grain tank cars unique to the CIS market to transport liquefied produced by TikhvinChemMash. gauge. products. hydrocarbon gas. The railway operator UNICON 1520 (part of RPC UWC) RPC UWC and MCC EuroChem, one of the fastest- won a tender from RusVinyl, a large manufacturer of PVC. Q4 growing major fertiliser producers, signed a contract The signed contract envisages the transportation of caustic to supply 55 tank cars with high loading capacity to soda for a period of 2 years. RPC «United Wagon Company» and TransContainer, RPC UWC received a certificate from FBO “RC FRT” for transport ammonia. The rolling stock is planned to be Russia’s largest intermodal container operator, signed articulated gondolas with a loading capacity of 117 tonnes a contract to supply 100 40-foot-long flat cars to (Model 12-6877 with a solid bottom) and 114.5 tonnes transport large-tonnage containers. (Model 12-6877-02 with unloading hatches).
Q2 RPC UWC and Gazpromtrans (a 100% subsidiary of PJSC RPC «United Wagon Company» produced its 100,000th Gazprom) signed a contract to supply 120 tank cars for railcar since Tikhvin Freight Car Building Plant opened According to the 2018 rating of the largest freight car RPC «United Wagon Company» has expanded its transporting molten sulphur. in January 2012. The milestone gondola went to the builders in Russia prepared by INFOLine-Analytics, RPC product portfolio and brought to market dump State Transport Leasing Company as part of a contract UWC was first in terms of volume of freight cars produced railcars designed for transporting and automated RPC «United Wagon Company» and National Railways to supply 20,000 gondolas. in Russia and third among the world’s largest producers. unloading of bulk and lumpy mineral construction of Zimbabwe (NRZ) signed a contract to supply freight and mining cargoes. cars for a 1,067-mm gauge. RPC UWC and Polish operator Laude Smart Intermodal RPC UWC delivered 26 tank cars to transport molasses SA signed a contract to supply 200 Sgmmns flat cars to and vegetable oils to GATX Rail Vostok (a subsidiary of transport large-tonnage containers for a 1,435-mm gauge. GATX Corporation, the world leader in operating lease of railway equipment).
Key Indicators REVENUES, RUB BLN NET PROFIT, RUB BLN CERTIFIED MODELS AND MODIFICATIONS NUMBER OF STAFF, THOUSAND PEOPLE
2019 72.7 2019 3.1 2019 68 2019 11.0
2018 77.0 -9.8 2018 2018 60 2018 10.9
2017 62.0 -4.5 2017 2017 51 2017 10.2
EBITDA, RUB BLN PRODUCTION VOLUME, THOUSAND RAILCARS LTIFR1 ENVIRONMENTAL PROTECTION COSTS, RUB MLN
2019 19.5 2019 21.0 2019 0.12 2019 87.4
2018 11.7 2018 19.7 2018 0.05 2018 84.3
2017 12.7 2017 19.1 2017 0.07 2017 123.2
1 Frequency of injuries resulting in temporary disability, based on 200,000 working hours.
10 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 11 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Business Model COST STRUCTURE BY SERVICE TYPE,1 % BY REGION, % BY CATEGORY, % (INCLUDING THE DISPOSED LEASE 4 3 2.1 5.1 1.2 SEGMENT), % Railcar sales 11.0 Railcar lease 12 Sale of castings Russia Third-party and components customers 3 Export Operation UWC Group companies in the 9 Other Lease segment 55.3 96 97 RUB bln 80.6 12 1 CLIENTS By the share of revenue as per IFRS in 2019. 64
Raw materials Tank New-generation 0.08 Payroll Gondolas 9.7 gondola 15.6 containers railcars Depreciation and amortization, including Platform cars 0.6 Hoppers 7.2 Standard 0.2 for the disposed Lease railcars segment Timber Tank cars 1.1 Residual value 1.1 Other new- 0.2 flat cars generation railcars of railcars Other, including for Other 1.9 the Lease disposed 494.8 thousand t 72 segment Chemical tank chemical freight transported service centres 1.1 cars in the network REVENUE STRUCTURE (INCLUDING THE DISPOSED 8 21 thousand 16 thousand 1.1 thousand 1.5 thousand LEASE SEGMENT), % new railcar railcars owned and under tank containers railcars repaired models produced financial lease in operation and serviced 2019 PERFORMANCE designed 3 11
RUB RUB RUB RUB 62.3 bln 8.0 bln 0.9 bln 1.5 bln (including RUB 58.6 bln from railcar revenue from revenue other revenue, 72.7 sales and RUB 3.7 bln from castings railcar lease from operation including service RUB bln and components sales)
86
Sale of railcars, castings and components Railcar R&D CENTRE RAILCAR AND OPERATING LEASE OPERATION SERVICE lease COMPONENT Design and certification Railcar lease to third- Transportation of Prompt and high-quality Other of new railcar models based PRODUCTION party customers and chemicals in tank repairs of any type in partner on customer needs the UWC operator containers and tank cars service centers and at the Production of railcars with enhanced Company’s own assembly performance and their plant Revenue components External flow of products and services Read more on page 42 Read more on page 52 Read more on page 66 Read more on page 68 Read more on page 70 Internal flow of
UNITS products and services
1.5 thousand railcars repaired
12 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 13 Strategic Report improving businessefficiency. rapid growth phase, thefocuswillshift to development areas, the whileat theendof for theyear. UWCwillmaintainthepriority In 2019, ourplans weimplementedmostof Implementation Strategy 32 transportation. railwayimproving thesafetyof the carryingcapacityand to contributeincreasing RPCUWC isThe missionof Overview Market 18 26 in 2019 Russian railcar market UWCinthe share of % 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
New-Generation Railcars also the development of the cargo group. The DB supplier status Customized approach Proved Effective base in Russia and neighbouring is a high appraisal of our work Keeping up with the times, UWC countries is analysed. For example, and products, and the doors to offers its customers a so-called negotiations are under way for the markets of many countries are now optional system comparable to the supply of railcars in 2024 by the open for UWC. is characterized by high supply The entire range is equipped with configuration offered when buying commissioning date of the new and overproduction of the rolling bogies of 25 tf and excels the a car. In the course of operation of chemical plants. Transportation of raw Moreover, in 2019, DB ordered our products, some elements turned stock, primarily all-purpose one. existing similar railcars in terms materials and export of products are an additional batch of railcars out to be excessive, while others, on of technical specifications and being considered in advance. from UWC and is ready for further the contrary, were lacking. We have economic parameters. cooperation. Apart from DB, we selected and formalized the most Production structure common customer requirements, For some types of cargo there are have other European customers. which are presented to them when no effective railcars yet, and R&D By the middle of 2019, gondolas Unique transport solutions drafting the project specification. plans include the development of We deliver Tikhvin castings and on Soviet-style bogies had almost This is a set of options, from specialized rolling stock for such spare parts for the production ceased to be sold in Russia. The UWC offers six-axle tank cars, which the customer can choose needs. UWC has a rather large of railcars to North America. output was redistributed in favour gondolas, hoppers and articulated components to equip the railcar portfolio of developed products We exchange developments of models with higher axle load. flat cars on the market. The benefit for easy use on its infrastructure, or with high readiness. With the and technical solutions with By the end of the year there were, of such railcars is obvious. First of unnecessary parts to reject and thus development of the cargo base our colleagues. In particular, in fact, two main manufacturers all, for the infrastructure that can save on them. and new corridors, these projects the articulated connector used of gondolas left: United Wagon dramatically increase the carrying will move to the certification stage. on six-axle UWC railcars is an BORIS MYAGKOV, Company and Uralvagonzavod. capacity of the network. The railcar The start of the series is usually adaptation of a model that has Deputy CEO for Commerce user, too, derives a significant Demand forecast synchronized with the launch of already proven itself to be good the cargo base source. and Marketing of PJSC «RPC Specialized rolling stock, in turn, economic benefit owing to an In the upcoming years we expect on North American railroads. UWC», tells about the product showed high growth dynamics. improved load-per-unit length the total demand for new railcars in strategy of the Group and the enabling to increase the cargo Russia to decrease to 40,000 units The African market is developing transportation volume. Another actively. There are many important basic principles of interaction per annum. Therefore, all factories Exports advantage is the reduction of will have to stay within the said projects in the construction of with customers UWC competitive advantages operating expenses on repairs and figure, which means a very tough The exporting business enables infrastructure, mining in the spare parts, as there is one bogie competition for the customer. UWC to further load its production centre of the continent, and UWC entered the new realities less per two railcar bodies. facilities and diversify its sales transportation of cargoes to Market trends 2019 of the market with an established We expect lower demand for channels. Owing to the fact that ports of loading. Such extensive all-purpose rolling stock and evidence base on high efficiency Another promising project the Group has managed to gain transportation needs create a The railcar building market started reorientation of the market to and operational reliability of the is an articulated flat car with the reputation of a quality supplier need for rolling stock. the year of 2019 with a shortage specialized railcars. The demand new-generation rolling stock. interchangeable bodies. Its main in the international arena over of wheels, steel castings and other for heavy railcars of any type will components. This resulted in Before, the Company had to task is to solve the problem of remain, as they provide for more several years, today UWC receives The railway market of India is reduction of the working fleet and justify the economy of railcars seasonal fluctuations in demand earnings and higher transportation plenty of invitations to participate promising for UWC. Since large- creation of an artificial scarcity of based on forecast calculations. for rolling stock, reduce the volume than their standard in the supply of rolling stock or scale programs for construction of railcars in an already oversupplied Now it is enough to look at the required fleet and overcome analogues. the development of production in coal-fired power plants and mining market. An additional launch of actual statistics on shipments, run infrastructure constraints. The different countries. are being developed in this country, all-purpose (conventional) rolling distances and setouts to make sure technology offered by UWC makes there will be a demand for new stock in response to the situation that the Tikhvin railcar is much less it possible to turn a six-axle flat car The key export markets for UWC railcars. In addition, India is actively overheated the market even more. Working with a promising likely to be set out, carries more into a multi-purpose underframe cargo base are Europe, North America and developing transport corridors, so cargo and yields maximum profit fit to carry all types of cargo Africa. In the reporting period, there is a great potential for flat cars. At the end of the year, the traffic UWC is constantly monitoring to its owner. depending on the interchangeable UWC passed the main stages growth rates slowed down and and evaluating programs for the bodies installed: coal, ore, grain, of acceptance and certification The 1520 space is also of interest the market predictably entered development of new construction and As at the end of 2019, UWC’s mineral fertilizers, containers procedures, and confirmation to us. UWC supplies railcars to the period of declining demand upgrade of current capacities of large the markets of the Baltic States, for railcars. All economic product portfolio included 68 or timber. The project is being cargo generating enterprises. Not of conformity with technical indicators, including lease rates, models and modifications of prepared for production. only the current demand data, but requirements of Deutsche Bahn Azerbaijan and Kazakhstan. We plan decreased. The current situation freight cars for various cargoes. (DB), Europe’s largest railway to develop sales in this region.
16 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 17 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
reorientation of freight flows to the Cooperation and Export”, by 2024 the export of agro-industrial complex Market Overview East. However, the polygon turned products should reach USD 45 bln. out not to be ready for such volumes due to the limited infrastructure, Railcar sales set new records UWC being the largest producer CAR LOADINGS ON RUSSIAN RAILWAYS NETWORKS,2 MLN T resulting in an increased gondola of freight cars1 in Russia held its turnover, reduced speed in the In 2019, railcar decommissioning was at a low level of 20,000 units (including position in the domestic market network and accumulation of a fleet 4,100 gondolas). At the same time, Russian factories sold a record number of 2019 1,278 in 2019 and expanded its global surplus. railcars: 79,000 units1 (gondolas accounted for 37,900 units), which was 15% presence through the supply of higher than in 2018. 2018 1,290 rolling stock to promising markets Grain loading was down by 20% abroad. at once compared to last year, and 2017 1,261 grain shipment for export reduced Domestic Market by 27% at once. Such significant CHANGES IN THE LOADING STRUCTURE AGAINST 2018,2 MLN T 2016 1,222 reduction in transportation volumes In 2019, the Russian factories was mainly caused by low world produced a record number of 2015 1,215 prices for grain, which forced freight cars. Important trends in national farmers to delay grain Iron ore (+3.0%) 3.5 the national railcar building market 2014 1,227 shipments in anticipation of more were gradual restoration of the favourable market conditions. Fertilisers (+2.2%) 1.3 dominance of railcars on the 25-tf bogies and increased production of The world timber market has Cement (+4.7%) 1.2 specialized types of the rolling stock. FREIGHT TURNOVER ON RUSSIAN RAILWAYS NETWORKS,3 BLN T/KM completed a two-year global price growth cycle. This is due Construction cargo (+0.2%) 0.2 Loading and freight turnover to the downward trend in timber 2019 2,601 demonstrated opposite consumption in China and Europe Coke (-4.3%) –0.5 dynamics and, as a result, lower demand. 2018 2,596 In addition, the structure of the Ferrous scrap (-7.7%) –1.2 After a three-year increase in loading transported cargo is changing within 2017 2,491 the segment: there is a decrease on the Russian Railways network, Coal (-0.8%) –3.0 the volume of rail transportation in in round timber shipments and 2019 decreased by 0.9%, to 1,278.1 2016 2,342 an increase in the transportation Timber (-8.1%) –3.7 mln tonnes; export reduced by 0.8% of sawn timber with a high and domestic supplies by 1.2%. The 2015 2,304 containerization degree due to the Ferrous metals (-5.6%) –4.4 freight turnover, on the contrary, was stimulation of the woodworking up by 0.2% compared to last year 2014 2,298 industry in Russia. Oil and oil products (-1.9%) –4,5 and set a new record of 2,601.3 bln tonnes/km. The national market has been growing in the mineral fertilizer Grain (-20.1%) –5.5 In many ways, the reduction in loading World quotations for power plant coal in 2019 passed the 2018 peak phase segment: domestic transportation Total load (-0.9%) was caused by adverse conditions in and dropped to USD 70 and 50 per tonne for the Eastern (FOB Eastern) increased by 6%, while export –11.6 global markets, which led to changes and Western (FOB Riga) destinations, respectively. Coal competitiveness remained at the level of the last in such export-oriented freight in the European market has declined due to the active reduction in the year. Changes in the transport segments as coal, grain, and timber. generation of electricity from coal in the region as part of environmental structure were associated with policies and the transition to liquefied natural gas as an alternative. Despite the development of the national Coal loading in 2019 was down the drop in loading, coal turnover in the network continued to grow in 2019, agriculture. For example, according 0.8% compared to the previous year. indicating further increase in average length of the haul distance due to the to the national project “International
1 According to INFOLine Analytics Agency: https://infoline.spb.ru/news/?news=162724. 2 According to Russian Railways. 3 According to Russian Railways. Loaded freight turnover considered. 1 According to the Rolling Stock Market Information Service. 2 The information was developed by RPC UWC based on the data of Russian Railways.
18 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 19 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
25-tf bogie railcars start RAILCAR DECOMMISSIONING AND SALES IN RUSSIA, THOUSAND UNITS the market of cement cars was GONDOLA SALES STRUCTURE IN THE RUSSIAN FEDERATION,1 dominating again also noted to have recovered: THOUSAND UNITS 1,600 units of rolling stock of In the face of falling export prices this type were sold, which was 20.0 for cargo transported by rail and 2019 the best result in the last 10 79.0 4.1
increased share of the railcar years. 3.9 3.9 3.8 3.8 3.8 3.8 3.7 3.7 3.6 3.6 3.6 3.6 3.6 3.6 3.5 3.3 component in their cost structure, 3.4 3.3 3.2
29.4 3.1 3.1 3.1 3.1 3.0 3.0 2.9 2.8 2.8 2.8 the efficiency of the operated fleet 2018 Despite the continuing negative 2.9 2.7
68.8 2.5 2.4 takes on greater importance for dynamics in rail transportation of 2.3 shippers and operators. In this oil and petroleum products, there 1.9 47.8 regard, starting from the second 2017 were factors indicating the trend 57.4 half of 2019 the innovative rolling towards stabilization of the transport stock started to dominate again in market. For instance, after a long 111.5 the national railcar building market 2016 period of reduced level of railcar compared to the standard one. 35.2 decommissioning, the segment of oil and gas tank cars entered the Jul 17 Jul 18 Jul 19 Jan 17 Jan Jan 18 Jan 19 Jan Jun 17 Jun 18 Jun 19 Oct 17 Oct 18 Oct 19 Apr 17 Apr 18 Apr 19 Feb 17 Feb Feb 18 Feb 19 Feb Sep 17 Sep 18 Sep 19 Mar 17 Mar 18 Mar 19 Dec 17 Dec 18 Dec 19 Nov 17 100.5 Nov 18 Nov 19 May 17 May 18 May 19 Aug 17 In 2019, railcars on 25-tf bogies 2015 balance phase. Already this year, the Aug 18 Aug 19 accounted for 42% of the sales 26.9 market players expecting a possible volume of the Russian plants in the shortfall in the segment, have 37.9 25 tf 23.5 tf gondola segment, while at the end 2014 started to replenish their fleet: the of Q4 their share was close to 80%. 54.6 railcar building plants produced and sold oil and gas tank cars for the first Hopper sales set a record in Russia time since 2015. Decommissioning Sales in 2019: almost 15,000 railcars were sold: High demand is expected to remain MANUFACTURERS’ SHARES ON THE 1520 SPACE MARKET in the (80 ft) container flat car BY SALES IN 2019,2 % a new sales record of 8,700 SALES DYNAMICS OF RAILCARS ON 25-TF AND 23.5-TF BOGIES market. Continuing trend for cargo railcars was set in the grain IN RUSSIA,1 THOUSAND UNITS containerization and fulfilment of 12,6 railcar segment. Despite the transit potential of Russia will require 22 UWC drop in grain transportation, an increase in the fleet of new flat Uralvagonzavod 2019 28.0 51.0 79.0 3,0 there was no oversupply in the cars for container transportation. RM Rail grain railcar fleet. Vacant railcars 4,0 2018 26.8 42.0 68.8 Altaivagonzavod were turned into chemical cars UWC retains its leading position 4,5 to transport mineral fertilizers; Zavod Metallokonstruktsy 2017 35.7 21.8 57.4 Kryukovsky railcar plant As of the end of 2019, 70% 5,5 the sales record of 3,700 railcars of all railcars sold by 1520 Promtraktor was also set in the category of 2016 24.4 10.8 35.2 Space plants were produced 19 Roslavlsky Railcar Repair Plant 6 mineral hoppers with almost by five manufacturers: RPC Barnaulsky Railcar Repair Plant 26.9 85% of them sold in 2019 being 2015 14.7 12.2 UWC, RPC Uralvagonzavod, Other < 2,000 of a 25-tf bogie type. Due to RM Rail, Altaivagon, and Zavod 11 the launch of new plants for 2014 16.5 38.2 54.7 Metallokonstruktsy. 12 production of mineral fertilizers,
further growth of transportation Railcars on 25-tf bogie Railcars on 23.5-tf bogie is expected, which will keep the high demand for new mineral hoppers;
1 The information was developed by RPC UWC based on the data of Rolling Stock Market Information Service. 1 The information was developed by RPC UWC based on the data of Rolling Stock Market Information Service. 2 The information was developed by RPC UWC based on the data of Rolling Stock Market Information Service.
20 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 21 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
JSC Zavod Metallokonstruktsy (Saratov Region) is a manufacturer of Global Market The organic growth of rail traffic continues in Europe. Germany plans to approve railway rolling stock (flat cars, dump cars, gondolas, and box cars) along and Export the largest railway investment programme in the history worth EUR 86 bln. A large 26% with metal structures for bridges and construction. share of flat cars (32%) in the total volume of railcars is specific for the European In 2019, the Company continued to railcar market. At that, the global cargo containerization process is to improve the share of UWC in the Russian UWC is able to maintain its market position due to a number of competitive develop its presence in the European demand for intermodal flat cars. Given these factors, supplies are expected to railcar market in 2019 (by sales advantages: and CIS freight car market and nearly double in the medium term. volume) expanded the supply of components its specialization in the production of new-generation rolling stock; and railcar casting to the United The CIS market is promising for new railcars capable of providing economic UWC holds a leading position in the States. effect in the transportation of products. UWC has already introduced the 1520 Space railcar building market having its own bogie model; articulated LPG tank cars to the market and plans to launch the articulated tank compared to competitor companies. Development prospects cars for light oils in the medium term. Based on the negotiations with potential The 1520 Space market share of a diversified portfolio of products; customers, there are opportunities to increase sales up to 900 tank cars per year. UWC is 22%. At the end of 2019, Sales volume for 2020 is planned on the Company’s share in the Russian having its own foundry capacity; the basis of contracts, which have A large number of railway projects are being developed in Africa. The market amounted to 26%.1 already been signed or will be signed specifics of the region is the need to raise foreign funds for the projects. Given having its own enterprises for the production of critical components; in the near future. the complexity of the export financing of customers, smooth growth of sales The main competitors of UWC in the in the region is expected up to 200 railcars per year in the medium term. Russian railcar building market are: modern, highly efficient production facilities; The product sales for the medium term are projected on the basis of market In the North America, UWC plans to maintain the supplies of heavy railcar JSC RPC Uralvagonzavod having its own integrated design office. analysis and preliminary negotiations castings, as well as shift to supplies of more complex parts and assembly units (Sverdlovsk Region) is the second with potential customers. to the North American railcar builders. This will increase product supplies to largest manufacturer of freight In the medium term, the purchases of new rolling stock, primarily standard one, USD 20 mln per year in the medium term. rolling stock in Russia. It is part of are expected to decrease and the demand is anticipated to shift from universal the Rostec State Corporation; railcars to specialized ones. In given conditions, the plants able to offer a product with improved technical and economic performance to customers will take RM Rail (Republic of Mordovia) advantage in the market. is an integrated manufacturer of freight rolling stock for railways, NORTH AMERICA EUROPE CIS as well as products for full cycle 2 gas and petrochemical industries. STRUCTURE OF RAILCAR SALES BY MAJOR PRODUCERS IN 2019, THOUSAND UNITS 2,175 390 378 The company’s perimeter heavy casting railcar sets railcars railcars includes JSC Ruzkhimmash, which manufactures over 75 UWC 20.8 Russian Federation models of freight railcars; North UVZ 6.6 11.2 America JSC Altaivagon (Altai Territory) Estonia 0.4 Kazakhstan is one of Russia’s leading plants RM Rail 10.5 15 Latvia for the production of railway Middle Supplies Lithuania freight rolling stock. It is a part East2 Altaivagon 10.2 in 2019 Belarus of the Siberian Business Union Innovative Service holding, which unites enterprises Zavod Germany 5.6 centres UAE in the coal mining, machine Metallokonstruktsy Standard Europe building, energy, and chemical Agency Africa Saudi agreements Arabia industries, among others. South 1 Altaivagon has three production According to the Rolling Stock Market Information Service. Office America sites: JSC Altaivagon and the 2 According to the Rolling Stock Market Information Service. Rubtsovsk branch (both located SA1 Australia in the Altai Territory), as well as Kemerovokhimmash (a branch in the Kemerovo Region); 1 Operating in all countries across the continent. 2 Operating in all countries across the region under agency agreements.
22 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 23 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
UWC EXPORT BY REGION OF OPERATION FORECAST FOR THE DEVELOPMENT OF RAILCAR MARKETS IN THE REGIONS OF OPERATION1
Region Supplies 2017 2018 2019 North America Railcars, units 1 172 390 Europe In monetary terms, RUB mln1 3 552 1,259 Gondola cars 24,000 26,510 Railcars, units 600 200 0 2,400 Middle East Box cars 2,700 In monetary terms, RUB mln 1,773 671 0 4,810 Railcars, units 10 104 0 Africa Flat cars 5,300 In monetary terms, RUB mln 46 512 0 4,810 Components, railcar sets2 192 1,704 2,175 Intermodal railcars 5,300 North America In monetary terms, RUB mln3 69 742 839 Tank cars 12,000 1, 000 2020 Railcars, units – 39 378 Other 0 2021 The CIS In monetary terms, RUB mln – 137 2,357
Railcars, units 611 515 768 Africa and the Middle East Total Components, railcar sets4 192 1,704 2,175
In monetary terms, RUB mln 1,891 2,614 4,455 Gondola cars 7,087 5,036 165 Box cars 174 EXPORT TARGETS IN THE SHORT AND MEDIUM TERM 807 Flat cars 366 Planned sales volume, units Region Type 689 2020 Medium-term perspective Intermodal railcars 748
Railcars 860 Tank cars 612 40ft/60ft flat cars Europe 636 600–1,200 per annum 187 2020 Other 196 80ft (articulated) flat cars 2021 Articulated oil and gas tank cars 45 The CIS 300–900 per annum Articulated LPG tank cars 336 Europe
Africa Gondolas/hoppers – 100–200 per annum Gondola cars 1,972 2,044 Total, railcars 1,017 ~1,000 – 2,300 per annum Box cars 635 666
Planned sales volume, USD mln Region Type Flat cars 1,060 1,120 2020 Medium-term perspective
Components Intermodal railcars 3,158 3,426
North America Components 15 ~20 per annum Tank cars 2,391 2,339 2020 1 The average annual exchange rates of the Central Bank of the Russian Federation have been used to convert the amounts in euro Other 601 641 2021 and US dollars. 2 Only heavy casting railcar sets are indicated. 3 Heavy casting railcar sets and other components. 4 Only heavy casting railcar sets are indicated. 1 Source: SCI Verkehr GmbH research.
24 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 25 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
The CIS DEVELOPMENT OF COOPERATION WITH DEUTSCHE BAHN
Kazakhstan 6,210 6,390 Strengthening its position in foreign markets is one of UWC Railway Group’s global strategic goals. Working with Ukraine 4,120 4,330 Deutsche Bahn is an important step in achieving this goal. 550 Belarus 550 In August 2019, the Company sent Sggrs80 articulated 1,050 flat cars manufactured for Deutsche Bahn to undergo TSI Uzbekistan 1,100 (Technical Specifications for Interoperability) certification tests by the end of 2019. The 80-foot-long six-axle Sggrs 1,150 2020 container flat car is characterised by a 108-tonne loading Other 620 2021 capacity and the ability to safely transport ISO containers, tank containers, and interchangeable intermodal bodies in various sizes with a gross rail load of up to 36 t. The UWC LAUNCHES FIRST ARTICULATED TANKS IN THE CIS design of the flat car is lightweight in relation to its traditional counterparts on the European market. The Loading capacity Loading length UWC and TEXOL Group, one of the largest railway bogie-equipped railcar has an axle load of 22.5 tf and is operators and freight car fleet owners in Kazakhstan, designed for operation on a 1,435-mm gauge. ANDREY KRIVCHENKOV, signed a contract to supply 400 articulated tank cars for Executive Director of Trade House the transportation of liquefied petroleum gases (LPG). The The companies additionally signed a contract for delivery United Wagon Company: articulated tank car is a unique freight car model on the CIS of 110 more articulated flat cars for the transportation of 108 t 80 ft market that has no equivalents in terms of its technical and “We have brought to the market a unique railcar large-capacity containers for a 1,435-mm gauge by the operational features. that increases the useful length of the train and 2nd quarter of 2021. As a result, the total volume of flat Axle load carrying capacity, without significant costs for cars ordered from the Russian side is 270 units. infrastructure modernisation. We hope that the Thanks to the design solutions applied in this tank, the market will appreciate the new product and operator receives savings in the tariff component and that TEXOL Group will get all the benefits from significantly optimizes operating costs. operating the first articulated railcars.” 22.5 tf
26 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 27 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
UWC ACTIVELY DEVELOPS EXPORT SUPPLIES TO THE AFRICAN CONTINENT Loading capacity Loading length BORIS MYAGKOV, UWC and the National Railways of Zimbabwe (NRZ) Deputy CEO for Commerce and Marketing entered into a contract to supply freight cars for BORIS MYAGKOV, of PJSC «RPC UWC», noted: operation on a 1,067-mm gauge. The agreement with Deputy CEO for Commerce and Marketing, “The development of cooperation with Laude the National Railways of Zimbabwe provides for the United Wagon Company: 74.5 t 40 ft Smart Intermodal SA in the 1,435-mm gauge delivery of 100 gondola cars with solid-bottom bodies. “UWC is known on the international market as space is an important step towards implementing The railcars will be shipped no later than 12 months from a universal manufacturer that can develop and Tare weight the Group’s export strategy. More and more large the date of receipt of NRZ funding with the assistance master the production of railcars for any gauge international companies see UWC as a reliable of UWC. It is planned to use gondolas for international and according to any railway standards. The supplier capable of developing and putting into traffic when transporting coal, ore, and grain in big bags. African market is already familiar to us, although it production different types of railcars to meet is highly fragmented. Today, this region is actively any requirements of international standards and 15.5 t The design of the gondola car with solid-bottom bodies developing transportation, including rail. We consumer requests.” will be developed by RPC UWC’s engineering centre in intend to further develop exports to the African accordance with international standards and taking into continent.” account operation in sub-equatorial and tropical climates on a 1,067-mm gauge (used in central and southern Africa nations). The gondola car has a loading capacity of 54 t, a body volume of 65 m3, and an axle load of 18.6 tf. UWC SIGNED A CONTRACT TO SUPPLY ARTICULATED FLAT CARS TO EUROPE Loading capacity Body volume UWC will also send a shipment of spare parts, special tools, and test equipment to NRZ. The agreement UWC and VTG Rail Russia, Europe’s leading lessor provides for a programme of technical and post-sale of freight rolling stock, signed a contract to supply support from UWC, including training staff of the 100 six-axle articulated flat cars for operation on on 3 National Railways of Zimbabwe in the servicing of railcars 54 t 65 m a 1,435-mm gauge. The flat cars are designed for both at the Tikhvin industrial site and at the site of the transporting large-capacity containers. Thus, the railway fleet’s operation in Zimbabwe. Axle load Group is expanding its presence in the European market, where articulated railcars from the UWC line are in high demand.
18.6 tf The prototype of this flat car model was first presented at the largest international exhibition of transportation equipment and transportation systems InnoTrans Loading capacity Loading length UWC AND POLAND’S LAUDE SMART INTERMODAL SA ARE DEVELOPING 2018 in Berlin. Today, contracts have been signed with COOPERATION ON A 1,435-MM GAUGE two major European railway companies for various modifications of the Tikhvin-made railcar. UWC and Poland’s Laude Smart Intermodal SA, one of the equipped with high-strength fittings for the placement and fastest growing companies in the intermodal transportation safe transportation of large containers with increased gross The 80-foot-long six-axle Sggrs container flat car has 108 t 80 ft and logistics sector in Central and Eastern Europe, have mass: two 20-foot with a gross mass of 37.25 t each or one a 108.6-t loading capacity thanks to its articulated signed a contract to supply 200 Sgmmns flat cars for the 40-foot standard container with a gross rail load of 40 t, or structure, which allows it to safely transport various Axle load transportation of large-capacity containers on a 1,435-mm specialised with a gross rail load of 74.5 t. sizes of ISO containers, tank containers, and removable gauge. Delivery of flat cars to the Polish operator is planned intermodal bodies with a gross rail load of up to 36 t. by the end of the first half of 2020. The flat car was developed by the UWC engineering centre. The flat car is equipped with sliding container pins in The first prototypes will be built at the production site in accordance with European standards for the placement 22.5 tf The technical characteristics of the flat car differ from those Tikhvin. From February 2020, the railcars will undergo a set of containers in various combinations. The railcar is on the European market. The railcar has a reduced tare of certification tests in one of the European testing centres characterised by a lightweight design due to the lack weight of 15.5 t (compared to 16 t and higher in standard for compliance with TSI, including static load and impact of a centre sill, the design and location of the braking models that are widely distributed on the market), a loading strength, stationary and running braking tests, ongoing equipment, as well as an original coupling device and capacity of 74.5 t, a length of 40 feet, and is equipped with dynamic strength tests, and noise tests. articulated connector. The railcar is mounted on a bogie a running gear with an axle load of 22.5 tf. The flat car is with an axle load of 22.5 tf for operation on a 1,435-mm gauge.
28 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 29 Appendices
ARTICULATED
TANK CAR FOR Bogie model Increased maintenance The SAC-1 RUS LIGHT OILS interval articulated connector 18-9855 for freight cars with integrated brake ensures smooth passage by system 500 the car’s articulated sections thousand km* through curved sections of Articulated tank car 15-629 is one-of-a-kind in the the track, including sharp CIS market and aimed at transporting light/white curves petroleum products. 8 years
Higher load Increased body Reduced demand capacity volume for the fleet
108 t 160 m3 up to 60 %
* To be determined after the pilot-controlled operation.
30 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 31 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Active participation in the The Company intends to achieve its strategic objectives by implementing Strategy Implementation development of heavy-haul priorities that correspond to the priority strategic areas. transportation technology and upgrading rolling stock by The mission of RPC UWC is to contribute to increasing the carrying producing high value-added capacity and improving the safety of railway transportation. railcars.
Developing global markets, In 2019, the Company implemented most of its plans for the building economic relations year. UWC will maintain the priority development areas listed with major transnational railway Strategic Objectives below, while at the end of the rapid growth phase, the focus will companies, and supplying direct shift to improving business efficiency. Maintaining a leading position The synergistic effect of the joint work of the Group’s industrial enterprises on exports of products by the in Russian innovative railcar the production of freight cars, bogies, and components, companies engaged Group’s industrial enterprises. manufacturing. in the lease of rolling stock and operations, the engineering centre and the service unit.
Strategy Implementation Priorities
Risks that may hinder strategy Priorities Key performance indicators 2019 plans Progress report implementation
1. Develop new high value-added products
Expand the range of railcar types Revenue Development, certification, Completed Increased competition production, and commissioning produced Railcar marginality Articulated tank car Model 15-9541-01 for transportation of LPG was certified, put into Decrease in demand for of new models of universal and Improve existing railcar models production, and launched on the market for operation transportation in several Number of certified railcar specialised railcars with an axle industries due to a general Expand the use of freight cars modifications load of 25 tf, including six-axle Development and certification completed of articulated gondola car Models 12-6877 decline of business activity articulated railcars and 12-6877-02 with solid-bottom bodies and unloading hatches Percentage of railcar product line in Russia coverage Development and certification completed of articulated hopper car Models 19-6978 and 19-6978-01 for transportation of grain and mineral fertilizers Transition of freight traffic to other types of transportation Dump railcars with increased body volume Models 32-6982 and 32-6982-01 developed, certified, put into production, and launched on the market In some cases, there is a need to invest in upgrading Tank car Model 15-6900-04 for transportation of molasses and vegetable oils developed, the loading and unloading certified, put into production, launched on the market, and put into operation infrastructure for articulated railcars A total of 8 certificates of conformity for new railcars received, and 3 declarations of conformity for components registered
Development of railcars and Completed components for export deliveries Development and testing of the Sggrs80 articulated container flat car for Deutsche Bahn completed Design documentation developed and prototypes produced of a 40-ft freight container flat car for the European market
Development and commissioning Partially completed of containers, swap bodies, and flat Design documentation developed, prototype production is under way or completed for a cars for transporting grain, mineral number of models fertilizers, timber, and rolled steel Open-type container for rolled steel developed, certified by the Maritime Register, and put into serial operation
32 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 33 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Risks that may hinder strategy Priorities Key performance indicators 2019 plans Progress report implementation
2. Export development
Price competition taking into account Share of export revenue Increase export revenue to more Completed Changes in exchange rates than USD 50 million aspects of state support Number of export projects Total revenue from exports at the end of the year amounted to USD 69 million (+64% Increasing competition on Use opportunities provided by JSC compared to last year’s results) international markets Russian Export Center, including JSC EXIAR and JSC ROSEXIMBANK, Increase presence in key regions — Completed as well as other Russian banks for USA and Europe USA: export financing maintained the volume of deliveries of heavy railcar castings and other components Develop the supply of components and localise railcar production in Europe: regions to gain an advantage 110 Sggrs80 articulated flat cars additionally contracted for Deutsche Bahn Maintain a positive image through 100 flat cars contracted for one of the largest European operators new deliveries and receiving 400 flat cars contracted for Laude Smart Intermodal SA: 200 units for transporting cargo additional recommendations on a 1,435-mm gauge and 200 units on a 1,520-mm gauge
Enter new markets Completed Contract signed with the National Railways of Zimbabwe to supply 100 gondola cars after the customer received funding
Develop at least 20 export projects Completed in America, Europe, the Middle Europe — 2 tenders, 4 requests East, and Africa Middle East — 1 request Africa — 1 tender, 12 requests Latin America — 3 requests
3. Ensure timely and high-quality service of all types
Improve the quality of repair for Maintain the number of operating Re-check existing service centres Completed railcars produced by the UWC Group service centres with on-site high- that have expired certificates, Work was carried to re-authorise the centres. At the end of 2019, there were: quality repairs of railcars produced upgrade the category of centres Authorise/reauthorise existing 72 service centres; service centres by RPC UWC Open new service centres 17 service centres entitled to carry out depot maintenance of railcars Expand the geography of the service Professional development of centre network specialists at railcar repair companies involved in repairs in order to Train railcar repair companies’ improve the quality of repair on Adjusted the criteria for classifying the centres in the RPC UWC service network. Since specialists in the maintenance and railcars produced by RPC UWC repair of railcar models 18-9810, 18- 2019, only the head service centre of TAP “Titran-Express” has been category 1 (highest), 9855 on Tikhvin bogies which allows authorisation of other centres, supplying them with spare parts, checking and monitoring the service and repair of railcars
Training of employees of at least Completed 15 railcar repair depots (service Employees of 19 railcar repair companies trained centres)
34 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 35 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Risks that may hinder strategy Priorities Key performance indicators 2019 plans Progress report implementation
4. Improve operational efficiency
Launch production of new railcar Maximum productivity Maintain maximum output while Completed Delays in supply and maintaining high quality models Release of different railcar models 21,000 railcars produced (+6.8% compared to last year’s results) installation of equipment Increase productivity of hopper car Improve the quality of accounting Increased metal prices assembly lines and reporting, automation Loading production with new Completed Reduce the level of internal defects high-margin products Launched production of articulated tank cars for transporting LPG in foundry products Launched production and release of dump railcars Automate operations Put into production articulated flat cars for the European market Reduce labour intensity Accounting automation Further reduction of mass Completed production costs Level of internal defects in foundry products reduced from 8% to 5%, compared to 2018
15% reduction in equipment Partially completed downtime Downtime reduced by 14.7% Automation of repair planning in ERP system Automated M&R: forming the need for materials and supplies accounting for equipment M&R costs
A unified corporate information Completed system based on SAP S/4 From January 1, 2019, TVSZ, TikhvinChemMash, and TikhvinSpetsMash switched to using was launched by TVSZ, SAP S/4 TikhvinChemMash, and TikhvinSpetsMash
36 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 37 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
…The prevalence of new-generation gondola cars Key Investment Appeal Factors in comparison with standard ones is restored
SHARE OF NEW-GENERATION GONDOLA CARS IN DYNAMICS OF SALES OF CARS ON 25-TF AND The need for high level rail transport… THE SALES STRUCTURE BY RUSSIAN PLANTS,4 % 23.5-TF BOGIES IN RUSSIA,5 THOUSAND UNITS
CAR LOADINGS ON RUSSIAN RAILWAYS NETWORKS,1 FREIGHT TURNOVER ON RUSSIAN RAILWAYS NETWORKS,2 83 2019 28.0 51.0 79.0 MLN T BLN T/KM 80 73 82 68 2018 26.8 42.0 68.8 2019 1,278 2019 2,601 60 55 2017 35.7 21.8 57.4 2018 1,290 2018 2,596 40 30 2016 24.4 10.8 35.2 26 26 26 2017 1,261 2017 2,491 20 27 20 2015 14.7 12.2 26.9 2016 1,222 2016 2,342 18 2014 16.5 38.2 54.6 2015 1,215 2015 2,304
Railcars on 25-tf bogies Jul 2019 Jan 2019 Jan Jun 2019 Oct 2019 Apr 2019 Feb 2019 Feb Sep 2019 Mar 2019 Dec 2019 Nov 2019 May 2019 2014 1,227 2014 2,298 Aug 2019 Railcars on 23.5-tf bogies
…that’s why railcar sales have reached historic highs UWC remains the market leader…
RAILCAR SALES DYNAMICS IN RUSSIA,3 THOUSAND UNITS SHARE OF PRODUCERS IN THE 1520 GAUGE MARKET BY DYNAMICS OF PRODUCTION OF UWC SALES VOLUME IN 2019,6 % RAILCARS, THOUSAND UNITS
2019 79.0 1.1 1.1 1.9 12,6 22 2019 9.7 7.2 2018 68.8 3,0 1 1.4 1.1 2018 11.1 5 4,0 2017 57.4 2.4 0.8 1.2 4,5 2017 14.6 0.1 2016 35.2 0.5 0.1 5,5 2016 13 2.3 0.1 2015 26.9 0.5 0.01 19 2015 11.6 0.2 6 2014 54.6 2014 7.5 2 0.1 11 12
UWC Kryukov Railway Car Building Works Gondola cars 1 Information prepared by RPC UWC according to JSC Russian Railways. Uralvagonzavod Promtractor Hoppers 2 Information prepared by RPC UWC according to JSC Russian Railways. RM Rail Roslavl Railcar Repair Plant Tank cars 3 According to the Rolling Stock Market Information Service. Altaivagonzavod Barnaul Railcar Repair Plant Timber flatcars 4 The information was developed by RPC UWC based on the data of Rolling Stock Market Information Service. Zavod Other < 2,000 Other Metallokonstruktsy 5 The information was developed by RPC UWC based on the data of Rolling Stock Market Information Service. 6 The information was developed by RPC UWC based on the data of Rolling Stock Market Information Service.
38 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 39 Operational Overview service. assets providing forsales, lease, operation and engineering andproduction capacities, aswell UWC isavertically integrated group, whichunites Innovation and Engineering produced railcars 21 Production 99 components components for railcars and conformity certificates of thousand 52 42 Operation 494.8 transported cargo thousand t Service 72 centres service 68 70 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
indicators, having increased axle development of Engineering and Innovation and running loads and providing modernisation projects, improved reliability, speed, expansion of the freight car 99 certificates of reduced maintenance costs, scope of application; conformity for RPC UWC, as the leader of the domestic innovative railcar building, is reduced negative impact on the including railcars and participating in the process of increasing the carrying capacity, safety track, as well as increased traffic support of the product components and reliability of the rolling stock on the railway transport. safety and network capacity. life cycle, development and implementation of To a large extent, this work is carried out by a special engineering The VNICTT team consists of technologies for the repair centre, which is part of the Group and facilitates the practical specialists capable of carrying of cars and running gears; out the most challenging railcar 68 implementation of ideas for creating innovative products, their valid certificates building projects. Many of them development of for railcars customization and maintenance in operation. have academic degrees of technologies for the candidates and doctors of science. production of cast components for freight cars, Key areas of VNICTT’s operations: research in the field of non- 8 conventional materials with certificates for design of new-generation tailored properties; new railcars railcars for a 1,520-mm gauge, running gears, automatic support of projects to Highlights of 2019 couplers, brake systems and reduce the cost of serial their components; production, optimisation of In 2019, 351 patents for railcars The total number of certificates foundry technology, the use 3 and their components were of conformity received for railcars design of export models of of new design solutions. declarations of 351 conformity for obtained. As a result, the total and their components in 2019 railcars and components under patents obtained components number of patents effective reached 99, including 68 effective in 2019 the TSI, AAR standards; in Russia and abroad as of certificates. In 2019, 8 certificates +41% y-o-y 31 December 2019 increased by for new railcars were received, and 41% as compared to the results 3 declarations of conformity for of 2018 — to 1,2021. components were registered.
Engineering Infrastructure
All-Union Research and Development Center for Transport Technology (VNICTT, St. Petersburg) CENTRE FOR TRANSPRTATION TECHNOLOGY
The engineering centre aimed at developing (including In the framework of the 3rd International Forum in the field of innovations and is a modern research and modification and improvement) development and design complex, and putting into production intellectual property (Innovation & IP Forum and Awards) held in Paris, RPC UWC specialising in the development innovative new-generation railcars won the Gold Award in the Best IP Department 2020 in Russia & Central and Eastern of freight rolling stock and and their components with Europe. Protection of intellectual property is based on VNICTT, where the created its components. Its work is improved technical and economic system of support for product development allows to quickly and efficiently resolve emerging issues, including patenting.
1 In the previous Annual Report, a technical error was made — the number of patents was indicated in the amount of 786 pcs. Actual data for 2018 was 851 patents.
42 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 43 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
This is a unique model in which, by Development of the model coupling device and spherical excluding two automatic coupling range of articulated cars articulated connector, and bogies. Railcar Building is a Forward- devices and one bogie from its Development and certification of At the same time, UWC is design, it was possible to achieve hopper cars for transportation of developing a 40-foot platform for a full axle load of 25 tf when Looking Industry grain and mineral fertilisers as well a 1,435-mm gauge, designed to transporting lightweight goods as gondola cars of the articulated transport large containers with a such as LPG. type were completed. So far, the gross weight of up to 74 tonnes. loading length of 80 feet have been Updating the four-axle railcar The project is certainly very market’s interest to these cars has In this way, UWC expands its successfully completed and a flat portfolio knowledge-intensive. The been moderate, as the design presence in a 1,435-mm gauge car with a loading length of 40 feet At present, the demand for various railcar design represents a new is absolutely new. However, the space. has been developed to transport a models of tank cars is predicted, construction that uses a self- customers of RPC UWC are ready wide range of containers, including which are technically outdated supporting tank and a unique to try operating the new cars Maturity stage containers with increased gross and have reached the end of solution to fix the tank on the in their infrastructure in order Many new products that have weight up to 72 tonnes. their service life. New natural gas underframe. It is this part of the to evaluate the convenience of body that absorbs the main loads. been actively introduced in the fields are being discovered and their loading and unloading, the In the central part, two tanks last few years are entering their Further development facilities are being opened to possible interaction with various are supported by the middle maturity stage. In 2014–2019, there process natural gas, resulting in loading and unloading devices. The actual direction of VNICTT bogie with a special articulated was an energetic increase in the additional routes and volumes of Interest in articulated cars is due activity is the further expansion connector. In order to prove to the economic calculations development of cars with an axle transportation and, consequently, of the line of specialised rolling the safety of such solution, an which show that such car renders load of 25 tf, as the bogie, new for the need for gas tank cars. Other stock with a load of 25 tf and extended scope of research and a higher transport efficiency. the market, made it possible to specialised tank cars also require improvement of the rolling stock testing was conducted, including Therefore, a series of additional create cars that have significantly renovation, for example, for food characteristics — reduction of for slide impacts, train braking performance tests were planned higher technical characteristics products and bulk cargo. the freight car container weight, and sharp curves. Comparison of and conducted with customers to than their existing counterparts in increase of its volume, improvement Industrial enterprises are dynamic quality indicators which confirm the declared commercial operation. About the results of 2019 and are inherent to outer and middle of interaction with loading and interested in rolling stock which performance. UWC’s portfolio currently includes new projects based on the bogies was made. The peculiarities unloading devices. is used on non-public tracks. In the main types of multi-purpose interview with ANNA ORLOVA, particular, these are dump cars. of car behaviour in various An important part of the Export projects and specialised freight cars: As this segment has not yet been conditions were studied. Deputy CEO for Strategy implementation of any product is gondola cars for various types of affected by modernisation, the Export markets have their own and Product Development of creating an effective repair system. Together with VNIIZhT, in unloading, hoppers for a variety fleet is very outdated, most of regulatory documents with PJSC «RPC UWC», Executive The cars produced by RPC UWC addition to certification tests, requirements for rolling stock of cargoes, tank cars, flat cars, the cars that were previously are scheduled for maintenance train tests were carried out to and technical procedures, box cars, and dump cars. Several Director of ”VNICTT” LLC produced for quarries and mining every 800–1,000 thousand km and verify the possibility of operating which include both testing and varieties of bogies with an axle and processing plants are not should be as close as possible to articulated-type cars in mixed verification of the production load of 25 tf were designed and produced today, spare parts are the restoration of the resource formation trains. Based on the conditions and quality launched into production to equip scarce. In addition, non-public Highlights of 2019 of components to the new test results, recommendations management system of the all developed types of cars. tracks have to deal with the same on the implementation modes In 2019, VNICTT, together with the state. This will allow them to run manufacturer. The UWC Group Now comes the time to sum challenges as main lines, but with of such trains were developed. car-building enterprises of the UWC again the same distance without has completed tests of an 80-foot up, including the results of the the specifics of the operations Work was also carried out with the Group, put into production 7 new being subjected to scheduled articulated platform and is operation of the produced fleet, to be taken into account: while Oktyabrskaya Railway Situation models of freight cars, including the maintenance. preparing to mass manufacture for the time of mature production, the the speed of movement is not Centre to develop process maps articulated type with an axle load of Deutsche Bahn (DB). For us, this is development of effective repair Until now, the consumers of our cars so important here, increasing for various emergency situations. a unique experience in creating a technologies, measures to reduce 25 tf. Preliminary works in the form have appreciated them for the service axle loads and the volume of All this should contribute to brand new product. The car differs production costs while maintaining of selection and a feasibility study of life from the construction to the first transported cargoes, as well as the increased safety when using from the serially produced ones the reliability of products in technical and economic parameters, scheduled maintenance, focusing safety of loading and unloading is articulated cars on Russian by the absence of a centre sill, operation, registering the new as well as functional inspections on the production quality. Now, a priority. railways. different design and location of achieved level of technology in the together with operating organisations following the results of the first depot the braking equipment, original regulatory documentation. allowed to take into account the repair, the most important thing is the Unique developments: necessary requirements of the market compliance of the repaired car with the first articulated railcar and make the design as convenient those parameters that were laid down in mass production and effective as possible. at the development stage. VNICTT has tested and continues to be engaged One of the most difficult projects As part of the implementation of in a new maintenance technology implemented recently was the contracts with European customers, where the technical performance of project of a six-axle articulated tests of an articulated flat car for the cars in further operation is not tank car for transportation of the transport of containers with a reduced. liquefied petroleum gas (LPG).
44 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 45 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Key Achievements in 2019
ARTICULATED TANK CAR FOR LPG ARTICULATED SOLID BOTTOM GONDOLA CAR
Tank volume Load capacity Axle load
Body volume Load capacity Distance between Axle load coupler faces 163.1 m3 90 t 25 tf
Actual axle load Payload ratio A significant achievement in (when transporting butane) (loading) 2019 was the completion of the 142 m3 114.5 t 19.54 m 25 tf procedure for certification and tf production of a six-axle articulated 24.75 0.67 +16% –15% Maximum rated static linear load Service life tank car for the transportation as compared less than for the In 2019, JSC TVSZ completed of liquefied petroleum gas on to counterparts counterparts certification and put into production bogies with an axle load of articulated six-axle solid bottom 7.68 t f/m 40 years 25 tf (Model 15-9541-01) by gondola cars with unloading hatches м +23% +(8–18) years JSC “TikhvinСhemMash”. The design features of the design ensures smooth passage on 25-tf TMX bogies 12-6877-02. compared compared articulated car provide significant of both single articulated car and to counterparts to counterparts The articulated tank is a model of a savings during the transportation the coupling with the standard Railcar load capacity is 114.5 tonnes. specialised freight car, unique for of goods, especially over long cars through straight and curved Due to the articulated design, the the CIS market and optimised for distances (on long runs). The tank sections of the track, including load capacity of the car is increased transportation of propane, butane volume of 163.1 m3 and load- sharp curves. Due to the fact that by 52–56% and the running load — and their mixtures. carrying capacity of 90 tonnes allow the location of the fittings is unified by 23%, which allows to significantly car and ensures smooth passage of the container and the number of to carry more than twice the cargo with the standard 12-meter long increase the efficiency of cargo of curved sections of the track, brake adjustments in operation. In the fleet of TEXOL, one of the and reduce the required fleet in car, articulated UWC tanks can transportation, i.e. to increase the including sharp curves. Cars are also largest railway operators and comparison with standard LPG cars. be easily maintained at standard carrying capacity of the network up equipped with three 25-tf 18-9855 The car is compatible with public owners of a freight car fleet in terminals. to 40%. In this way, the weight of the bogies. A bogie-by-bogie brake and private infrastructures and can Kazakhstan, tank Model 15-9541- The unique design of the storage train is increased without changing system features increased efficiency be unloaded with all tandem car 01 is in supervised operation, consists of two tanks connected by A six-axle tank car is equipped with its length. and process reliability compared to dumpers installed in large Russian its performace is constantly an articulated joint unit designed a 25-tf bogie. The brake system a conventional brake system. The ports, as well as with modern monitored. for increased longitudinal and is installed directly on the bogies Gondola cars are equipped with actuating part of the brake system models VRS-125 and VRS-134. vertical loads. With the car length which allows to ensure safe and a spherical articulated connector is integrated into the bogie design of 24 meters, the coupling device effective braking. that connects two sections of the which helps to reduce the weight
46 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 47 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
ARTICULATED HOPPER CAR DUMP CAR WITH INCREASED BODY VOLUME
Body volume Load capacity Distance between Axle load coupler faces Body volume Load capacity Axle load
71–72 t depending 160 m3 113.5 t 19.38 m 25 tf on the railcar model +10 t m3 compared to counterparts tf Maximum rated static linear load Service life 42 25 In 2019, JSC TVSZ began producing Inclination of the car body Service life six-axle articulated hopper cars In 2019, JSC “TikhvinSpetsMash” years 19-6978 and 19-6978-01 for grain 7.74 t f/m 40 manufactured dump cars on bogies м о and mineral fertilisers. +26% +(8–14) years with an axle load of 25 tf (Models compared compared 45 32 years to counterparts to counterparts 32-6982 and 32-6982-01). to either side with the simultaneous opening +10 years According to UWC estimates, the of the sides compared use of such cars will increase the The dump car line is represented by to counterparts carrying capacity of the network by two models with hinged sides and 22% and reduce the required fleet which ensures the smooth passage and can be operated at all existing double-sided unloading: Model by 38%, as well as lower the cost of of curved sections of the track, terminals. Eight loading hatches 32-6982-01 is the most efficient at cargo transportation by reducing including sharp curves, and hump located as close as possible to transportation of fine-fraction bulk dump car model is 32-6982 with a provides for a 45-degree inclination the freight charge per car. tracks. Cars have separate bogie-by- each other ensure that the entire cargoes, while Model 32-6982 at shock-absorbing floor, load capacity of the car body to either side with bogie brake system, are mounted body volume is filled evenly. The carrying large-fraction ores. of 71 tonnes and body volume of the simultaneous opening of the The 160 m3 body volume of both on three18-9855 bogies with an mechanism of locking and sealing 42 m³. The design of the car is more sides followed by the return of the hopper models enables efficient increased axle load of 25 tf and devices reduces the car handling The dump car 32-6982-01 resistant to shock loads during body to the transport position. transportation of a wide range of integrated actuating brake part. This time. The tilt angles of the rear walls without shock-absorbing floor is loading. bulk goods using a full load capacity increases reliability and efficiency and tank walls have been selected characterised by an increased body Using the 18-9855 bogie to equip of 113.5 tonnes. Such results were compared to traditional solutions in so as to ensure full discharge of the volume of 42 m³ and load capacity The design of dump cars allows the car, increases the maintenance achieved due to the articulated this area. product (hoppers in the overhung of 72 tonnes which allows to increase their running in any freight trains, interval which allows to significantly design of the car: its two sections, parts of the body eliminate blind the efficiency of cargo transportation as well as the ability to operate in reduce operating costs for the entire which make maximum use of the Both models of the hopper car spots), as well as to increase in comparison with the counterparts. the existing infrastructure of freight life span of the dump car, which is overall space, are connected by are compatible with the standard the convenience and speed of Loading growth in such cars amounts forwarders and recipients. The side 32 years (compare to a common a spherical articulated connector, loading and unloading infrastructure discharge operations. up to 10 tonnes which reduces the opening mechanism together with counterpart which serves for only required fleet by 15%. The second the pneumatic unloading system 22 years, 10 years less).
48 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 49 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
ARTICULATED FLAT CAR BUILT TO TSI STANDARDS the brake beam of 18-9855 bogie a joint assembly for flat cars an unloading body for the with a new structure of enhanced complying with TSI standards was dump car was developed and reliability indicators was put into developed; put into production. production; the assembly of the SAC-1 RUS repair training for cassette-type spherical articulated connector Timken bearings was performed; for railcar center sills was launched at the facility;
Load capacity Loading length Number of axles Axle load 2020 Plans
New product development plans: production of a 40-foot flat car of mass-produced tank cars; (for a 1,435-mm gauge); production of an articulated tank improving serial production of car for gas condensate; development of a 46-foot flat car side frames and bolsters; 108 t 80 ft 6 22.5 tf (for a 1,520-mm gauge); production of a specialised working on introduction of The 80-foot long six-axle Sggrs UIC 592-4. The design of the flat car Speed articulated flat car for development of a tank car for marking procedures for parts container flat car is characterised is lightweight compared to similar transportation of containers and concentrated nitric acid with a high subject to strict registration. by a load capacity of 108 t and models common on the European replaceable bodies for 25 tf TMX durability aluminium alloy tank; the ability to safely transport all market. The bogie-equipped bogies; Development of repair types of ISO containers according railcar has an axle load of 22.5 tf production of TMX bogies documentation: to ISO 830-99 20’, 30’, 40’ under and is designed for operation on a production of a six-axle hopper with an axle load of 25 tf up to km/h ISO 668:1995 and UIC 592-2, 1,435-mm gauge. 120 car with replaceable bodies for lightweight railcars; improvement of the technical including tank containers, as well for mineral fertilisers with an system for maintaining as replaceable intermodal bodies In 2019, several tests on compliance of a supply contract of 270 flat cars unloading hatch at the end wall development of two Y-25 and repairs of freight cars with the gross weight of up to 36 t with European requirements were to a company of the Deutsche Bahn for 25 tf TMX bogies; bogie varieties (for a 1,435-mm manufactured; of groups 1, 2, 3, 3a and 4 under performed. These works were part Group. gauge). development of a high-speed conducting of experimental flat car for the transportation Plans for improving characteristics railcar repairs (reaching 1 million of containers with an on-board of existing products: kilometres mileage or 8 OTHER DEVELOPMENTS telemetry system (OTS) and operation years) in accordance electronic air brake (EAB); changes to the structure of with repair documentation In 2019, the following developments container for transportation of length of 40 and 60 feet and an mass-produced railcars in developed by third-party repair were also certified: rolled steel. extended service life (40 years) development of a tank car order to reduce their net cost companies. were completed; for gas condensate and other while maintaining operational six-axle articulated gondola Among works related to mass- petrochemicals with reduced tank reliability indicators; Plans for controlled operation: car, Model 12-6877, 1-VM produced railcars: 15 production projects of volume; dimensions; railcars for 18-9855 bogies with production of Timken bearings reliability and improvement removable equipment was an extended service life up to development and production with components found in Russia; analysis of mass-produced tank for transportation of designed and put into production 40 years were completed. of modifications for the 80-foot railcars according to the molasses, Model 15-6900-04. for the 80-foot loading platform articulated flat car (for a 1,435-mm production and incorporation of results of the supervised field flat car which allows for In the field of component gauge); our own fittings into the design operation. Put into production and cleared for transportation of refrigerated development and production: operation: containers; bogie 18-9855 with a TMX brake T14 tank container with the production works of a standard- system was put into production; charge/discharge device placed size range of multi-purpose and in the upper part; specialised flat cars with a loading
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Production Production Assets Learn more
UWC is the leader in the production of railcars in Russia and CIS JSC Tikhvin Freight Car Building Plant (TVSZ) countries. The Company manufactures products with improved TVSZ is one of the largest and most advanced transport engineering companies in Europe. It produces new-generation freight cars (gondola technical and economic characteristics, which increase the efficiency cars, hoppers, flat cars) and their components. The TVSZ car assembly of rail freight transportation and contribute significantly to the and foundry lines, integrated into a single technological complex, Tikhvin Freight Tikhvin railcars: TVSZ Car Building where, how produced its provide high performance and flexibility of production. Plant (video) and who builds 100,000th development of the Russian transport industry. www.tvsz.ru/en them (feature) railcar (video)
UWC facilities manufacture a wide range of high quality products by using the latest technologies, best practices and modern production facilities: Learn more
new-generation railcars railcar castings; springs; JSC “TikhvinСhemMash” (TikhvinChemMash) (gondolas, hoppers, flat cars, TikhvinChemMash produces new-generation tank cars with improved load tank cars, box cars, etc.); wheelsets; other components. capacity, designed for the transportation of all kinds of chemical cargoes (sulfuric acid, methanol, ammonia, caustic soda, etc.). TikhvinChemMash also produces articulated tank railcars which have no counterparts in the CIS. Tikhvin tanks: Made in Russia. where, how and TikhvinChemMash railway Production lines ensure quick adjustment for production of various types of who builds them tanks (RBK-TV video) tank cars depending on customer requirements. (feature) www.tcmash.ru
“Timken UWC” LLC (Timken UWC) JSC “TikhvinSpetsMash” (TikhvinSpetsMash) The Timken Company is the TikhvinSpetsMash produces new-generation specialised railcars: flat cars for world’s largest manufacturer transportation of wood and timber, box cars, etc. Flexible production lines of specialised bearings and ensure quick adjustment for production of various types of railcars, including components for mechanical in small batches. energy transmission. A joint www.tsm-wagon.ru venture with Timken, Timken UWC, produces high-tech bearings for freight car bogies. UWC production facilities include: JSC TAP “Titran-Express” (Titran-Express) TAP “Titran-Express” provides a full range of services in the field of freight car modernisation and repair, complying with deadlines and ensuring the quality of work. The production of wheel pairs and running parts of freight 5 >20 cars equipped with cassette-type bearings has also been mastered at the plants for the production automatic facilities of TAP “Titran-Express”. of railcars and components and automated lines www.titran.ru
Learn more: 2 >100 Springs Industrial Technology Center LLC joint ventures for the industrial robots (NPC Springs) production of components; one of the JVs entered the NPC Springs produces high-quality springs for freight cars in operational phase, while compliance with strict performance requirements and considering activities of the second the design features of freight car bogies with enhanced technical and How NPC Springs JV are currently being economic characteristics, as well as springs for locomotives, electric verifies the quality up to thousand arranged 22 trains, metro cars, trams and car suspensions. The plant fully complies of its products railcars per year is the total with UWC spring requirements. (video) production capacity npc-springs.ru/en
52 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 53 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Business Model of the Production Segment
CLIENTS
Producers of rail equipment Railcar repair depots Export Leasing companies Operators/Cargo shippers and automobiles
components components components and railcars railcars railcars
RESOURCES, PRODUCTION OF COMPONENTS PRODUCTION OF COMPONENTS INCL. PRODUCTION
Production staff is
Gondola cars, hopper cars, flat cars >10 thousand people
up to 30 thousand up to 90 thousand t up to 65 thousand Own power plant railcar sets castings per annum — wheel sets per year up to of high-strength production capacity cast iron parts per year Tank containers 22 thousand railcars per year “TIMKEN UWC” LLC
Flat cars, box cars, etc.
up to 80 thousand up to 30 thousand cassette-type railcar sets >50 % components bearings per year of rail springs per year demand
STATE SUPPLIERS OF PARTS AND MATERIALS
REGULATION SUPPORT Rolled metal products; Brake equipment; Cast iron; Ministry of Industry and Trade of the Preferential financing of TikhvinChemMash Axle boxes; Scrap; Other. Russian Federation; and TikhvinSpetsMash; Solid-rolled wheels; Ministry of Transport of the Russian Tax benefits from the Government of the Federation; Leningrad Region.
54 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 55 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Made in Tikhvin: Every 10th Railcar 3 101 m ; by the end of the year the As before, performance workshop achieved a production enhancement activities were held in the Russian Railways Network is of 14 railcars per day. In the bogie at TikhvinChemMash. Thanks to the work for eliminating losses RUB and railcar assembly shop, a mln new painting line was built from and competently reorganising the >50 Produced by UWC scratch and launched, which working space, the performance economic effect allowed to paint up to 5 cars per of the final tank car assembly line of the implementation day. At TikhvinSpetsMash, a deep for molten sulphur was increased of Tikhvin Freight Car Building Expansion of rationalisation ideas modernisation of the welding by 30%. Plant. This was a very important of the product range lines was carried out, which gave milestone in the history of the When developing and producing A system for the continuous the opportunity to expand the Group. Today, about one in ten new railcar models and improvement has been actively In order to execute the production simultaneous production line to railcars operating in the Russian modifications, the UWC Group developed when employees of programme and the financial plan, 4 models. To varying degrees, Railways network is produced at focuses on the current and any section and speciality submit developing a cost management modernisation to improve the the Tikhvin Industrial Site. UWC projected customer demand. proposals to improve the current system is required, taking into efficiency of the works affected has taken a significant share in the In 2019, UWC railcar building production and administrative account the market conditions and almost every production area. market, which allows it to influence facilities designed 8 new — in processes of the companies, the influence of external factors. the railway cars development fact, unique for the Russian of which implementation is Obviously, the current processes will trends and determine the market — railcar models with an Development of the cost-effective and enhances lead to a slowdown in the economy qualitative characteristics of rolling axle load of 25 tf, including the production system productivity in such areas. and this will affect all industries. We stock. articulated type. In particular, Employees are encouraged to will continue to produce quality In 2019, a new production system the TikhvinChemMash facility submit such kaizen proposals products with tight cost controls. We Another significant figure was the tool was successfully introduced produced more than 300 and A3-format projects for which see this one as a key challenge. In smelting of the 500,000th tonne at the Industrial Site: mapping articulated tank cars for they receive a remuneration. In this regard, in 2020 the UWC Group of steel. of product value streams. Such a transportation of liquefied 2019, we set a record with facility plans to offer railcars in line with tool allows to analyse the entire The results of the production In addition, Tikhvin Freight petroleum gas (LPG). Also, we workers submitting more than 1 the optional system to the market, production stream, determining programme in 2019 are Car Building Plant successfully started to produce stainless steel thousand kaizen proposals (for according to which the customer the resulting losses, bottlenecks, passed the audit of production tank cars for the transportation comparison, in 2017 the number receives a product with relevant summed up by GENNADY imbalance between operations, and quality management by the of molasses and vegetable was 121, and in 2018 it was 651). consumer properties, and so-called VESELOV, Deputy CEO of and surplus stocks. This helps VUZ Railway Research Institute oils at TikhvinChemMash. Such During the year, twenty A3-format redundancy will be removed from to see the picture as a whole PJSC «RPC UWC», Managing (Czech Republic), an authorised specialised rolling stock is yet projects were implemented, the railcar. At the same time, it is and develop comprehensive Director of the car-building certification body accredited by new to Russia, and UWC is at and the economic effect of the not allowed to reduce the basic interventions to address the enterprises at the Tikhvin the European Railway Agency. the forefront of this process, implementation of rationalisation requirements of the product: safety, problems found. As a result of This allowed to obtain certificates offering to the maket such railcar ideas exceeded RUB 50 million. In operational reliability, maintainability. Industrial Site the application of mapping, the of compliance with the European equipped with bogie with an total, for kaizen activity last year, Right now, an experimental model performance of two TVSZ lines for TSI requirements for production increased axle load. Another facility workers were paid about of a gondola with unloading hatches railcar production — painting and of the Sggrs80 articulated flat railcar to join UWC’s product RUB 2 million. and design modifications is being final assembly, as well as assembly car destined to the largest line in 2019 was the dump made. After a series of tests, a new and welding of flat cars — was Staff training in the principles railway operator in the European car presented in two varieties modification of the railcar will be put increased. of the production system Union, Deutsche Bahn. This is a at a time and fit for efficient into production. Similar work will be Production volumes continued. Through the year, serious challenge that we have transportation of small and large carried out with other Tikhvin railcars. goods. Though complex in terms almost 2.5 thousand Industrial The total production capacity deservedly embraced and are of design and technology, the Site employees were trained; Manufacturing of export products of the UWC Group is up to now optimistic about the further dump car is successfully produced for comparison, in 2018, it was is also among our priorities. 22,000 railcars per year. In 2019, development of our railcar at the TikhvinSpetsMash facility. 1.5 thousand people. 270 articulated flat cars will be the enterprises of the Tikhvin exports to Europe. Industrial Site produced 21,000 manufactured as part of the supply cars, which became an absolute And we are still expanding on contract with Deutsche Bahn. high of the railcar building in our collaboration with Wabtec Production development 2020 targets In addition, we have other large Tikhvin. Corporation, a global supplier of and modernisation Demand for freight cars will depend orders for the European market high-tech products for railways, At the beginning of 2019, a almost 2.5 thousand on the development of the industry that we will be working on. Another under a ten-year export contract. new workshop for welding and the pace of its recovery six-axle articulated tank car model Production achievements In 2019, more than 2,000 heavy gondola cars and hopper cars Industrial Site employees were from the coronavirus pandemic. will be put into mass production at The most notable event of the casting car sets for Barber S2HD was launched at TVSZ, for the trained in the principles of the As we already anticipate, the TikhvinChemMash in 2020, intended year was the release of the bogies were shipped, almost a production of mineral and grain production system in 2019 consequences will be very serious. for transportation of gas condensate 100,000th railcar since the launch quarter more than the previous year. carriers with a body volume of
56 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 57 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
and the plant team successfully RAILCAR PRODUCTION BY TYPE, UNITS represented us at Russian and Highlights of 2019 international competitions. In thousand >4 2019, the TVSZ team finished * Production of railcars 9,732 12% employees were affected * second at the European Strength >30 and casting 7,227 43% by the salary increase Championship. employees were trained 2019 1,052 5%* under the Foreman School 1,092 24%* in 2019 1,902 67%* TVSZ actively cooperates with internal educational project In 2019, RPC UWC production of educational institutions at various railcars increased by 6.8% to 21.0 11,052 5,039 levels. Last year, students of the thousand units, which corresponds and other petrochemicals. A pilot Lebedev Tikhvin Industrial and 2018 999 with the target indicators. 1,439 railcar model has already been Technological School and the Support for urban 1,139 built and is undergoing tests. Peter the Great St. Petersburg development projects A key driver of growth throughout 14,588 Polytechnic University undertook 2,417 In 2019, with the support of the year was an increase in Social policy priorities internship at the Industrial Site. 2017 747 Within the framework of the TVSZ, a modern playground rope specialised rolling stock production. 1,167 Our enterprises are constantly 137 current agreement, 80 facility complex was installed at the Thus, the manufacturing of hopper working to increase employees Generations Park in Tikhvin. In workers are trained at the St. cars for the year increased by 43%, 13,003 wages. In 2019, salaries were addition, the plant has traditionally 2,293 Petersburg Polytechnic University. while for tank cars the growth was increased for representatives 2016 460 We cannot but mention our acted as a partner for the Tikhvin 801 of 21 professions. Bonuses rose 5%. Production of other railcars (box internal educational project: the Lel national competition, and 5 proportionally, too. Total salary cars, universal and container flat Foreman School. The programme participated in the organization cars, etc.) increased by 67%. 11,640 increase last year affected more of Town Day in Tikhvin, as well 489 is designed to train existing 2015 than 4 thousand employees of 12 employees of the Industrial Site as in events devoted to the Year the Industrial Site. 232 engaged in service jobs, with the of Theatre in Russia, the Year of By contrast, manufacturing of In the facility health centre, aim of replenishing the personnel Healthy Lifestyle in the Leningrad gondola cars decreased by 12% 7,541 Region and the 175th anniversary 2014 2,043 prevention rooms for welders pool with potential line managers. in 2019, in full line with the market 53 were installed, with hand massage Many graduates of the School of the birth of N.A. Rimsky- trend demanding a gradual shift equipment and inhalers. For rapid are immediately allocated to the Korsakov. We also organised a towards specialised stock. The volunteer movement to support Gondola cars Flat cars for wood Other response to emergencies and workshops for master positions. In gondola cars share within the total the Brotherly Cemetery memorial Hopper cars Tank cars incidents at the labour protection, 2019, the program trained more production decreased by 21 p.p., than 30 people. complex. Improvement works are industrial safety and ecology reaching 56% against 77% in the service, a single dispatch centre being carried out in preparation * Against 2018. In 2020, all social benefits and previous year. began to operate. for the celebration of the 75th guarantees for workers remain anniversary of the Victory in the Traditionally, much attention in place. This applies to bonus Great Patriotic War. At the same time, the Company’s RAILCAR PRODUCTION BY PLANT, UNITS has been paid to the practice remuneration, voluntary health casting production increased by 6%, insurance, food reimbursement, We consider the city of Tikhvin as * of sports. In the reporting year, due to the growth of its own railcar 17,672 7% there were volleyball and mini- free transportation, spa treatment one with the facility, and practice 2019 2,281 7%* manufacturing and sales to the 1,052 5%* football championships in the and other areas of support. The social responsibility to ensure 21,005 6.8%* North American market. plant. The plant athletic club importance of occupational health that both our employees and other residents of Tikhvin have 16,531 “PROKACHKA 1520” worked and safety issues, the acquisition 2018 2,138 999 energetically. The sports club of working clothes and personal a prosperous and comfortable 19,668 hosted competitions among protective equipment continue to environment for life and employees of the companies, be addressed. recreation. 17,006 2017 1,304 747 19,057
15,301 2016 125 460 15,886 1 In previous annual reports, a technical error was made: the railcar production of 12,361 Tikhvin Freight Car TikhvinSpetsMash for the year 2016 was 2015 12,361 Building Plant specified at 125 units. The data of this TikhvinSpetsMash annual report are up-to-date. TikhvinChemMash 2014 9,637 9,637 Total
* Against 2018.
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DYNAMICS OF RAILCAR PRODUCTION, THOUSAND UNITS CASTING PRODUCTION, THOUSAND TONNES
1.1 1.1 1.9 2019/2018, % 2019 9.7 7.2 Casting type 2014 2015 2016 2017 2018 2019 1 1.4 1.1 Heavy 33.1 49.6 55 62.3 65.7 70.0 +7 2018 11.1 5 Gondola cars 2.4 0.8 1.2 Hopper cars Medium-sized 2017 14.6 0.1 0 5.7 7.2 7.7 7.8 9.2 +18 Tank cars and small 0.5 0.1 2016 13 2.3 0.1 Flat cars for wood Total 33.1 55.3 62.2 70 73.4 79.2 +8 0.5 0.01 Other 2015 11.6 0.2
2014 7.5 2 0.1 DYNAMICS OF SUBMISSION A3 PROJECTS OF KAIZEN PROPOSALS, PCS.
1,090 25 STRUCTURE OF RAILCAR PRODUCTION BY TYPE IN 2019, % 2019 1,064 2019 20 Over the year, 20.7 thousand new railcars were sold to third-party 9 651 9 customers. The largest deliveries 2018 2018 647 6 6 were made to PJSC “GTLK”, Rusagrotrans, Uralkali, Kronospan, 5 121 3 Gondola cars Trade House “RIF”, TexolTrans, 2017 2017 Hopper cars SPA “Azot”, and “EuroChem”. In total, 110 2 46 Tank cars 14.3 thousand railcars were sold to Flat cars for wood these companies. Submitted Implemented Submitted Implemented Other RPC UWC Production 34 System DYNAMICS OF ECONOMIC EFFECT, RUB MLN Improvements that were UWC enterprises have developed implemented in 2019: a Production System that aims 2019 50.753 to create a culture of continuous increase in the tank car DYNAMICS OF CASTING PRODUCTION, THOUSAND TONNES improvement. This is accomplished production by 40 units per 2018 30.205 through unlocking employees’ month;
7%* potential as a result of their 2019 70.0 9.2 * 2017 0.2 18% involvement in the development increase in the daily capacity process and eliminating actions that of the 80-foot flat car production 2018 65.7 7.8 do not create value for the client line; (losses). Proven tools have been 2017 62.3 7.7 introduced within the framework of EMPLOYEE TRAINING DYNAMICS, PEOPLE increase in the daily capacity the Production System, such as the of the painting line. 2016 55 7.2 5S and TPM systems, value stream 2019 260 2,145 70,0 mapping, the Standardised Work 2015 49.6 5.7 Methodology for assessing staff 2018 394 1,110 load, Kaizen, A3 project, etc. 2014 33.1 Managers, specialists Workers and employees Heavy castings Medium-sized and small castings
* Against 2018.
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In 2020, further development of the Spring production Major achievements in 2019: springs for locomotives: Production System is planned: In 2019, NPC Springs produced 1,822,000 springs. Key consumers of the export commercial deliveries increase the share of commercial spring deliveries for locomotives; involving staff in the process company products: in the railcar segment — JSC TVSZ; in the locomotive to LLP Electric Locomotives of continuous improvements segment — JSC Transmashholding enterprises, LLC Ural Locomotives (springs Assembly Factory Electrovoz complete the certification of springs and start commercial by not only training managers for electric trains), Transport Systems PC (springs for trams). Kurastyru Zauyty (Kazakhstan, deliveries of springs for a new high-speed flat car project for the and specialists, but workers as well (the goal is to train 60% of Alstom Group plant) were transportation of containers at speeds up to 160 km/h; employees); In comparison with 2018, the share of production of springs for locomotive commenced; construction, metro railcars and trams was increased by 2%. complete the certification of springs under EN 13298 for the eliminating bottlenecks in the the participation in the export project of JSC TVZ and start the commercial deliveries of workshops; Metrowagonmash projects was springs; strengthened; in particular, a consolidation and TOTAL SPRING PRODUCTION, THOUSAND UNITS new type of springs for railway certify springs for passenger railcars manufactured by JSC TVZ and implementation monitoring of buses RA-3 was certified, and start commercial deliveries of products; the cost optimisation roadmap; commercial deliveries were 2019 1,872 commenced; suspension springs for a Russian car conveyor: evaluating the effectiveness of 2018 1,862 the enterprise’s main processes commercial deliveries of springs complete the development of commercial production technology of using value stream maps; to RPC Uralvagonzavod were springs for conveyor lines of Peugeot Citroen Rus, Reno Russia and 2017 1,688 commenced; AVTOVAZ; training managers and specialists on BMS issues and 2016 1,442 the delivery volume of springs get nominated for the project B9 of Peugeot Citroen Rus; process approach; to the locomotive construction 2015 1,044 segment was increased; get nominated for the projects of Reno Russia and AVTOVAZ; developing the Knowledge Management process in terms of consolidating best practices; 2014 991 commercial production of increase the deliveries of springs to the car spare parts market; springs made in compliance with the requirements of analytical work on marketing and sales: extending the principles of the total equipment maintenance European standard EN 13298 system (TPM) to all enterprises SPRING OUTPUT BY SEGMENT IN 2019 for their future delivery to search for alternative markets for springs; of the Tikhvin Industrial Site. JSC Tverskoy Vagonostroitelny
Segment Volume, Share, % Zavod (TVZ) is approaching evaluating and attracting consumers to the market of springs for thousand units market entry; railway repair. Joint Ventures Railway springs the commercial production of Procurement Activities In 2019, “Timken UWC” LLC suspension springs for Russian increased the supply of products JSC TVSZ freight cars 1,742 95.5 car parts market entered the The procurement policy of RPC UWC is determined by the Company’s to TVSZ, shipping around 71,000 market stage, and deliveries Standard for Procurement Procedures and Supply Policy. Other freight cars 25 1.4 bearings against 50,000 a year were commenced. earlier. Basic principles of procurement activities: Locomotives 26 1.5 In 2020, the enterprise plans on In 2020, the enterprise plans on Metro cars, trams 24 1.3 expanding work in several areas: mandatory use of competitive methods of conducting procurement manufacturing and shipping around procedures (except for the cases provided by the Standard for 75,000 bearings to TVSZ increasing Car springs springs for railway freight cars: Procurement Procedures); the local cost share due to the use of the components manufactured in Car springs for AUTOZIP 5 0.3 increase the share of attracting the maximum number of participants to ensure a high level Russia in the structures. spring deliveries to of competition. According to the standard, the number of participants Total 1,822 RPC Uralvagonzavod; must be no less than five, otherwise the reasons for the lack of minimal competition for each purchased item must be specified;
62 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 63 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
no restrictions on admission to PROCUREMENT STRUCTURE BY TYPE OF PURCHASED PRODUCTS, % for scarce materials and components in a record high projects of RPC UWC. The total amount of procurement participate in the procurement year for car builders (78.5 thousand freight cars were amounted to RUB 51.8 billion. due to improper requirements sold, which is 14% more than in 2018), development for participants; of alternative supply channels critical materials and The key suppliers of products to UWC enterprises include 29 34 components, implementation of optimisation measures, leading Russian and foreign companies. A large share of holding tenders in several Rolled metal products provision of materials and components for new export procurements falls on Russian domestic products. stages with obligatory Wheels rebidding; Axles Bogie components Quality Management the FAI (First Article Inspection) procedure was developed and equality, fairness, non- Axle joints implemented for all units and components of the Deutsche Bahn discrimination and absence Brakes The basic components forming the project. of unreasonable restriction competitiveness of UWC products Other of competition in relation to 5 16 are their consistently high quality and A technical audit of production processes, control, and requirements for participants; 5 operational reliability. The distinction supplies was carried out at 11 enterprises of suppliers of particularly critical 2 8 of the quality management structure units and components. transparency and information of the UWC Railway Group is that openness of procurement, it is a well-coordinated system with The level of railcars delivery from the first presentation of railcars and ensuring the minimisation of PROCUREMENT STRUCTURE IN 2019 BY LOCATION OF SUPPLIERS, % constantly improving processes for components to the Inspection Centre (the authorised body of Russian procurement risks and the creating products that best meet the Railways for the control of car building products) is maintained within target 3 formation of a positive image of actual requirements of customers. indicators and amounts to: the customer; The trend towards the development railcars — 99.6% is held at a high level; ensuring targeted and cost- of project management and effective use of funds for the optimisation of quality management bogies — 99.9% is held at a high level; purchase of products, taking into Russian suppliers processes has made it possible to account the cost of its life cycle. Foreign suppliers achieve significant results: components — 99.9% is held at a high level.
In 2019, when carrying out the Organisation’s Standard To evaluate and increase customer satisfaction, a group has been established procurement activities, the following “Supplier Assessment and Audit” to work with customer representatives who carry out technical acceptance of strategic tasks were implemented: was developed and implemented railcars at the manufacturer site. achieving the best conditions based on the tools of the PPAP 97 international standard (Production As part of automating control and management processes: Part Approval Process); TOP 10 SUPPLIERS OF RPC UWC1 unified codifiers of inconsistency causes and perpetrators have been business contacts have been introduced; Supplier Products procured Amount in 2019, RUB bln established with new and PJSC "Severstal" Rolled metal products 9.8 approved suppliers in the personal directories for inspectors were developed to work in the ERP course of technical audits, system; JSC "VSW" Whole-rolled wheels 8.0 commission acceptance and LLC "TC "EvrazHolding" Car-building structural steel 3.1 remote questionnaires, which the procedure for tracing the product status in railcar assembly PJSC "CHKPZ" Rough axles, forgings 2.5 make it possible to promptly production was developed, implemented and put into industrial
LLC “Trade House EPK” Bearings (axle equipment) 1.7 respond to identified problems operation; at incoming inspection, in PJSC "Uralkuz" Rough axles 1.3 production and operation; ultrasonic control of welded joints of tank bodies in tank cars was JSC “Transpnevmatika” Components (brakes) 1.3 automated due to launching the latest control equipment. LLC “SpetsVagonDetal” Components 1.0 the methodology for the integrated evaluation of The implementation of these tasks allowed to increase manageability, JSC "Ritm" TPBE Components (brakes) 1.0 suppliers has been improved. productivity and informativeness of quality control of products, and reduce LLC “SKF” Bearings (axle equipment) 0.9 Emphasising confirmation of the HR costs for operational control. the supplier’s ability to produce 1 Excluding companies that are part of the Group. quality products;
64 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 65 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Thanks to the transactions made, the CHANGES IN THE FLEET UNDER OWNERSHIP Railcar Lease fleet grew to 16 thousand railcars AND FINANCIAL LEASE AT THE END OF THE YEAR, THOUSAND UNITS in 2019, including 15.3 thousand in financial lease, 0.44 thousand 2019 15.3 0.7 UWC offers its partners a wide range of opportunities to obtain owned by the RAIL1520 Group of Companies, and 0.26 thousand new-generation railcars. In addition to direct sales, customers may 2018 11.1 0.8 rent rolling stock. owned by the parity joint venture MRC 1520 between PJSC «RPC 2017 13.3 UWC» and Mitsui & Co ltd. The fleet grew by 34.5% against the previous year. A significant part of the changes 2016 16.0 concerns an increased share of RAIL1520 Group railcars with an axle load of 25 tf/axle 2015 16.0 to 98.6% together with a reduced The group of the Lease segment companies united under the RAIL1520 average age of the fleet to 2.9 years, 2014 16.6 brand is one of the largest on the Russian freight rolling stock leasing market. which is still one of the best indicators in the market. Ownership Financial lease The current fleet includes gondola cars, flat cars, and tank cars. RAIL1520 customers are major operators and cargo owners, including Modum-Trans The past year proved to be a LLC, JSC SUEK, RusVinyl, Petrochemicals Transportation Company (NKhTK), watershed for the gondola car and UNICON 1520. market. The shortage of gondola cars, CHANGES IN THE FLEET STRUCTURE BY RAILCAR TYPE, % which took place in 2016–2018 due to 1 large-scale write-offs of the obsolete 2019 99 70,0 fleet, was overcompensated by railcar builders. It resulted in the fleet 2018 14 86 surplus in Russian Railways, which Highlights of 2019 gradually pushes the rates to new break-even points. In the reporting 2017 19 81 In 2019, the operating lease segment of the UWC Group underwent lease transfer of tank cars year, the average leasing rate of significant changes. A number of transactions were made that significantly under the lease contract with UWC produced new-generation 2016 49 51 affected the scope of the lease segment business: Gazprombank Leasing JSC was gondola cars decreased by 17% and carried out. In the middle of amounted to RUB 1,507/day as at 2015 50 50 railcars were redistributed between the sub-lessees of the RAIL1520 2018, the RAIL1520 Group of 31 December 2019. According to fleet, resulting in a new leader. Vostok1520 LLC, part of the First Heavy Companies and Gazprombank forecasts by the UWC Railway Group Standard railcars New-generation railcars Haul Company Group of Companies, was replaced by Modum-Trans Leasing performed a management, a short-term decline LLC, which is one of the largest independent transport companies in the leaseback transaction for in demand for gondola cars will take Russian freight rail market. As of the end of 2019, Modum-Trans had 14.8 11.2 thousand railcars which place in the market within the next STRUCTURE OF THE FLEET (IN OWNERSHIP AND FINANCIAL LEASE) thousand gondola cars on lease; included 1.4 thousand oil and 5 years, and the leasing rates may BY RAILCAR TYPE AS AT 31 DECEMBER 2019, % gas tank cars produced by fall to RUB 1,000–1,100/day for an 2 the volume of the lease contract with PJSC “GTLK” was reduced. In the AZOVOBSHEMASH, PJSC. In innovative railcar and to RUB 800– middle of 2018, the RAIL1520 Group of Companies and PJSC “GTLK” September 2019, lease rights 900/day for a standard one. signed a financial lease contract for 10 thousand gondola cars produced under the lease contract for by Tikhvin Freight Car Building Plant. UWC’s own trading house 1.4 thousand tank cars were The return to the maximum values of supplied the railcars. Under the agreements reached, the total volume assigned to Transoil LLC, which 2019 is expected no earlier than 2026 under the contract was reduced to 5.5 thousand gondola cars, and the is part of the Transoil transport after the reduction of the new rolling Gondola cars delivery period shortened to the end of 2020. As of December 2019, all and logistics group, the largest stock production and the absorption Other cars 5.5 thousand railcars under the contract joined the fleet of the RAIL1520 private rail operator of oil and oil of excess railcars by the market. Group of Companies; products in Russia.
98
66 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 67 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
AVERAGE ANNUAL LEASING RATE OF UWC-PRODUCED NEW-GENERATION GONDOLA CAR regions of the Russian market and also exports cargo (to countries of the IN 2018–2026, RUB/DAY CIS, the Baltic states, Eastern Europe, Southeast Asia, and the Middle East).
1,730 1,740 Its clients include some of Russia’s leading chemical enterprises such as Uralchem, KuibyshevAzot, EuroChem, RusVinyl, UMMC, Sayanskhimplast, 1,610 among others. UNICON 1520 had a 6% share of the Russian market for tank container transportation in 2019. 1,460
1,300 1,240 Highlights of 2019
1,160 Actual rate In 2019, the tank container and tank car fleet of UNICON 1520 remained 1,100 As of the end of 2019, the the same. Its flat car fleet slightly increased (+0.4%). UNICON 1520 fleet included: Forecast In 2019, the Company transported 494.8 thousand tonnes of chemical 2018 2019 2020 2021 2022 2023 2024 2025 cargoes (mainly, sulphuric acid, oleum, sodium hydroxide, acetic acid, anhydrous ammonia, сarbamide-ammonia mixture and lignosulfonate), 1.1 thousand which is a 62% increase against 2018 (305.1 thousand tonnes). tank containers
In 2019, the railcar turnaround decreased by 15% compared to the including previous year, from 28 to 24 days. Accelerated railcar turnaround is mainly 2020 Plans related to the implementation of the project devoted to routing customer 670 5.5 thousand shipments of PJSC “KuibyshevAzot”. The tank container railcar static load railcars When leasing rates are low, there is a significant risk that the terms increased by 1.8 tonnes in 2019 and amounted to 59.06 tonnes since the of financing the RAIL1520 railcar fleet will not provide for satisfactory railcars were transferred company transported more high-density freight. to PJSC “GTLK”, business margin. In this regard, at the end of 2019, the Board of Directors a subsidiary of PJSC «RPC UWC» decided to terminate its operations in the Lease 592 business segment. Its own fleet may be restored in case of favourable flat cars conditions. The first transaction as per the decision to terminate operations in the Lease segment 2020 Plans In 2020, UWC will continue the process of selling its own fleet, which was performed in January 2020, namely, 78 began in 2019, to market buyers, until the current Lease segment is fully 5.5 thousand railcars were transferred Fulfilling obligations to current key customers and increasing chemical liquidated until the end of 2020. together with the lease contract to transportation revenue. tank cars PJSC “GTLK”, a subsidiary.
CHANGES IN THE UNICON 1520 RAILCAR FLEET IN 2017–2019, UNITS
1090 1,098 Operation 2019 592 78
The universal container company UNICON 1520, which was 647 1,098 established in 2017, specialises in arranging transport services and 2018 585 multimodal bulk cargo logistics. 78
637 UNICON 1520 2017 259 38 The company’s fleet consists of tank containers that transport chemicals, cars and tank cars with high load petrochemicals, and liquefied petroleum gas, as well as container flat capacity. UNICON 1520 operates in all Tank cars Flat cars Tank containers
68 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 69 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
The enterprise’s management system is certified to comply with the “Titran-Express” successfully trained Service requirements of international railway industry standard ISO/TS 22163:2017. the employees of 19 railcar repair enterprises. UWC’s service system is built on the principle of being “all inclusive”. This In 2019, we started scheduled maintenance includes comprehensive training for railcar repair enterprises to provide In 2019, over 1,500 freight cars works on freight cars manufactured by Tikhvin maintenance, routine, depot, and overhaul services. The key objectives of the underwent various types of repairs maintenance service are to: and maintenance through “Titran- railcar building enterprises in 2012–2013. Express”. The plant made more than The scheduled maintenance works were prepared by JSC TAP “Titran- reduce railcar downtime during repairs; 12,000 wheel sets, up 20% from last Express”, the main service centre of PJSC «RPC UWC». year. reduce the life cycle cost of rolling stock; As part of developing the service TAP “Titran-Express” eliminate the risks of using counterfeit products and components. network, key importance is given to the issue of providing the plying In 2019, the criteria for classification of the centres of the UWC Group In order to provide comprehensive maintenance, the Group closely cooperates fleet with spare parts. By the end service network were adjusted. According to the updated regulation, with customers, infrastructure owners as well as railcar repair and maintenance of 2019, 144 spare parts and “Titran-Express” was the only service centre to achieve the first (highest) of new-generation cars depots in the Russian Federation, Kazakhstan, Belarus, Latvia, Lithuania, and components storage spaces had category, giving it the right to carry out all types of repairs to the entire throughout the service Estonia as it builds a partner network of service centres. Service centres are based been created. range of new-generation freight cars produced at the Tikhvin railcar network. at railcar repair depots. building enterprises, and to perform authorisation and inspection control of the rest of service centres of PJSC «RPC UWC». “Titran-Express” remains the base for conducting experienced This ensures the effective distribution of service experience and repairs of the entire range of Highlights of 2019 technology throughout the entire 1,520-mm gauge railway network, freight cars produced by the 12 thousand and allows for improved quality control of repairs and maintenance Group’s enterprises. In 2019, the total number of authorised service centres on the 1,520 gauge wheel sets area at year end was 72. were made
70 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 71 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
provides a significant reduction in gondola car between uncouplings one request, which was concerning the downtime of cars undergoing is about 200 thousand km, and the repair of a wheel set. Moreover, UWC’s Railcars are Always repair to operators of rolling stock, the average estimated number of all operating 1,520-mm gauge control of their technical condition, uncouplings in CUR for 1 million km depots have the right to conduct and guarantees the use of only is up to 5 times, while a standard uncoupled railcar repairs to Tikhvin Under Supervision original components. TAP “Titran- railcar for the same period is railcars with the participation of a Express”, as the main service centre, repaired at least 15 times (6 repairs representative of any authorised is responsible for tracking all are planned as part of the depot UWC centre. The organisation of uncoupling and repairs, including repair volume). The maximum scheduled maintenance within the depots, supply of spare parts to Quality control them, annual inspections, and the provision of spare parts. number of uncouplings is due to 1,520-mm gauge area outside of control over service centres. In UWC regularly collects statistics the turning of wheel sets. Mean time Russia is under negotiation. on the uncoupling of Tikhvin between failures at a mileage of the second category centres, the The situation with other countries railcars, carefully analyses the Results of the first 850 thousand km still did not reach planned repairs of Tikhvin railcars further abroad is different. These are causes of malfunctions and, in the limit values, which suggests a and spare parts, that is, separate planned repairs always complex exclusive projects. order to assess the quality of the sufficient margin of safety before the units of the railcar (wheel sets with In 2019, the first batch of Tikhvin In order to organise properly built bearings, bogie parts, braking work carried out, monitors further first scheduled repair. operation of railcars that have railcars underwent a planned service support, as a rule, a partner systems, etc.) are carried out. renovation. Preparation for this Inspection within the controlled in the local market is selected Depots of the third category carry undergone repairs as part of the current repair. If the railcar is sent procedure had been going operation is carried out every 100 together with the customer, who out uncoupled car repairs (TOR on since the production was to TOR repeatedly, our specialists thousand km of mileage or once can localise maintenance services in Russian). Moreover, TORs done launched. In 2019, OJSC Russian travel to the depot in which it was a year. The last one took place in of Tikhvin railcars. Staff is trained in on Tikhvin railcars can be carried Railways approved the necessary repaired. There, an inspection September 2019. The commission key operations, and the warehouse out within the entire 1,520-mm documentation and regulations of the site and a detailed study was composed of representatives is filled with spare parts. There are gauge area, at any depot with the were updated. of OJSC Russian Railways, Railway cases which require the personal participation of a representative of of process technology is carried out. In addition to unscheduled The main conclusion according Research Institute (JSC “VNIIZhT”), participation of UWC’s specialists. If the authorised centre. The fourth the Specialised Design Bureau so, they travel to the site and solve category includes warehouses inspections, each authorised service to the results of the planned renovation was that wear-resistant of the Moscow State University of problems there. responsible for storing spare parts centre is inspected throughout the IGOR TKACHEV, year for compliance with UWC’s parts (wedges, adaptors, friction Railway Engineering (SKB MIIT, and assemblies. LLC), All-Union Research and Managing Director requirements regarding technology, plates, bolster inserts, etc.) showed comments are dealt with, etc. Also, if minimal wear. Their durability Development Center for Transport Plans for the development of JSC TAP “Titran-Express”, necessary, re-training is carried out will suffice for two more depot Technology, LLC (”VNICTT” of the service network Depot authorisation process LLC), the repair depots and the tells about organising the in Tikhvin or on the sites of service renovations. Wheel sets also We are planning to maintain the In 2019, on the basis of the sustained some wear, which does manufacturer. No excessive wear renovation of Tikhvin railcars centres, as well as on the territory existing centres offering high quality updated “Regulations on voluntary of one of the six training centres not require a major repair. The of parts has been identified. Safety maintenance and repairs and to and the development of authorisation of subdivisions of organised on the basis of railcar thickness of the wheel rim proved margins are determined and increase their number in those areas UWC’s service network enterprises on readiness to repair building enterprises. sufficient for further operation. The resources are predicted according where Tikhvin railcars run. UWC newly developed innovative expected wear level was recorded to the level of actual wear, from is closely monitoring the situation assemblies of freight cars”, only for brake beams and automatic the beginning of operation to to ensure that we have enough approved by the Non-Commercial Spare part supply coupler parts. It is now planned to the moment the limit condition is capacity for repairs and renovations. reached. According to the results The structure of UWC’s Partnership “Union of Industries of At the end of 2019, 144 spare parts adjust the repair documentation At the same time, we are trying to of the inspection, the possibility service network Railway Equipment”, UWC adopted storage sites were organised on the on the basis of the acquired optimise the logistics of the owners, experience, as it is directly related of increasing the overhaul interval A system for carrying out repairs the authorisation regulation of basis of service centres and in areas so that they avoid unnecessary costs to the owner’s costs. should be considered. Everything to freight cars built at the Tikhvin the Group’s service centres. The for sending cars for repair and back of mass loading and unloading of will depend on how well the railcar building enterprises has been procedure itself is carried out by TAP for loading. Tikhvin railcars. Nomenclature is supervised railcars function in the organised on the 1,520 gauge area; “Titran-Express”. determined based on the statistics Prospects for increasing future, but for now all forecasts are The railcar fleet manufactured warehouses with the necessary In the first phase, the possibility of of uncoupling and planned repairs. confirmed. turnover of spare parts and Moreover, a list of irreducible overhaul interval by UWC is concentrated among organising repairs in a particular a few large-scale owners and is components have also been created. depot is assessed on the basis reserves has been established. It is The overhaul interval for Tikhvin The service network geography made up of 36 positions, including cars has been increased to 1 not spread out over the network. of information about the railcar Service and repair Owners often go to where they think takes account of locations where repair enterprise, the available bolsters and side frames, springs, million km, or 8 years. UWC’s specialists regularly examine the of railcars abroad it seems more convenient to carry UWC railcars are operated, as well as equipment and the qualifications friction wedges, brake beams, and 12-9853 gondola cars in controlled The 1,520 gauge area has its own out repairs, with the initiative of the wishes of the fleet’s owners and of the employees. In the next more. There have been no failures tenants. or delays in the provision of spare operation. They work in an intensive service centres, which are part authorising the depot. UWC meets step, UWC’s specialists conduct them there. Some clients have their parts. For planned repairs, supply mode and over the course of a year, of the authorised UWC network. At the end of 2019, 72 authorised field checks to determine the own depots where they want to carry goes according to the requests of on average they run more than 130 For example, in Kazakhstan three UWC service centres were category and find areas of possible out repairs. This too is negotiable, railcar repair enterprises. thousand km, and in some cases, up depots have been certified for improvement. Additional staff operating on the network. Each to 200 thousand km. In controlled ongoing repairs since 2013, but and even mutually beneficial. In any of them is assigned a specific training is provided. After everything operation, the estimated reliability for the reporting period no cars case, service centres are created not from scratch, but on the basis of category. The basis of their is confirmed, a contract for the indicators laid out at the design have been repaired there, as there Service support ready-made infrastructure. Another distribution has been slightly right to repair is concluded, a set of stage of the railcar are compared was simply no need for it. In any of UWC railcars important task is continuous corrected. The first category now design and repair documentation with actual values. According to case, as in other service centres, Over 70% of railcars manufactured training of maintenance and repair includes only the main service is transferred to the depot, and the Railcar-Building Design Office the necessary spare parts are by UWC receive comprehensive specialists to service new-generation centre of TAP “Titran-Express”: standard technological processes of OJSC Russian Railways for 2019, stored there. At the Baltic operating maintenance services. This model railcars. it manages authorisation of the are introduced. the average mileage of the Tikhvin domain, there has only ever been
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2020 Plans DYNAMICS AND STRUCTURE OF CAPITAL INVESTMENTS, RUB BLN
As part of developing the programme for new-generation freight car warranty railcars, as well as improving our 1.2 and post-warranty service, UWC pays special attention to increasing the service in facilitating the sale of 2019 0.5 number of service centres of the highest category in the partner network, in spare parts. order to support the operation of freight cars throughout the entire life cycle. 1.4 It is also planned to automate 2018 0.7 In 2020, we plan to open new service centres along the pathways that RPC handling buyer requests, sales UWC’s railcars follow. and shipment processes, and to 2.9 moderise JSC TAP “Titran-Express”’ 2017 Due to the fact that our enterprise has introduced fundamentally new existing production lines, including 0.6 products to the market, employees of third-party railcar repair enterprises purchasing new equipment and 4.6 need constant training. This is one of the primary tasks. changing process layouts. These 2016 events will increase the workshop’s 0.2 The focus in 2020 will also be on training employees of third-party railcar capacity for the production of wheel repair enterprises in the methods of maintenance and repair of Tikhvin sets by 20%. 2015 7.2 Development 2014 3.9 Capitalised repairs Investment Activities
Investment activities of UWC are carried out in accordance with strategic plans based on approved investment programs. The Company practices a project approach to managing its investment activities, and financing is provided individually for each project.
Between 2014 and 2018, a total of RUB 21.5 billion was invested. The RUB Company’s investment expenses in 2019 decreased by 19% to RUB 1.7 billion bln compared to 2018. The dynamics is due to a decrease in development costs, 1.7 as the investment phase for most of the planned investment projects has the Company’s investment been completed. 32% of expenses were expenses for capitalised repairs. In expenses in 2019 2019, the Company made its last payments under investment projects and in the future plans to spend only on capitalised repairs, as well as on launching new railcar models.
74 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 75 Financial Report priorities. strategicissues andinvestinimplementation of thus enablingtheCompany tobothsolvethecurrent UWC todemonstrate stablefinancialperformance, financialcapitalallows Competent management of of RUB9.8billionayear earlier.of compared toaloss amounted toRUB3.1billion In 2019, theCompany’s netprofit
82 EBITDA Revenue 19.5 RUB bln 78 79 72.7 RUB bln Photo byMikhail Popov 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Revenue REVENUE BY SEGMENTS, RUB BLN Production Segment Lease Segment (being disposed of) 1 2 In 2019, the Company’s total revenue decreased by 5.6% 2019 78.0 2019 8.2 to RUB 72.7 billion due to a decrease in railcar sales volumes to third parties. Revenue from railcar sales decreased by 9.5% 2018 67.1 2018 6.9 to RUB 58.6 billion. At the same time, the delivery of 5.5 thousand 2017 54.7 2017 6.1 gondola cars under the transaction of reverse leasing from PJSC “GTLK” are excluded from the consolidated revenue from continuing operations 2016 43.4 2016 5.2 and capitalized on the balance sheet of PJSC «RPC UWC». 2015 32.1 2015 4.3
2014 23.2 2014 4.4 The positive factor was the growth DYNAMICS OF TOTAL REVENUE, RUB BLN of the average annual railcar leasing rate in 2019 as compared 2019 72.7 to 2018. Revenue from railcar leasing increased by 17.6% to 2018 77.0 RUB 8.0 billion. EBITDA 2017 62.0 Furthermore, additional support was provided by the rail liquid cargo In the reporting year, total EBITDA including discontinued expanding the product range, including by transportation segment, whose 2016 48.5 operations increased by 66.7% to RUB 19.5 billion, while introducing new high-margin products of a new revenue increased by 28.8% to EBITDA from continuing operations excluding subsidies in generation — six-axle articulated tank cars for RUB 873 million. 2015 36.9 2019 was similar to consolidated EBITDA from continuing LPG transportation, specialized wagons for chips operations (in 2019, UWC did not receive funds under transportation and dump cars; 2014 17.1 government industry support programmes). Significant growth of the indicator is due to: reducing commercial, general and administrative expenses. TOTAL REVENUE STRUCTURE, RUB BLN increase in prices and sales volumes of new railcars, first of all, specialized railcars; Indicator 2014 2015 2016 2017 2018 2019
Sale of railroad cars 12.2 32.3 42.9 55.1 64.8 58.6
Rendering of operating lease services 3.5 4.4 5.2 6.1 6.8 8.0 CONSOLIDATED EBITDA FROM CONTINUING CONSOLIDATED EBITDA FROM CONTINUING OPERATIONS, RUB BLN OPERATIONS EXCLUDING SUBSIDIES, RUB BLN Sales of castings and components 0 0 0.1 0.3 3.6 3.7
Provision of rail transport services 1.2 0 0 0.1 0.7 0.9 2019 11.9 2019 11.9 Other revenue 0.2 0.2 0.3 0.4 1.1 1.5 2018 5.4 2018 5.4
2017 12.7 2017 12.0
1 Total revenue from continuing operations and discontinued operations of the Lease segment as reported in the consolidated financial 2016 13.7 2016 10.5 statements. 2 The consolidated financial statements for 2018 have been restated due to the completion of acquisition cost determination of SZIPK JSC, 2015 7.1 2015 7.1 also due to the termination of the Lease segment the presentation of the consolidated income statement and other comprehensive income has been changed. 2014 3.6 2014 3.6
78 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 79 ARTICULATED
GONDOLA CAR Bogie model Increased maintenance The SAC-1 RUS interval articulated connector Articulated gondola car, Models 12-6877/12-6877-02, has for freight cars no equivalents in the CIS market and is aimed at transporting 18-9855 ensures smooth passage by cargoes in a wide range of densities. with integrated brake the car’s articulated sections system 500 through curved sections of thousand km* the track, including sharp curves 6 years
Higher load Increased linear Enhancing the capacity load network’s carrying capacity
114.5 t 7.68 tf/m up to 40 %
* To be determined after the pilot-controlled operation.
80 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 81 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
EBITDA OF THE PRODUCTION SEGMENT, EBITDA OF THE PRODUCTION SEGMENT, interest paid on loans and in the an increase in financial income by RUB 1.8 billion due to the restoration RUB BLN EXCLUDING SUBSIDIES, RUB BLN size of the debt portfolio; of the reserve for expected credit losses on issued loans.
2019 15.1 2019 15.1 2018 6.5 2018 6.5 Financial Debt 2017 9.7 2017 8.0
Total debt including financial lease The remaining 4.5 thousand railcars were purchased by PJSC “GTLK” under 2016 9.0 2016 5.9 liabilities at the end of the reporting the railcar purchase and sale contract. year was RUB 107.6 billion, 2015 4.2 2015 4.2 compared to RUB 120.5 billion at On December 23, 2019 the Board of Directors of PJSC «RPC UWC» made the end of 2018. The reduction of a decision to terminate the Lease segment. The assets of the segment, 2014 1.3 2014 1.3 debt portfolio is connected with represented mainly by 15.7 thousand1 freight cars fleet, are to be sold by repayment of principal debt on the end of 2020. The first transaction in accordance with the decision of the EBITDA OF DISCONTINUED OPERATIONS credits and loans on RUB 17.9 billion Board of Directors on the sale of assets was carried out in January 2020 — the OF LEASE SEGMENT, RUB BLN TOTAL EBITDA1, RUB BLN and bonds on RUB 3.75 billion, rights and obligations under the financial lease agreement with PJSC “GTLK” excluding funds attracted under the for 5.5 thousand railcars were transferred to an independent purchaser for a transaction of financial leasing from fee of RUB 1,800 thousand. A similar transaction in favour of LLC “Transoil” of 2019 7.6 2019 19.5 PJSC “GTLK”. 1.4 thousand tank cars, which were in financial leasing to LLC “Gazprombank Leasing”, was made in September 2019. 2018 5.1 2018 11.7 Key events in terms of debt movements 2019 2017 5.2 2017 12.7 STRUCTURE OF TOTAL DEBT AT 31 DECEMBER 2019, % In September 2019, UWC carried 2016 4.3 2016 13.7 out the next stage of complex debt 16 restructuring — prolongation of 2015 2.8 2015 7.1 BO-01 series bonds till September 2024. One of the conditions 41 Credits and loans 2014 3.3 2014 3.6 for prolongation was partial Obligations repayment of the principal debt 19 on the bonds in Q3 2019. The 107.6 Lease liabilities restructuring of the loan portfolio RUB bln Leaseback liabilities with Net Profit/Loss is planned to be fully completed PJSC “GTLK” by the end of 2020.
Net profit of UWC in 2019 DYNAMICS OF NET PROFIT/LOSS, RUB BLN In autumn 2019, the reverse amounted to RUB 3.1 billion financial lease of 10 thousand 24 compared to a loss of railcars with the company 2019 3.1 RUB 9.8 billion a year earlier. In PJSC “GTLK” with the total value of NET DEBT/EBITDA RATIO addition to EBITDA growth, the RUB 32 billion under the delivery –9.8 2018 following factors contributed to the contract. (net of VAT) in 2019 was 2019* 5.0 decrease in loss and net profit: reduced to 5.5 thousand railcars, –4.5 2017 which as at 31 December 2019 the 2019 4.6 a decrease in financial Group recorded as assets of the expenditures by RUB 2.9 billion, 2016 0.6 segment being eliminated. mainly due to a reduction in 2018 9.4 –9.7 2015 * Taking into account the terminated Lease segment.
2014 0.5 1 PJSC «RPC UWC» and Mitsui & Co. Ltd (Japan) established a joint venture (50/50 equal shares) — IMRCR LTD (Cyprus), which owns a
1 share (100%) of LLC “MRC 1520” in which 0.26 thousand railcars are owned. Taking into account the fleet of LLC “MRC 1520”, the total EBITDA from continuing operations and outgoing Lease segment. number of railcars is 16 thousand.
82 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 83 Corporate Social Responsibility company has astrategic competitive advantage. protection. We believethat asociallyresponsible humanresourcesdevelopment of and environmental to maintainbalance betweeneconomicefficiency, to creatung thebasisforsustainabilitywhich aims Since itsestablishment, UWCpaysspecialattention of valuesforallstakeholders. of development andthecreation Company’s harmoniousbusiness environment whichpromotes the asocial supports establishmentof presence,the regions of theCompany By investinginthedevelopmentof 11.1 headcount average thousand Development Training and Staff 98 88 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
The Company respects employees’ GENDER COMPOSITION OF UWC STAFF AS OF 31 DECEMBER 2019, % HR Management legal right to establish public unions that would protect their ALL EMPLOYEES rights and interests. At UWC’s Employees are the core value and key to UWC’s success and Tikhvin enterprises, Tikhvin Freight sustainability. The Company’s general objectives in the area of human Car Building Plant carries out its 70% 30% activities. It is part of the Russian resources management are attracting, retaining and motivating highly men women Professional Union of Industry qualified specialists along with ensuring they enjoy a decent living and Workers ROSPROFPROM and good health. the Interregional Independent HEADS Professional Union of Car Building Workers ProfVagon. At NPC Springs, The HR Management Policy has HEADCOUNT BY ENTERPRISE AS OF 31 DECEMBER 2019, % a special commission on social 79% 21% been prepared to take into account partnership partially performs men women the Company’s strategic goals and the functions of a trade union 2 2 to enhance its competitiveness by 3 1 organisation. 2 effectively utilising the professional 4 potential of its employees. The HR PJSC «RPC UWC» EMPLOYEE STRUCTURE BY EDUCATIONAL BACKGROUND 5 Headcount and Structure Management Policy rests on five JSC Tikhvin Freight Car AS OF 31 DECEMBER 2019, % pillars: Building Plant At the end of 2019, the Group had JSC “TikhvinСhemMash” a total of 11,038 employees, up active involvement of staff in 11,038 NPC Springs LLC 1% year-over-year. The average 24 achieving strategic goals; people headcount was 11,121 people, JSC TAP “Titran-Express” 33 an increase of 3.5% compared JSC “TikhvinSpetsMash” Secondary education creation of an environment with 2018. Most of UWC people ”VNICTT” LLC for professional and career are employed at its industrial Specialised secondary education Other growth; enterprises. Basic vocational education 81 Higher education continuous improvement Workers make up the bulk of the and unlocking of employee Group’s staff with over 8,000 people. 23 potential; EMPLOYEE STRUCTURE BY CATEGORY AS OF 31 DECEMBER 2019, % Most of the Group’s employees 20 balance of authority and are men (70%), which is typical for responsibility; 11 Russian industrial enterprises. The proportion of male and female effectiveness of both financial Workers employees is roughly equal at and non-financial incentives. 16 Specialists enterprises that do not require (24.5%), while another 42.7% have a specialised secondary or basic and researchers physical labour (PJSC «RPC UWC» vocational education. A rather high percentage of employees with secondary RPC UWC’s labour relations Managers and VNICTT). education (32.9%) is typical for industrial companies. TVSZ accounts for 87% with its personnel are consistent of employees with secondary education. with Russian legislation and the The average age of UWC employees standards of business ethics. The barely changes from year to The Group had a staff turnover of 29% in 2019 and was up compared Company has zero tolerance for year and is around 38 years. This with 2018 (23%). Staff turnover is offset by newly hired personnel (29%). discrimination on the ground of indicator fluctuates from 35 to Nevertheless, the Company takes measures to retain its personnel and origin, gender, age, beliefs or any 73 51 years at the Group’s enterprises. enhance their engagement, such as: other grounds when hiring and The average age of managers is managing its staff. When hiring slightly higher (39 years) and ranges raising salaries for the core working professions; employees, the Company pays from 39 to 50 years. attention to candidates’ skills only job. Common objective criteria are applied to assess work productivity as expanding social support programmes; and whether they are fit for the part of specific job descriptions. About a quarter of Company employees have a higher degree conducting regular job satisfaction surveys;
86 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 87 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
creating focus groups from University of Civil Aviation. It also has an agreement on targeted training of concluded with the St. Petersburg In 2019, salaries were increased for 21 vocational professions (compared to among employees to discuss graduates with Lebedev Tikhvin Industrial Technological Technical School. Polytechnic University under which 13 vocational professions in 2018) to strengthen highly skilled personnel and production improvements. employees of the Tikhvin Industrial increase their financial interest in the consistent production performance of Staff Training and Development Site can remotely receive higher the planned tasks. The Company strives to attract education in target areas. highly qualified personnel to its RPC UWC offers continuous training and development that encompasses To further motivate qualified staff to continue working at the enterprise and enterprises regardless of their all levels and categories of its staff. The Company’s priorities are to ensure The company also supports to create conditions for employees to have a vested interest in the results residence. A unified database of its employees have opportunities for professional growth and career employees seeking degrees. of their performance in 2019, a one-time payment was made for 2018. The candidates has been created, as development, to boost their skills and abilities, and to accumulate and pass VNICTT employees who are amount depended on the employee’s length of work at the enterprise. well as job fairs are held by UWC on the knowledge they acquire. graduate students are given the Those who had worked at the enterprise from 3 to 5 years (inclusive) both in cities where it operates opportunity for a flexible work received 80% of the employee’s established salary. Those who had been and in other regions. In addition, The Company provides three types of employee training activities: schedule as well as the necessary at the Company over 5 years received 100% of the employee’s salary specialised websites, social advisory support from experienced established. networks and media advertising mandatory (on occupational, fire, and industrial safety); workers. are used to attract employees. With an eye to increasing the real level of salary, enterprise employees’ UWC’s enterprises in Tikhvin have a professional training for workers (including training, retraining, and Remuneration salaries and piece rates were indexed in line with the increase in consumer hotline to answer questions about advanced training in their profession); and Incentives for Staff prices for goods and services as per Article 134 of the Labour Code of the employment. Russian Federation. specialised workshops and training sessions (development of functional UWC has a unified Remuneration In 2019, TVSZ started implementing skills in certain areas). Policy that sets out the principles of The average salary of a qualified employee at the Tikhvin Industrial a project for the adaptation of new the remuneration system, the types Site (JSC TVSZ, JSC “TikhvinSpetsMash”, JSC “TikhvinСhemMash”, employees, including employees Employees are trained using both the Group’s internal resources as well as of material and other payments, JSC TAP “Titran-Express”) in 2019 increased by 4% compared to 2018 to from other regions. For the with the involvement of third-party educational organisations. In 2019, staff and the procedure for making RUB 52,000 per month. convenience of both current and training expenditures, including living allowances and compensation, totalled them. potential employees, the Industrial RUB 72 million. Site has a multifunctional centre Financial remuneration of the (MFC) in place, where visitors fill out At the enterprises of the Tikhvin Industrial Site, the average number of employees consists of fixed and job applications, sign necessary HR training hours per employee is 218 hours a year. Occupational training and variable components. The fixed documents, and obtain work-related retraining/training in second (related) professions, professional development, component includes salary and certificates. On average, up to 500 recertification training, and certification of managers and experts, controlled various additional payments AVERAGE WAGES AT THE ENTERPRISES OF THE TIKHVIN INDUSTRIAL 1 people visit the MFC every day. by the Federal Service for the Supervision of Environment, Technology and stipulated by the Labour Code SITE , RUB THOUSAND PER MONTH The adaptation programme also Nuclear Management, obtaining permission for certain works (52 types) are of the Russian Federation. The provides for weekly get-to-know- carried out. variable component consists 2019 52.0 you meetings for new employees, of commercial incentives and where plant specialists tell them The Company’s development and the expansion of its product line and bonuses that depend on the 2018 50.2 about the enterprise, occupational sales geography require constant updating of training programmes and degree to which key performance and industrial safety rules, the improvements to employees’ skills. indicators are fulfilled over a 2017 46.4 social package, and the incentive reporting period. programme. Employees continue to be trained on how to use the tools of the UWC 2016 45.2 Production System. In 2019, the Company involved not only managers and In 2019, a piece-rate remuneration Besides, the Company’s specialists in the process of continuous improvement, but workers as well. structure was introduced to increase 2015 39.8 enterprises collaborate with labour productivity in certain universities: they take part in In addition, UWC conducts training at its Foreman School, whose sections of Tikhvin Freight Car conferences, invite students of programme gives the knowledge and skills that each foreman needs: how Building Plant. 2014 39.1 specialised universities to take to organise the production system, how to work with the ERP and business an internship, and hire their management systems, occupational safety, economics and accounting, graduates. For example, TVSZ working with staff, etc. cooperates with Peter the Great St. Petersburg Polytechnic University, UWC creates conditions for the professional growth and education of its St. Petersburg State Transport employees. Personnel who receive higher or specialised secondary education University, and St. Petersburg State are granted leave for further training. A cooperation agreement was 1 Excluding part-time workers.
88 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 89 ARTICULATED TANK CAR
FOR LPG Bogie model Increased maintenance The SAC-1 RUS interval articulated connector Articulated tank car 15-9541-01 is a freight car model that has no for freight cars equivalents on the CIS market. It is used for the transportation of 18-9855 ensures smooth passage by liquefied petroleum gases. with integrated brake 500 the car’s articulated sections system through curved sections of thousand km* the track, including sharp curves 8 years
Higher load Increased body Reduced demand capacity volume for the fleet
90 t 163.1 m3 up to 50 %
* To be determined after the pilot-controlled operation.
90 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 91 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Social Policy STRUCTURE OF SOCIAL EXPENDITURES IN 2019 BY TYPE, % Occupational Health UWC offers its employees the 12 full range of social guarantees Compensation for meals and Safety required by the laws of the 5 35 Compensation for housing Russian Federation. Furthermore, programmes the Company offers employees Voluntary health insurance Employees’ health and safety have always been a priority for additional benefits and Compensation for apartments UWC. The Company has responsibilities to its employees compensation, including payments 15 273 RUB mln and hostels and works to implement advanced health, safety, and for meals and mobile phones, Compensation for moving to voluntary health insurance and a new workplace, environmental protection standards developed in full travel to work regular free medical examinations, Other payments compliance with the relevant laws of the Russian Federation extra paid leave, compensation for 16 and world best practices. children’s stays at camps, travel to 17 and from work, etc. The set of social benefits will expand further. The basic principles for ensuring therapeutic, and preventive measures that aim to ensure safe and healthy occupational health and safety in working conditions for the Company’s employees. A comprehensive housing UWC include: programme is in place at all of the housing programme, 141 of whom joined the programme in 2019. A total of The OSMS functions by complying with state regulatory occupational safety Group’s companies. In Tikhvin, nine 792 workers, including 127 since 2019, receive compensation through the measures to prevent requirements taking into account the specifics of activities, achievements in buildings with more than 2,000 mortgage loan. occupational injuries and modern science, best practices, the obligations assumed by the Company, apartments have been built for diseases; international, interstate, and national standards as well as the guidelines and Industrial Site workers. Employees of The company pays great attention to supporting sport and healthy living. The recommendations of the International Labour Organisation. On the basis the enterprise can take advantage of a Tikhvin Industrial Site features a gym, which is free of charge to all employees preventing bodily injury of the OSMS, the Company has developed standards and a procedure to programme that compensates part of who join the club. Workers who join the club perform with success at during all stages of production monitor occupational safety requirements, regulatory documents (regulations, the interest payments on mortgages. all-Russian and international competitions. activities; instructions, and technological processes) as well as organisational and administrative documents. At the Tikhvin Industrial Site, In 2019, the Group’s expenses for employees in all areas of social support compliance with applicable 1,118 employees participate in the amounted to RUB 273 million. international and national The main risks to employees’ health are concentrated at the Company’s standards and other production areas in Tikhvin and Izhevsk. The management system of JSC requirements for occupational, TVSZ in the field of professional and occupational safety is certified for industrial, and fire safety. compliance with the requirements of the international standard OHSAS 18001:2007. NPC Springs is currently undergoing certification of its UWC’s occupational safety occupational health & safety system in compliance with the standard OHSAS management system (OSMS) 18001:2007. consists of a set of interrelated components (policy, organisation, As part of the unified Occupational, Industry, and Fire Safety Policy, the planning, application, and Group’s enterprises conduct regular monitoring of working conditions evaluation) as well as procedures and work organisation as well as the technical condition of equipment. that aim to continuously improve In accordance with the requirements of Federal Law No. 426-FZ “On the occupational safety at the Company Special Assessment of Working Conditions” dated December 28, 2013, UWC and promote employees’ activities enterprises publish summary data on the results of the special assessment of with respect to occupational working conditions on their official websites. safety issues. The OSMS regulates the unified procedure for the All hazardous production facilities are insured under a liability risk insurance preparation, adoption, and contract for injury during operation. Plans have been developed to contain implementation of organisational, and eliminate the consequences of accidents at hazardous production technical, sanitary, hygienic, facilities located on the territory of the Industrial Site.
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The Group has developed LTIFR1 AT TVSZ providing workers engaged in In an effort to improve safety culture, the enterprises conduct mandatory regulations on the investigation work with harmful or dangerous training sessions for employees on safe working methods and health and and documentation of accidents working conditions, as well as safety, offer professional retraining, and test knowledge of standards, 2019 0.12 and the procedure for investigating in work carried out in special rules and instructions, in addition to holding classes at the Foreman minor injuries (which did not temperature and climatic School. 2018 0.05 result in an employee’s temporary conditions or associated with disability) and hazardous events. pollution, special clothing, In 2019, 100% of workers in vocational professions (7,401) received The circumstances and causes 2017 0.07 footwear and other personal annual occupational health training. Initial and regular training and of accidents are communicated protective equipment. testing on occupational safety requirements were also conducted by to employees in all production 2016 0.09 898 managers and specialists. A total of 552 managers and specialists departments. After each accident, In 2019, financing for preventive who organise work and technical supervision in production units received the Company conducts thorough 2015 0.16 measures for labour protection at training and knowledge testing in the institution for additional vocational verifications on compliance with the Company was increased by education. occupational safety requirements, 7.7% to RUB 46.3 million. internal safety audits of production processes, and extraordinary ACCIDENTS AT RPC UWC ENTERPRISES audits of employees’ knowledge of occupational safety requirements. 9 2019 2 Environmental Protection Thanks to the consistent 0 measures on implementing safety requirements at UWC enterprises, 4 Environmental protection is a fundamental principle in UWC’s activities. 2018 1 no fatal accidents occurred in 2019. 0 The Company is committed to implementing advanced technologies and 8 technical solutions to reduce negative environmental impacts. Labour protection costs decreased 2017 2 by 13% in 2019 compared to 2018 1 and amounted to RUB 248 million. Environmental management system Tikhvin Industrial Site enterprises spent RUB 87.4 million on environmental Minor injury Serious injury Fatal injury The Company allocates significant is based on the Environmental protection in 2019, which is 4% more than in 2018. The increase in funding to provide preventive Protection Management System environmental protection spending is due to the increase in waste measures for occupational safety, developed in compliance with management costs as a result of the ongoing landscaping of the area and such as: RPC UWC SPENDING ON LABOUR PROTECTION MEASURES, RUB MLN the requirements of the GOST R dismantling of building debris landfills. ISO 14001:2016 standard. The mandatory periodic medical provisions of the system apply 2019 248 check-ups of workers involved in to all production processes STRUCTURE OF ENVIRONMENTAL PROTECTION EXPENDITURES BY work with harmful or hazardous and all structural units and are 2018 285 TIKHVIN INDUSTRIAL SITE ENTERPRISE IN 2019, % production factors; also communicated to the staff of counterparties. The system special assessment of working 2017 214 stipulates that the environmental conditions; risks associated with production 32 2016 209 should be assessed, followed by health resort treatment for the development of an action plan Waste management workers involved in work 2015 161 for their minimisation, as well as Wastewater collection and treatment with harmful or hazardous the compilation of a register of Air protection production factors; 2014 148 significant environmental aspects. Charges for negative Each year, a programme of environmental impact 59 environmental protection measures 2 is developed on the basis of this 8 1 Frequency of injuries resulting in temporary disability, per 200,000 working hours. (Typically, this indicator is calculated at 1 million register. working hours, but due to the small number of injuries at UWC enterprises, the results would be too small to adequately display the dynamics).
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Air Emissions subsequently allows the use of STRUCTURE OF PRODUCTION WASTE AT THE TIKHVIN ATMOSPHERIC EMISSIONS AT THE TIKHVIN INDUSTRIAL SITE, TONNES “former waste” for the second INDUSTRIAL SITE BY THE METHOD OF TREATMENT, THOUSAND TONNES The Company annually monitors time. Hazardous waste, such as compliance with the standards of used mercury lamps, various 2019 3,333 43 maximum permissible emissions wastes of liquid chemical materials 2019 1 of pollutants into the atmosphere. are transferred to business entities 2018 3,556 114 Industrial air monitoring includes: for disposal. One of the main tasks of the occupational health service, 2017 3,424 26 instrumental measurements of industrial safety and ecology in the 2018 0 pollutant content at emission Tikhvin enterprises is to reduce the 82 sources; 2016 378 volume of waste to be placed on landfills. Separate waste collection calculating pollutant content in 2015 370 allows significant reduction in the 41 2017 emissions; amount of unsorted types of waste 0 2014 268 and thereby reduces the impact 66 monitoring the efficiency of gas of enterprises on increasing the treatment and dust collecting area of cluttered land. To facilitate 22 equipment; selective collection, containers are 2016 0 AIR EMISSIONS AT THE TIKHVIN INDUSTRIAL SITE BY HAZARD CLASS, % marked with the type of waste to 61 analysing the results for be accumulated in the container. compliance with the maximum 0.05 To minimise the negative impact 19 permissible emission (MPE) on the environment, some of 2015 0 standards. 34.6 the generated waste has been 53 converted into material assets and Instrumental inspections and Classes I and II are to be sold. The implemented 18 Neutralised and disposed, thousand t calculations are carried out by “waste to income” principle 2014 Class III 0 laboratories that are certified and allows to significantly reduce the Disposed, thousand t Class IV 51 accredited in the prescribed manner. environmental footprint of car Reused, thousand t production on the environment. The Company also conducts Some waste is also recycled with 65.4 Energy Efficiency laboratory testing of air quality at the use of specialised presses, the border of the sanitary protection resulting in a reduction of the Equipment, buildings, and structures at UWC’s facilities meet all modern zone on a quarterly basis. At present, weight by 10 to 12 times, which requirements concerning resource management and are among the most the Office of the Federal Service allows to significantly reduce the energy efficient ones, not only in Russia, but in Europe as a whole. UWC owns for the Oversight of Consumer costs of their export. Tikhvin CHPP, commissioned in 2016 with an electric capacity of 110 MW Protection and Welfare in the and a heat capacity of more than 25 Gcal/h. The CHPP design features the Leningrad Region is in the process In 2019, the volume of waste at the concept of Smart Power Generation, which makes it possible to reduce costs of approving a project on a unified Waste Management Tikhvin industrial site increased and increase the efficiency of the power system. An internal CHPP can react sanitary protection zone for groups 46% by 2018 and amounted to quickly to changes in the level of energy consumption and handle peak loads, of enterprises at the Industrial Site. The Company is constantly improving its Environmental Management System. 158 thousand tonnes. In the total thus balancing the power system and ensuring low specific fuel consumption Gas purification equipment has been In particular, in 2019, JSC TVSZ continued the implementation of the project volume of waste, waste of hazard and emission levels. Due to the CHPP reaching full capacity, gas consumption installed at Company enterprises, on selective waste collection and accumulation. Selective waste collection is a classes I–III comprise 2%. The main in 2017–2019 increased sharply compared to previous periods. The total providing efficient cleaning of prerequisite for waste management in production and is fixed by organisation share is contributed by hazard cost of the Tikhvin Industrial Site for the purchase of energy resources in industrial emissions. standard STO 0182-001-2018. This measure allows significant reduction of class IV1 (59%) and hazard class V 2019 amounted to RUB 765 million, which is 3.4% higher than in 2018 the level of negative impact on the environment. (39%)2 waste. (RUB 740 million); compared to costs of 2017 (RUB 1,589 million) the increase In 2017 and 2018, atmospheric in costs in 2019 against 2018 is completely insignificant. emissions at the Tikhvin Industrial Site Separation of waste into groups allows to transfer waste to various increased significantly as a result of business entities with the greatest benefit, both for the nature resource launching the CHPP. When including user and for the environment. For example, waste containing valuable 1 Class IV — low hazard waste. This class includes municipal solid waste, construction, street and road waste, etc. It has a low-degree envi- CHPP, emissions in 2019 decreased useful components, such as polyethylene film waste, cardboard and ronmental impact. by 6.7% compared to 2018. paper waste, wood waste, is transferred for processing (recycling), which 2 Class V — virtually non-hazardous waste. This class includes waste foundry sand, wood waste, cardboard waste, polyethylene waste, etc.
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DYNAMICS OF ENERGY CONSUMPTION AT THE TIKHVIN INDUSTRIAL SITE In 2019, with the support of Tikhvin Support for Culture Freight Car Building Plant, a modern playground rope complex was Culture is one of the integral elements of a comfortable urban living Indicator 2014 2015 2016 2017 2018 2019 2019/2018, % installed in the Generation Park. environment. In 2019, TVSZ has traditionally acted as a partner for the Tikhvin The total cost of the construction of Lel national competition, and participated in the organization of Town Day in Electricity, GWh 177.2 194.3 235.4 268.9 283.0 299 +6 the complex, its installation and the Tikhvin, as well as in events devoted to the Year of Theatre in Russia, the Year of 3 Gas, mln m 25.7 29.1 41.9 111.4 122.9 118 –4 rubber coating amounted to about Healthy Lifestyle in the Leningrad Region and the 175th anniversary of the birth Gasoline, thousand l 185.6 169.8 162.2 139.2 135.8 157 +16 RUB 10 mln. of N. A. Rimsky-Korsakov.
Diesel fuel, thousand l 336.3 419.3 509.1 672.7 815.1 981 +20 Education Support Volunteer Campaigns
UWC pays great attention to A volunteer campaign takes place at the facilities of the Tikhvin Industrial Site. DYNAMICS OF ENERGY RESOURCES ACQUISITION COSTS AT THE TIKHVIN INDUSTRIAL SITE, interaction with regional educational In 2019, plant employees held two voluntary clean-up days at the Brotherly RUB MLN (EXCLUDING VAT) institutions at all levels. Career Cemetery memorial complex, the largest military burial site in Tikhvin District. guidance classes are held at Tikhvin Memorial plates are being restored. The plant hosted the “St. George Ribbon” 6 38 schools. For students of the Lebedev and “Gift to a Veteran” traditional volunteer events for Victory Day. 2019 102 619 765 Tikhvin Industrial and Technological 5 30 College, internship was organised at 2018 74 631 740 Teffy Social and Cultural Centre the Industrial Site facilities. 4 21 A new modern library — Teffy Social and Cultural Centre (Nadezhda 2017 552 1,012 1,589 In 2019, TVSZ also organised Lokhvitskaya, a writer who lived for a while in Tikhvi, used this pseudonym in the 5 16 an internship for students of first half of the 20th century) — opened with TVSZ’s direct involvement. 2016 715 210 946 engineering and technical Electricity 5 12 specialities of the Peter the Great St. The library meets all modern requirements and is equipped with the latest Gas 2015 594 149 760 Petersburg Polytechnic University. computer equipment and high-speed Internet, with free access to the Gasoline 5 10 Under the current agreement electronic resources pool. The library has more than 22,000 copies of books as Diesel fuel 2014 492 125 632 between TVSZ, Tikhvin Industrial well as collections of newspapers and magazines. Readers also have access to and Technological College and the LitRes e-library with its collection of more than 3,500 items and archives of the Committee of Education of the Boris Yeltsin Presidential Library. Teffy has over 6,000 users. Leningrad Region on cooperation in Development training highly qualified specialists, Social Support 80 plant workers are in training at the Polytechnic University. TVSZ has been a partner of the AdVita charitable foundation which provides of the Regions of Presence support to adults and children with cancer for many years. In 2019, as part of VNICTT cooperates with Emperor developing the Russian Bone Marrow Donor Registry, TVSZ allocated funds By investing in the development of the regions of presence, the Alexander I St. Petersburg State to purchase reagents and consumables for the Typing Laboratory of the Raisa Company supports establishment of a social environment which Transport University whose Gorbacheva Memorial Research Institute of Children Oncology, Hematology promotes the Company’s harmonious business development and graduates become employees at and Transplantation at the Pavlov First Saint Petersburg State Medical University. VNICTT. In addition, students, along the creation of values for all stakeholders. with members of the technical Furthermore, TVSZ has been the official partner of the Charity Foundation archive and patent specialists from Foodbank Rus which provides food to low-income families, large families, UWC is fully aware of its responsibility Urban Development Projects VNICTT, are working to create an elderly people who live alone, families with disabled family members, and to the population of all regions where electronic science and technology homeless people in all regions of the Russian Federation. In addition, TVSZ the Company operates and above all UWC is consistently implementing an ambitious programme to develop library and fill it with data from provides support to the Charity Fund “Place in the Sun” which implements in the town of Tikhvin where its main the town of Tikhvin, aimed at creating a comfortable and modern urban relevant Russian and international social adaptation programmes for children and young people with disabilities. production site is located. Urban environment. In the course of several years, with the support of the local exhibitions and conferences. development, education and cultural administration, a number of projects have been implemented that have projects, as well as support of the fundamentally transformed the city. A recreation area with walking track vulnerable population groups and and the first bicycle path in the town has been constructed at the area of an physically challenged people, are the untended wasteland with a total area of about 4 hectares. A festival venue priority areas. for town holidays and events has been built.
98 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 99 Corporate Governance operating andfinancialefficiency. system enablestheCompany toenhanceits thecorporateimprovement governance of oursuccess.the key elementsof The consistent UWC’s corporate governancesystemisoneof the business’profile. increasing share valueand, asaresult, raising investorsandshareholders, the rigthsof between UWCanditsinvestors, protecting at buildingandmaintaining trustrelationships corporate governanceisaimed Our systemof corporate governance. modern international standards of observing thebestpractices and PJSC «RPC UWC» iscommitted to Directors Board of 2 directors independent 105 Control and Internal Management Risk Photo byIvanShapovalov 102 116 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Corporate Governance DIAGRAM OF INTERACTION BETWEEN MANAGEMENT AND SUPERVISORY BODIES
General Meeting Principles and System of Shareholders External Auditor Internal Auditor PJSC «RPC UWC» is committed to observing the best practices and modern international standards of corporate governance. Board of Directors
Management Board/CEO Management bodies UWC corporate governance is all stakeholders and the high quality of the decisions adopted by the based on the principles set out in management: Oversight bodies Remuneration and the Corporate Governance Code Nomination Committee recommended by the Letter of Bank protection of the rights and interests of shareholders; Committees under of Russia No. 06-52/2463 dated the Board of Directors Audit Committee 10 April 2014. equitable and fair treatment of all shareholders; Structural units of the Company Internal These principles allow the Company transparency of activities for shareholders and investors; Audit Service to ensure sustainable and consistent development of the core elements an effective mechanism of interaction between government bodies; Risk Management for the corporate governance Department system at all levels of hierarchical the independence of the Board of Directors in its decision-making; and organisational interaction across Corporate Secretary UWC Group. an effective internal control and audit system;
The following basic principles of unconditional legislative compliance in all business areas. corporate governance serve as the General Meeting of Shareholders basis for the atmosphere of trust UWC management and supervisory bodies function on the foundation that has been created between of the Company’s constituent and intracorporate documents. The current The General Meeting of Shareholders is PJSC «RPC UWC» highest management and supervisory bodies are presented in the diagram. governing body. By taking part in the Company’s General Meeting, shareholders exercise their right to participate in the Company’s management.
According to UWC’s Charter and of Shareholders, make proposals to the agenda, and nominate candidates for PJSC «RPC UWC» considers corporate governance as a tool to increase the current legislative standards of the Board of Directors and the position of Internal Auditor. the efficiency of the Company’s activities, strengthen its reputation and reduce the Russian Federation, shareholder participation is required to adopt The procedure for holding a General Meeting of Shareholders is set out in UWC’s capital expenditure. a number of the most important Charter and the Regulation on the General Meeting of Shareholders. In the course corporate decisions. The powers of the year, the Annual General Meeting of Shareholders is held (once a year of the General Meeting of within the time frame established by the legislation of the Russian Federation) and Shareholders are defined in the Extraordinary General Meetings of Shareholders can be convened (by a decision UWC’s Charter. UWC offers its of the Board of Directors or at the request of the Audit Commission, the External shareholders equal opportunities to Auditor, or a shareholder with a stake of at least 10% of UWC’s voting shares). participate in the General Meeting Meetings may require attendance or allow absentee voting.
Learn more Learn more
Constituent and Regulation on the General intracorporate documents Meeting of Shareholders of on the Company’s website PJSC «RPC UWC»
102 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 103 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
In 2019, three General Meeting approval of the new edition No. 6 of the Company’s Charter; of Shareholders (one annual Board of Directors meeting and two extraordinary) approval of the Regulation on the Management Board of the Company; were held. election of the Company’s Audit Commission; The Board of Directors is a collective management body that handles the The Annual General Meeting of general management of the Company’s activities, except for matters that Shareholders, which took place approval of the Company’s auditor for 2019. fall within the purview of the General Meeting of Shareholders. on 28 June 2019, adopted the following decisions: At Extraordinary General Meetings of Shareholders held in joint presence on 11 March 2019 and 8 November 2019, the following issues were considered: approval of the Annual Report for 2018; early termination of powers of members of the Company’s Board of The Board of Directors is a vital MEMBERS OF THE BOARD OF DIRECTORS AS OF 31 DECEMBER 2019, % Directors; tool for protecting the rights and approval of the Company’s legitimate interests of shareholders, 14 annual accounting (financial) determination of the number of members of the Company’s Board of including those with minority statements for 2018; Directors; holdings. 29
Executive director distribution of profit, including election of members to the Company’s Board of Directors; The activities of the Board of Directors the payment (declaration) of are regulated by the Federal Law Non-executive directors dividends, and losses based approval of the Regulation on the Audit Commission of the Company; “On Joint-Stock Companies,” Independent directors on the results of 2018; the Company’s Charter, and the early termination of powers of the Company’s Audit Commission Regulation on the Board of Directors. election of members to members; the Company’s Board of Members of the Board of Directors Directors; election of the Company’s Audit Commission. are elected annually based on 57 the results of the cumulative voting of the General Meeting of Shareholders. According to the current version of the Charter, the Company’s Board of Directors In 2019, there were two compositions of the Board of Directors: the Board of consists of at least five members. Directors elected at the Extraordinary General Meeting of Shareholders on 11 March 2019 (the powers of all members of this Board were extended at In order to form an effective and the Annual General Meeting of Shareholders on 28 June 2019) and the Board professional Board of Directors of the of Directors elected at the Extraordinary General Meeting of Shareholders on Company capable of making non- 8 November 2019. biased independent judgements and making decisions that meet the According to the decision of the Extraordinary General Meeting of interests of the Company and its Shareholders dated 8 November 2019, Artem Kirillov left the Board of shareholders, the Board of Directors Directors. His brief biography is presented in the Annual Report for 2018. shall include independent directors. The current composition of the Board of Directors of PJSC «RPC UWC» is As of 31 December 2019, the balanced in terms of necessary competences and professional experience. UWC Board of Directors included The principle of a balanced Board of Directors is implemented on the basis two independent directors, four of a high level of professional knowledge and competence, sufficient time non-executive directors, and one to perform the duties of a member of the Board of Directors, and absence of executive director. conflicts of interest, which facilitates effective decision-making.
104 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 105 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Brief Biographies of Members of the Board of Directors (as of 31 December 2019)1
Member of the Board Status in the UWC Board of Directors Education Work experience of Directors
Alexander Chairman of the Board of Directors, Non-Executive Director Higher 2018–present — National Bank TRUST (PJSC) President and Chairman of the Management Board Sokolov, Member of the Board of Directors since 2019 born in 1979 2018–present — VTB Bank (PJSC) Member of the Supervisory Board Chairman of the Remuneration and Nomination Committee 2019–present — PJSC «RPC UWC» Chairman of the Board of Directors, member of the Board of Directors
2019–present — INTECO Joint Stock Company Member of the Board of Directors, Chairman of the Board of Directors
2019–present — Bank Otkritie Financial Corporation (PJSC) Head of the First Unit
2019–present — National Bank TRUST (PJSC) Member of the Supervisory Board
Timofey Member of the Board of Directors, Executive Director Higher 2018–present — PJSC «RPC UWC» CEO Khryapov, Member of the Board of Directors since 2019 born in 1970 2019–present — PJSC «RPC UWC» Member of the Board of Directors 2019–present — PJSC «RPC UWC» Chairman of the Management Board
Rakhman Member of the Board of Directors, Independent Director Higher 2013–present — REILGO LLC Chairman of the Management Board Khalilov, Member of the Board of Directors since 2019 born in 1977 2018–present — TRANS-PETROL-SERVICE LLC Chairman of the Management Board Chairman of the Audit Committee Member of the Remuneration and Nomination Committee 2019–present — PJSC «RPC UWC» Member of the Board of Directors
Andrey Member of the Board of Directors, Independent Director Higher 1999–present — OJSC Ural Mining and Metallurgical Company Member of the Board of Directors Bokarev, Member of the Board of Directors since 2019 born in 1966 2003–present — JSC Kuzbassrazrezugol Coal Company Chairman of the Board of Directors Member of the Audit Committee Member of the Remuneration and Nomination Committee 2004–present — JSC Transmashholding Member of the Board of Directors 2004–present — OJSC Rosterminalugol Member of the Board of Directors
2006–present — RSPP Member of the Administrative Office
2006–present — Regional Association of Employers “Kuzbass Union of Employers” Chairman of the Management Board
2008–present — Breakers Investments B.V. Member of the Supervisory Board
2008–present — JSC Transmashholding President
2009–present — JSC Football Club Lokomotiv Member of the Board of Directors
2010–present — All-Russian Public Organisation Russian Ski Association President
2011–present — RSPP’s Engineering Complex Commission Chairman of the Commission
2012–present — International Ski Federation (FIS) Member of the Council
2012–present — MPK LLC Chairman of the Board of Directors
2014–present — SC Mosmetrostroy Member of the Board of Directors
2014–present — JSC Non-state Pension Fund “UGMK-Perspektiva” Chairman of the Board of Directors
2018–present — Presidential Council for the Development of Physical Culture and Sports Member of the Council
2019–present — PJSC «RPC UWC» Member of the Board of Directors
2019–present — JSC Ugol-Trans Chairman of the Board of Directors
2019–present — JSC Pervy Luch Member of the Board of Directors
1 Detailed information about the members of the Board of Directors, including the full list of previously held positions in the collegial management bodies of other organisations, is presented in the Quarterly Reports of PJSC «RPC UWC» for 2019.
106 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 107 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Member of the Board Status in the UWC Board of Directors Education Work experience of Directors
Mikhail Member of the Board of Directors, Non-executive Director Higher 2019–present — National Bank TRUST (PJSC) First Deputy President and Chairman of the Management Board, and Chief Khabarov, Member of the Board of Directors since 2019 Executive Officer born in 1971 2019–present — PJSC «RPC UWC» Member of the Board of Directors
Vladimir Member of the Board of Directors, Non-executive Director Higher 2018–present — Bank Otkritie Financial Corporation (PJSC) Director of Corporate Banking Risk Department Varivonchik, Member of the Board of Directors since 2019 born in 1976 Member of the Audit Committee 2019–present — PJSC «RPC UWC» Member of the Board of Directors
Sergey Member of the Board of Directors, Non-executive Director Higher 2018–present — Bank Otkritie Financial Corporation (PJSC) Head of the Department for Manufacturing and Basic Industries Chagay, Member of the Board of Directors since 2019 Crediting born in 1980 2019–present — PJSC «RPC UWC» Member of the Board of Directors
As of 31 December 2019, the Report on the Board of Directors Performance for 2019 providing recommendations Andrey Bokarev. Board members held no Company on appointment of an external shares or shares of other entities In 2019, the Board of Directors held 12 meetings (including 4 in absentia). All auditor and determining the In 2019, the Audit Committee held one meeting to address the following controlled by the Company, even members of the Board of Directors attended 100% of the meetings they had auditor’s remuneration, as well issues: indirectly. In the year under review, the ability to attend. as monitoring the work of the the Board of Director’s members external auditor; the audit plan of the accounting statements of PJSC «RPC UWC» for the did not buy nor dispose of In 2019, PJSC «RPC UWC» concluded no transactions recognised by Federal period from January 1 to December 31, 2018, prepared in accordance with Company shares. Law of the Russian Federation No. 208-FZ On “Joint-Stock Companies” dated monitoring the effectiveness the Russian Accounting Standards and International Financial Reporting 26 December 1995 as related party transactions that shall be approved in of the risk management and Standards; Throughout the year, the Company accordance with Chapter XI of the said law. internal control system; did not provided loans to any approval of the procedure for selecting the auditor of PJSC «RPC UWC» in member of the Board. In the course of the year, no transactions recognised by Federal Law of monitoring activities to combat 2019; the Russian Federation No. 208-FZ On “Joint-Stock Companies” dated corruption and protect insider The independence of the Board 26 December 1995 as major ones were entered into by the Company. information. the report of the Internal Audit Service on the results of inspections for the members is determined in Q4 of 2018, preparation of recommendations to the management of the accordance with the criteria of Committees to the Board of Directors At a meeting of the Board of Company (if necessary); independence of the Moscow Directors on April 15, 2019, the Exchange and the Corporate The UWC Board of Directors has two committees whose task is to provide composition of the Audit Committee the report of the Risk Management Department regarding the creation and Governance Code recommended guidance and advice to the Board of Directors on matters falling within their was formed. It included two functioning of an effective risk management and internal control system by the Bank of Russia. competence. independent directors, including of PJSC «RPC UWC» for the Q4 of 2018, including the risk management the Chairman of the Committee: report in the Q4 of 2018; As of the date of nomination Audit Committee and during 2019, the Board of Rakhman Khalilov (Chairman); the work plan of the Audit Committee. Directors reported no conflict of The main objective of the Audit Committee is to facilitate the Board of interest (including those related Directors in resolving issues related to strategic management and monitoring Vladimir Varivonchik; to participation in management the financial and economic activities of the Company, including: bodies of the Company’s competitors). ensuring the completeness, accuracy and reliability of financial Learn more statements; Regulation on the Audit Committee of PJSC «RPC UWC»
108 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 109 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Remuneration and Nomination Committee Remuneration of Members of the Board of Directors Management Board On February 15, 2019, the composition of the Remuneration and Nomination Committee was formed, The terms and procedure for payment, as well as rules which also included two independent directors: for calculating remuneration for members of the Board of The Management Board is a collective management body of Directors, are stipulated in the Regulation on Motivation the Company, which together with the sole executive body Alexander Sokolov (Chairman); for Members of the UWC Board of Directors. of the Company — the CEO — manages current activities The remuneration includes: Andrey Bokarev; in accordance with the competence established by the remuneration for participation in the work of the Company’s Charter. Rakhman Khalilov. Board of Directors;
In 2019, the Remuneration and Nomination Committee remuneration for participation in the work of The activity of the Management Appointment of members of the Management Board is made by the decision held three meetings, addressing, among others, the committees of the Board of Directors. Board is regulated by the Federal of the Board of Directors, and candidates to the Management Board are following issues: Law “On Joint-Stock Companies”, the presented by the Company’s CEO. By the decision of the Annual General Meeting of UWC Charter and the Regulation on the personnel policy of the Company and measures Shareholders, the following shall be approved: the Management Board. aimed at increasing its effectiveness; the maximum amount of remuneration for one COMPOSITION OF THE MANAGEMENT BOARD AS OF 31 DECEMBER 20191 ensuring continuity and creation of a personnel pool member of the Board of Directors for serving as a for key positions in the Company; member of the Board of Directors for one corporate Full name of a member year; Current position of the Management Board the need to amend the Regulation on the Remuneration and Nomination Committee; the maximum amount of remuneration for one Timofey Khryapov CEO of PJSC «RPC UWC» member of the Board of Directors serving as a the work plan of the Remuneration and Nomination member of one of the committees of the Board of Alexander Brinza Deputy CEO, Сhief Financial Officer of PJSC «RPC UWC» Committee. Directors for one corporate year.
Deputy CEO of PJSC «RPC UWC» / Managing Director of Railcar Building Entities at the In the 2019 corporate year, no remuneration was paid to Gennady Veselov Tikhvin Industrial Site members of the Board of Directors.
Victor Dolgov Deputy CEO of PJSC «RPC UWC», Commerce and Marketing
Alexander Krekov Deputy CEO of PJSC «RPC UWC», General Matters
Alla Maslennikova Deputy CEO of PJSC «RPC UWC», Legal, Corporate and Property Affairs
Boris Myagkov Deputy CEO of PJSC «RPC UWC», Commerce and Marketing
The CEO is elected by the Board of Directors and is accountable to the Board of Directors and the General Meeting of Shareholders. The CEO’s Learn more Learn more Learn more remuneration is determined by the terms of an employment contract.
Regulation on the Remuneration Regulation on the motivation Regulation on the and Nomination Committee of of members of the Board of Management Board In December 2018, Timofey Khryapov was appointed as CEO of UWC, whose PJSC «RPC UWC» Directors of PJSC «RPC UWC» of PJSC «RPC UWC» powers continue to date.
1 Biographies of the Management Board have been disclosed on the UWC official web-site at the link: https://www.uniwagon.com/en/about/management/.
110 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 111 ARTICULATED
HOPPER RAILCAR Bogie model Increased maintenance The SAC-1 RUS interval articulated connector Articulated hopper railcars 19-6978/19-6978-01 have no equivalents for freight cars on the CIS market. They are used for the transportation of grain/ 18-9855 ensures smooth passage by mineral fertilizers. with integrated brake 500 the car’s articulated sections * through curved sections of system thousand km the track, including sharp curves 6 years
Higher load Increased body Enhancing capacity volume the network’s carrying capacity
113.5 t 160 m3 >20 %
* To be determined after the pilot-controlled operation.
112 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 113 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
The Internal Audit Service aims monitoring compliance with legislative requirements and the Company’s Corporate Secretary to support the achievement of internal documents; the goals set by the Company. Its activities are based on the principles monitoring the safety and sufficient protection of assets; The Corporate Secretary serves to guarantee that the Company’s of independence and objectivity: officers and management bodies comply with procedural taking part in fraud investigations; requirements that ensure the rights and legitimate interests of the head of the Internal Audit Service is accountable to assessing the completeness and reliability of financial and management shareholders. the Board of Directors and is statements, as well as information subject to mandatory disclosure appointed and dismissed by the under the law. The Corporate Secretary is elected ensuring management bodies strictly adhere to their purview; CEO based on a resolution by by and reports to the Board of the Board of Directors; The Internal Audit Service coordinates its activities with the Audit Committee Directors. The functions of the ensuring interaction between the Company’s management, Board under the Board of Directors and interacts with the External Auditor of UWC. Corporate Secretary include: of Directors, and shareholders; the head and employees of the Internal Audit Service may not In order to control the financial and economic activities of UWC for the interaction with shareholders; monitoring compliance with the requirements of the Federal Law combine their activities with reporting year, the General Meeting of Shareholders elects the Audit “On Combating the Unauthorised Use of Insider Information and activities in other UWC units. Commission, which carries out inspections (audits) on its own initiative, by the supporting the effective work Market Manipulation” and related regulatory legal acts. resolution of the General Meeting of Shareholders, the Board of Directors or of the Board of Directors and its The Internal Audit Service performs at the request of a shareholder owning at least 10% of the voting shares. committees; Since 18 March 2019, Maria Kurnosova has been appointed Corporate its activities in accordance with the Secretary. Regulation on Internal Audit, which Composition of the Audit Commission as of 31 December 2019: stipulates that its main functions In 2012, Maria Kurnosova graduated from the Lomonosov Moscow are to assess the effectiveness of Grigory Stekolshchikov, member of the Audit Commission; Learn more State University with a major in law. She took advanced training the internal control system and the courses at the Higher School of Economics. An experienced specialist risk management system, as well as Dmitry Mikliaev, member of the Audit Commission. Regulations on the Corporate Secretary in corporate governance affairs, she worked for large public joint- to evaluate corporate governance. of PJSC «RPC UWC» stock companies. In the reporting year, the Audit Commission conducted an audit of the annual The key objectives of the Internal financial statements and the annual report of RPC UWC for 2019. Based on Audit Service are to formulate and the results, a corresponding opinion was drawn up on 10 June 2020. execute a risk-based audit plan, including: Remuneration to the members of the Audit Commission at the end of 2019 was not paid. Audit analysing whether the goals of business processes, projects, External Audit and structural units comply with Internal Audit over the Company’s financial and economic activities. It effectively identifies, the Company’s goals; In order to confirm the accuracy of the consolidated financial statements prevents, and minimises financial and operational risks, and timely detects under IFRS and the financial statements under RAS, RPC UWC hires an In order to protect the rights and violations. identifying and assessing the independent External Auditor, who is appointed by the General Meeting of interests of shareholders and risks in business processes; Shareholders based on a proposal from the Board of Directors. investors, UWC employs an internal The internal audit system includes the following elements: audit system that ensures oversight analysing the effectiveness of In 2019, Deloitte & Touche CIS was approved as the External Auditor. The Audit Committee under the Board of Directors (for more information, control procedures and other actual amount of remuneration paid to the External Auditor for the audit of see page 108); risk management measures, the financial statements under RAS, the consolidated financial statements Learn more including the effective use of the under IFRS for 2019, as well as the review of the Group’s interim Internal Audit Service; resources allocated for these statements for the 6 months of 2019 amounted to RUB 22,760 thousand Regulation on the purposes; (excluding VAT). Internal Audit of PJSC «RPC UWC» Audit Commission.
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Risk Management STRUCTURAL DIAGRAM OF THE RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM Setting goals Identifying Analysing Risk Monitoring and Internal Control and objectives risks and assessing risks response and control tools
In order to improve the corporate governance system in Board of Directors CEO CEO Heads Internal Audit of structural units accordance with the requirements of the current legislation, the Deputy CEOs Deputy CEOs Service Risk Management and Internal Control Policy of PJSC «RPC UWC» Management Board Heads Heads of Risk management was developed and approved in 2018. It defines the goals and of structural units structural units and internal CEO control objectives, the basic principles of the risk management and internal Risk Manager Deputy CEOs Employees of control system, the methods and approaches to risk management structural units Heads of structural units Risk Manager and internal control, the basic processes of risk management and Head of risk internal control, as well as the distribution of responsibilities and management and internal control powers of the parties involved in the risk management and internal control system.
Strategy Identification Risks and Development Risk management development of strategic risks implication of the risk and internal and analysis materiality management plan control inspections Identification assessment implementation of operational The Policy was drafted taking into As of 31 December 2019, risk management and internal control in the Operational of the risk Control over risks account international standards Company was carried out by a separate structural unit — the Risk Management goals setting management implementation of risk and recommendations concerning Department. identification plan of reporting management plans internal control system and risks risk management, including The main activities of the Risk Management Department: Analysis of the risk identification business processes the Committee of Sponsoring of legal risks and internal control Organizations of the Treadway coordinating risk management and internal control processes; activities Commission (COSO), and serves as development the basis for the drafting of internal developing and updating the methodological base used to ensure risk and update methodological and administrative management and internal control processes; of control procedures documents governing the organisation of the risk management monitoring the performance of functional duties by all parties involved and internal control system. in the risk management and internal control system;
The policy applies to all types of collecting, processing, and analysing information on risk identification Long-term Risk register Risk register Risk management Recommendations activities of PJSC «RPC UWC». from structural units. strategic goals measures plan of the Internal Audit Service Short-term Risk Management and Internal Control System objectives and Plan for business plans addressing Learn more Risk management and internal control at PJSC «RPC UWC» is an ongoing deficiencies in the risk management process carried out by the parties involved in the risk management Risk Management and procedure Internal Control Policy and internal control system at all levels of management. It includes the of PJSC «RPC UWC» identification, assessment, monitoring, and control of risks. Controls matrix
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Various factors have an impact on awareness. Information is reliably and effectively exchanged between Risk Radar UWC’s business and may provide all parties involved in the risk management system; both an adverse and a positive effect on the achievement of business relevance. The ratio of the cost of risk management measures and their goals. In order to manage and economic effect is always analysed. There is a clear definition of the minimise the risks, the Company scope of risk that is considered acceptable in the process of achieving 3.5 has adopted a risk-based approach operational and strategic goals; designed to ensure the adoption of the most effective management continuity. The Company continuously monitors and controls risks Risk of losing solutions by the senior staff. and correlates them with the stages of the project life cycle and risk Currency risk tenants Credit risk Market risk assessment methods; PJSC «RPC UWC» has a high level of risk management quality. The sequencing. This complements the principle of continuity and 3 Company has a well-developed provides for the thorough consideration of each stage of the risk management system that formation and implementation of risk management and internal makes it possible to identify, track, control methods; and control a wide range of risks. Motivation risk/ Human Risk of competitive PJSC «RPC UWC» has established focus. Risk management is a part of management’s responsibilities and Risk of satisfaction resource loss risk Tax risk advantage Legal risks collective decision-making bodies, an integral part of all organisational processes, including for strategic 2.5 has clearly demarcated their planning, all projects, and changes in management processes at powers, conducts an assessment the Company. Risk management is also part of the decision-making of the levels of most risks, and process (complements the principle of consistency in terms of the implements measures to minimise responsibilities of department heads); the consequences of these risks. Risk of lack of classification. A uniform corporate reference guide (classifier) spare parts Basic principles of risk management concerning risk management is being drafted. 2
at RPC UWC: Probability Since 2019, the Company has employed the UWC Risk Management consistency. Risk management Procedure, which stipulates: the procedure for the risk analysis process, the is integrated into all business procedure for implementing and monitoring the risk management process, Risk of loss State regulation/ processes; the procedure for preparing risk reporting, and the distribution of roles Infrastructure of intellectual Capital and country-related risk rights Service risk liquidity risk risks between parties involved in risk management as well as their responsibilities 1.5 responsibility. The duties, and powers. powers, and responsibility for the implementation of risk A resolution of the UWC Audit Committee approved the Risk Management management procedures are Department’s work plan for 2019–2020, which provides for: assigned to employees in job descriptions and regulations on the development, implementation, and monitoring of risk management interaction; measures; 1
purposefulness. The risk the periodic assessment of the effectiveness of the risk management Automation Reputational Reduced Financing risk Bank risk Property risk management goals are clearly system; risk risk sales of service defined and connected with products goal-setting at the enterprise risk management reporting. and the ability to implement risk 0.5 management measures; 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 Significance
118 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 119 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
RPC UWC’s Key Risks in 2019
Potential implications of risk Changes compared with 2018 Risk description Probability Impact Risk management/mitigation methods materialisation Forecast for 2020 Financial and economic risks Financing risk Low Strong Increased funding costs and, as Formalising financing conditions in long-term Risk decreased: Risk of a significant change (upwards) in the a result, a decrease in product loan agreements the key rate reduced from 7.75% at the end of 2018 to 6.25% at the borrowing rate unilaterally by the creditor margins Monitoring compliance with covenants end of 2019; Risk of a significant change in basic financing under loan agreements and other financing money market rates also continued to decline: MosPrime 3m rate fell conditions conditions, timely obtaining of the consent of from 8.62% to 6.46%, RUONIA index — from 7.59% to 6.23%; creditors (waivers), modifying the terms of loan Risk of early loan recovery due to violation of ending rates continued to grow: according to the Central Bank of the agreements in advance covenants Russian Federation, the volume of loans and borrowings increased Revising the distribution structure of borrowed from RUB 3.03 trillion at the beginning of 2019 up to RUB 3.55 trillion funds taking into account priority financing for at the end of Q3 2019 areas with a higher return on capital Forecast: it is expected that easing the monetary policy of the Central Bank of the Russian Federation will continue; the key rate is expected in the range from 5.5% to 6.0%; a decrease in money market rates is predicted at lower rates, due to the persistence of sector risks in 2020 related to the COVID-19 pandemic; lending growth will decline in small and medium-sized businesses to 14%, stagnation is expected to be about zero for large businesses
Against the backdrop of the economic crisis caused by falling oil prices and measures related to the risk of COVID-19 spreading, work is underway with major creditors to restructure the debts of the companies of the UWC Group, in terms of lowering interest rates and changing repayment schedules. It is assumed that creditors will not increase loan interest rates unilaterally. A positive factor is the inclusion of PJSC «RPC UWC» and its subsidiaries in the list of systemically important enterprises of the Ministry of Industry and Trade, which makes it possible to apply for easier obtaining working capital loans at a reduced rate Currency risk High Weak Losses due to exchange rate Localising production of imported components Risk unchanged Risk of significant currency fluctuations differences on contracts for Forward contracts with fixed conversion rates Forecast for 2020: the supply of equipment and Increase in export contracts with fixing the components. the ruble is expected to weaken from the average value of 2019 of amount of payment in foreign currency RUB 64.7 per USD 1 to the level of RUB 76.55–80.85 per USD 1 (these Ensuring the comparability of currency levels were reached in the first quarter of 2020) requirements and obligations in the amount and Ruble depreciation may positively affect export operations term Capital and liquidity risk Low Strong Failure to meet current financial Increased share of long-term funding sources in Risk decreased Risk of short-term/long-term cash shortage obligations overall volume there was a favourable trend in demand for finished products, supported Lack of internal working capital Constant monitoring and management of by a sufficient amount of advance payments for operating activities accounting liquidity Forecast for 2020: Constant work with banks to raise additional a 20–25% drop in demand for finished products is expected against financing the background of the current market situation in the freight sector Maximising buyers’ advances and macroeconomic negative facts and, as a result, a decrease in Customer portfolio diversification advance payments by buyers A positive factor is the inclusion of PJSC «RPC UWC» and its subsidiaries in the list of systemically important enterprises of the Ministry of Industry and Trade, which makes it possible to apply for easier obtaining working capital loans at a reduced rate
120 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 121 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Potential implications of risk Changes compared with 2018 Risk description Probability Impact Risk management/mitigation methods materialisation Forecast for 2020 Tax risk Average Average Additional charging of VAT, Tracking the latest changes in tax legislation and Risk unchanged Different interpretations of tax legislation income tax, and the payment of accounting updating Forecast for 2020: tax penalties Structured document flow and the timely maintenance of risks at the 2019 level due to the absence of adverse submission of documents for tax audits changes in tax legislation in 2020 Preliminary transaction analysis Banking risk Low Strong Suspension of the Company’s Opening back-up accounts with other banks Risk unchanged: Risk of the termination of operating activities, payments under international Evaluating the financial condition of banks/credit in 2019, the tendency to withdraw licenses from credit organisations risk of withdrawal of Central Bank license from contracts in foreign currency rating when opening accounts continued in Russia, but it did not affect the UWC Group, as UWC banks serving the UWC Group Cash and Settlement Services (CSS) in beneficiary cooperates only with first-class banks Risk of international sanctions being imposed banks of the Group Forecast for 2020: on Russia’s banks Risk of the Russian banking due to the macroeconomic changes, the downward trend in credit system disconnection from SWIFT organisations observed in recent years will not change or will grow due to expected decline in liabilities of banking institutions and a significant deterioration in the quality of the loan portfolio as a result of the COVID-19 pandemic; imposition of new and further reinforcing of existing US sanctions against the Russian Federation, state banks and individuals may have a negative impact on the Russian financial market Credit risk High Average Default of lessees Employing a stringent credit policy when Risk increased: choosing customers that ensures diversification Risk of the default of one or more railcar Risk of payment delay under a trend of decrease in lease rates and increase in downtime of railcars by industry lessees that hold a substantial portion of the the lease contract due to at operators starting from the third quarter of 2019 deteriorating market Regular monitoring of a customer’s current portfolio, and the risk of losses in the Lease In this regard, in December 2019, the Board of Directors of PJSC «RPC financial condition segment due to deteriorating market Downtime of railcars UWC» made a decision to suspend the activities of the UWC Group in Forced decrease in lease rates In the event of a lessee’s anticipated default, the Railcar Fleet Lease business segment for some time during remarketing searching for a new one in advance and concluding contracts in order to eliminate railcar downtime
Legal risks Legal risks Average Strong Bankruptcy of contractor / tenant Conducting comprehensive legal due diligence Risk unchanged: Risk of a counterparty’s insolvency / supplier of customers and suppliers when concluding an the economic situation in the country is stable. Russia’s GDP growth Failure to comply with existing agreement rates amounted to 1.3% contracts / obligations Follow-up monitoring to identify breaches of Forecast for 2020: Litigation contractual terms Russia’s GDP is expected to decline from 4% to 6% , bankruptcies and Regular monitoring of a counterparty’s legal Failure to receive VAT refund arrears due to the shutdown caused by the COVID-19 pandemic are status expected to increase Ownership risks Low Strong Loss of control over the Monitoring the establishment of a corporate Risk unchanged Risk of the loss of property ownership Company organisational structure Risk of the loss of company management Litigation Creating a system of control over the acquisition Loss of ownership rights to the and disposal of assets Company’s assets Directors and Officers Liability Insurance (D&O) Risk of the loss of intellectual property rights Low Average Emergence of competitive Legal review of intellectual property protection Risk unchanged Risk of the loss of rights to intellectual analogues on the market at lower mechanisms property items prices Introducing non-disclosure and concluding non- disclosure agreements Risk of the illegal use of patents Failure to receive income under license agreements Monitoring the production volumes of licensed Litigation companies Timely development of new intellectual property
1 The base scenario in the Central Bank of the Russian Federation inflation forecast for 2020.
122 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 123 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Potential implications of risk Changes compared with 2018 Risk description Probability Impact Risk management/mitigation methods materialisation Forecast for 2020 Commercial risks Market risk High Strong Reduced demand for new rolling Constant monitoring of the current freight market Risk increased: The risk of a decline of the freight market, fleet stock situation handling on the Russian Railways network in 2019 was down by 0.9% surplus, falling rates Decrease in revenue Demand forecasting for new rolling stock year-over-year; Reduced margin Development of high-margin products and their reduced transport volumes led to an increase in the fleet surplus, Substantial decline in lease rates inclusion in the Company’s product portfolio which resulted in lower lease rates and prices Increasing the share of innovative cars that are Forecast for 2020: less prone to falling prices in the overall fleet demand for new railcars is expected to decrease due to further Using options to change lease rates in lease reduction of transportation and low stock decommissioning contracts Expanding and diversifying the clientele Slashing expenditures and production costs Concluding long-term lease contracts without the ability to lower rates and using fines for early termination Risk of losing lessees High Average Reduced revenue due to a Diversification of the Group’s clientele in the Risk increased: Risk of losing customers due to the loss of decrease in the size of the lease Lease segment carloadings on the Russian Railways network in 2019 totalled 1.28 advantages of cooperating with the Group portfolio Sale of products to related companies billion tonnes, which is 0.9% lower compared to 2018. At the same Costs related to the downtime for Ongoing work to improve the railcar quality time, the production of new cars reached a record of 79,600 units. part of the railcar fleet due to the The beginning of stagnation in the freight market together with Improvement of the quality control of rolling absence of a lessee/customer high volumes of new railcars production created an oversupply of stock repair and maintenance Additional administrative costs rolling stock, which by the end of 2019 led to greater competition in Extension of lease terms and revision of lease for the urgent expansion of the the railcar lease market and related risks associated with the loss of rates in the falling market clientele/sales of products at lessees unacceptable prices Forecast for 2020: the trends of late 2019 will become stronger. In this regard, in December 2019, the Board of Directors of PJSC «RPC UWC» made a decision to suspend the activities of the UWC Group in the Railcar Fleet Lease business segment for some time Risk of competitive advantage Average Average Decrease in the Company’s Increasing the share of new-generation railcars in Risk increased: The emergence in the market of competitors market share the Company’s railcar fleet since 2019, there has been a trend towards the gradual reorientation with more attractive prices and lease rates with Decrease in rates and prices for Development of high-margin products and their of competitor plants to produce new-generation cars. Thus, the share similar railcar features innovative railcars inclusion in the Company’s product portfolio of gondolas on a 25 tf bogie in the sales structure approached 80% Decrease in revenue Slashing expenditures and production costs in Q4 Reduced margin Licensing the production of innovative railcars Forecast for 2020: Expanding and diversifying the clientele in the medium term, demand for new rolling stock is expected to decrease, which will lead to greater competition in the market Concluding long-term lease contacts without the ability to lower rates and using fines for early termination Investing in R&D
124 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 125 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Potential implications of risk Changes compared with 2018 Risk description Probability Impact Risk management/mitigation methods materialisation Forecast for 2020 Service risk Low Average Loss of time and downtime Expanding the network of service centres that Risk unchanged: Risk of lack of service centres capable to Financial losses repair railcars with enhanced performance the total number of RPC UWC service centres and the number of top- features provide technical and service maintenance of Difficulties with the maintenance ranking centres saw an increase (more details on page 71) 18-9855 bogies and UWC cars of 18-9855 bogies Providing training on the repair of 18-9855 bogies Reduced demand for both18- 9855 bogies and railcars on such bogies
Risk of missing spare parts Average Average Loss of time and downtime Distributing spare parts through the network of Risk unchanged Financial losses service centres Difficulties with the maintenance Building the supply chain of 18-9855 bogies Conclusion of life cycle contracts Reduced demand for both18- Stockpiling at key points 9855 bogies and railcars on such bogies Risk of decrease in sales of service products Low Average Decrease in sales of service Decrease in the cost of depot repairs Risk unchanged: (relative to the target indicators) products and in revenue of the Reduce in the repair downtime through the due to the low margin of rail transportation services, it is possible to Service sector availability of spare parts and experts delay repairs and lay railcars up
Marketing risks Reputational risks Low Weak Deterioration of the Company’s Verifying and tracking market information about Risk unchanged: Risk of losses due to the negative perception of business reputation counterparties RPC UWC is the largest manufacturer of rolling stock with increased the Company’s image by lessees, contractors, Loss of close relations with Building long-term relationships with journalists payload and improved technical and economic parameters in the business partners, regulatory authorities, and counterparties and doubts and the media, monitoring sources of information Russian market (more details on page 18); creditors among creditors and and tracking and refuting misleading information positive feedback in media publications counterparties about the Working to build and maintain a positive Company’s reliability and viability business reputation Dissemination of negative Corporate staff relations and team building information about the Company Promoting a positive image of the Company on and deterioration of its social media and with feedback from Company reputation in the labour market employees as a result of its failure to hire required employees from the market Loss of market share
126 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 127 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Potential implications of risk Changes compared with 2018 Risk description Probability Impact Risk management/mitigation methods materialisation Forecast for 2020 State regulation/country risks Low Strong Loss of existing competitive Participation in various production associations Risk unchanged: Risk of changes in the political situation in the advantages (Union of Railway Machinery Manufacturers, Directive No. 1756-r of the Government of the Russian Federation country and/or deterioration of the business Decrease in demand and sales Union of Railcar Builders) dated 17 August 2017 approved the Transport Engineering climate Work with federal executive bodies and Russian Development Strategy until 2030, including financial support, as well Risk of increased industry regulation and Railways as tariff and technical regulation related to products of freight car changing standards Risks of changes in the political situation in the building; Risk of reduced state support for transport country and/or deterioration of the business the International Cooperation and Export national project1 set targets engineering enterprises climate are beyond the scope of control of RPC for the development of industrial exports and support measures to UWC. Response measures and their parameters ensure their achievement will depend on a particular situation in a As part of dealing with the COVID-2019 crisis, PJSC «RPC UWC» was particular case listed among strategic enterprises of the Russian Federation in 2020. Therefore, the state assistance is expected in terms of ensuring the continuous operation of the Group and the possibility of receiving a targeted subsidy Technical risks Infrastructure risk Low Weak Partial or total loss of Company Using virtualisation systems in a failsafe mode Risk unchanged Risk of troubles with information technologies data Storing mail on a remote server Risk of the failure to comply with the business Temporary shutdown of the Placing servers in a remote location Company process automation schedule Monitoring information transmitted by employees to the external environment Data backup Separating levels of access to information depending on the level of authority
Risk of automation Low Weak Low efficiency of the Company’s Introducing a single SAP financial management Risk unchanged: Risk of losses in the efficiency of business business processes system at UWC enterprises – a common a single data model will allow for tracking changes as quickly as processes due to the existence of duplicate Late preparation of financial and solution to automate planning, budgeting, and possible, optimising workflow, avoiding replication, and reducing data information systems and databases and due to non-financial reporting as well as consolidation tasks volume by several times; violations of planned automation deadlines internal and external reporting Monitoring the timely implementation of access target architecture assumes integration with existing ERP systems Compilation of unreliable reports automation plans Failure to comply with tax laws and requirements of the in-house regulatory documents
1 Approved by the Presidium of the Presidential Council for Strategic Development and National Projects, Minutes No. 16 of 24 December 2018.
128 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 129 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Potential implications of risk Changes compared with 2018 Risk description Probability Impact Risk management/mitigation methods materialisation Forecast for 2020 Staff risks Human resource risk Average Weak Loss of the Company’s key Having procedures to restrict access to Risk unchanged Risk of losing key employees who know the customers information in accordance with the level of In 2020, the risk may be up due to the rapidly changing macroeconomic Company’s trade secrets. Leak/loss of sensitive financial authority and to introduce non-disclosure situation Risk of losing highly qualified employees information or trade secrets Employee verification by the internal security Loss of intelligent resources with service during recruitment and proficiency the departure of key employees testing Outflow of highly-qualified Development of the talent pool by key positions employees from enterprises in regions
Motivational risk/risk of satisfaction loss Average Weak Dismissal of key employees due HR branding Risk unchanged Risk of discrepancies in current corporate to diminished motivation Improving the motivation and material incentive principles with expectations of most employees Financial losses due to staff systems for employees Increased workload due to possible headcount turnover or leakage of trade Maintaining competitive wage rates information reduction Reviewing business processes Deterioration in the quality of works performed
Shareholders and Investors STRUCTURE OF UWC SHAREHOLDERS AS OF 31 DECEMBER 2019, %
12.3 In May 2016, UWC conducted a secondary public offering (SPO). The Charter Сapital 0.9 company sold 7,867,948 shares, or 6.9% of its charter capital, for a total of 27.8 UWC held an initial public offering more than RUB 5 billion. The offer price was set at RUB 640 per share. 9.3 National Bank TRUST (IPO) on the Moscow Stock PJSC Bank FC Otkritie1 Exchange in April 2015. As part of In April–May 2017, UWC held an SPO for 2,572,741 shares, or 2.2% of its Emil Pirumov2 the IPO, 12,896,570 shares were increased charter capital, and raised a total of RUB 1.9 billion. The offer price PJSC SAFMAR Financial investments3 sold to investors, or 12.22% of the was set at RUB 720 per share. 10.4 JSC “RPC Uralvagonzavod Company’s charter capital, including Other strategic investors 5,556,000 shares from an additional As of 31 December 2019, UWC had the charter capital of RUB 115,996,689 Free-float issue and 7,340,570 shares owned split into 115,996,689 uncertified registered ordinary shares with a par value by United Wagon Plс. The offer price of RUB 1 each. In addition to the outstanding shares, the Company has the 15.0 24.3 was set at RUB 700 per ordinary right to place 489,559,311 registered ordinary shares with a par value of RUB share. The Company raised RUB 1 each. 9.028 billion as a result of the 1 Including Indirect ownership through bank-controlled private pension funds whose pension savings are managed offering. UWC has no preferred shares. The Russian government has no stake in the by Menedzhment-konsalting LLC. Company’s charter capital. 2 Indirect ownership through PLAINWHITE CONSULTANTS LIMITED. 3 Indirect ownership through JSC NPF SAFMAR, who is controlled by the Company and has a stake together with “Investment management” LLC and JSC IQG Asset Management.
130 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 131 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Shares Dividends are paid from the PARAMETERS OF UWC FINANCE BONDS AS AT THE END OF 2019 traded in T+ trading mode: Shares and DRs – order to buy and included in the Company’s net profit, which The Company’s shares are listed on following Russian stock indexes: Moscow Exchange Broad Market Index and is determined based on the the Moscow Stock Exchange (UWGN Moscow Exchange RTS Index. accounting (financial) statements Description Exchange-traded Rouble bonds series 01 ticker), and as of 31 December prepared in accordance with rouble bonds series BO-01 2019 were included in the third- The Company’s market capitalization fell by 27% over the reporting period Russian law. Dividends may be tier quotation list. The shares are and stood at USD 36.6 billion as of 31 December 2019.1 paid from the retained earnings of Issue volume 15,000,000 ea. 15,000,000 ea. previous years. The decision to pay dividends is adopted by the UWC 2 CHANGES IN TRADING VOLUME AND QUOTATIONS OF UWC SHARES ON THE MOSCOW EXCHANGE IN 2019 General Meeting of Shareholders Redemption volume RUB 3,750,000,000 RUB 0.00 based on recommendations of
70,000 700 the Board of Directors. However, Current face value RUB 750 RUB 1,000 the amount of dividends shall not 60,000 600 exceed the amount recommended Issue date 16.09.2014 04.12.2013 by the Board of Directors. 50,000 500 Maturity date 03.09.2024 24.11.2021 40,000 400 The Company did not pay dividends for previous years. 30,000 300 Annual rate of coupon 1 12.5% 8.7% 20,000 200 Bonds Current annual rate of 9.55% 3.62% 10,000 100 coupon “UWC Finance” LLC, a subsidiary of 0 0 UWC, is the bond issuer. As of the Conditions of coupon rate end of 2019, the Company had two Fixed 9.55% CPI + 3% January December determination outstanding bond issues with a total volume of RUB 26 billion. Daily trading volume (median value for a month), RUB thousand (left axis) Coupon period 91 days 182 days Average price a share, RUB Following the meeting of BO-01 bond owners held on 14 August Trading platform Moscow Exchange Moscow Exchange Dividend Policy CHANGES IN UWC SHARE PRICES 2019, the debt restructuring was approved. As a result, the following The procedure used to adopt adjustments were made: decisions on dividend payment Indicator 2016 2017 2018 2019 and to calculate dividends is the bond circulation term Closing price on the first 738 795 790 400.6 regulated by Russian legislation, trading day was extended until 4 the duration of coupons from 11 to 30 was set to 91 days; the UWC Charter, and the September 2024, subject to Maximum closing price 797 828 818 748 Company’s Regulation on the a repayment of 25% of the the interest rate for coupon periods from 11 to 30 was set at 9.55%
Dividend Policy. When providing Minimum closing price 641 721 363 313.3 nominal securities value on per annum. recommendations to the General 30 September 2019. RUB Meeting of Shareholders in respect Closing price on the last 3,750,000,000 were paid in In addition, the following companies provided security offers for the bonds: 795 790 397 313.3 of the dividend amount and trading day due time; JSC “TikhvinSpetsMash”, JSC “TikhvinСhemMash”, JSC “Heavy Engineering payment procedure, the Board of Works”, JSC TAP “Titran-Express”, JSC North-Western Investment Industrial Directors is guided by the principle the number of coupon periods Company, JSC Tikhvin Freight Car Building Plant, and “Trade House “United of an optimal combination of and respect of shareholders’ rights to receive a portion of net profit as were increased from 10 to 30; Wagon Company” LLC. UWC’s effective development dividends.
1 Market capitalization was calculated using the market price data (average price as of the end of a relevant reporting period) of a UWC ordinary share as disclosed by the Moscow Exchange at https://www.moex.com/en/data. 2 Including transactions in negotiation mode.
132 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 133 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
CHANGES IN COUPON RATES OF EXCHANGE-TRADED ROUBLE BONDS SERIES BO-01, % CHANGES IN COUPON RATES OF ROUBLE BONDS SERIES 01, %
December 2019 9.55 November 2019 9.90
September 2019 12.25 May 2019 6.34
March 2019 12.00 November 2018 6.68
September 2018 12.00 May 2018 4.12
March 2018 13.50 November 2017 7.04
September 2017 14.50 May 2017 6.86
March 2017 15.00 November 2016 11.16
September 2016 15.50 June 2016 9.08
March 2016 15.50 December 2015 27.36
September 2015 16.00 June 2015 10.56
March 2015 12.50 December 2014 11.72
June 2014 8.70
Interaction with Shareholders and Investors
UWC places a high priority on arrangement of meetings and calls with investors and analysts; building trust-based relationships both with existing shareholders and participation in conferences; potential investors. The Company has a division responsible for preparation of presentations and press releases on operating and investor relations. It focuses on financial results; the introduction of various tools to engage with the investment preparation of press releases on other newsworthy events that are community, complying with relevant for investors; the best practices in the area of disclosure and ensuring the utmost maintenance of a section for investors on the Company’s official transparency. The key tools are as website; follows: regular mail-outs of the Company’s materials to analysts and investors.
Learn more
Information for shareholders and investor on the Company’s website
134 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 135 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Appendices List of Subsidiaries Included in the Report Scope
PUBLIC JOINT STOCK COMPANY “RESEARCH AND PRODUCTION CORPORATION “UNITED WAGON COMPANY”
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (in millions of Russian Rubles, unless otherwise indicated)
Information in respect of the Group’s significant subsidiaries is disclosed in the table below:
Ownership interest in the Group At At Place of 31 December 31 December Company name registration Principal activity 2019 2018
Rail 1520 (BVI) LTD BVI Investment company 100% 100% Rail 1520 Finance Cyprus LTD Cyprus Investment company 100% 100% Disclaimer Rail 1520 Cyprus LTD Cyprus Investment company 100% 100% “RAIL1520” LLC RF Operating lease of railcars 100% 100% Rail 1520 Service LTD Cyprus Investment company 100% 100% Rail 1520 Service Cyprus LTD Cyprus Investment company 100% 100% “RAIL1520 SERVICE " LLC RF Operating lease of railcars 100% 100% Rail 1520 Cyprus Leasing LTD Cyprus Investment company 100% 100% “RAIL1520 LEASING” LLC RF Finance lease of railcars 100% 100% Rail 1520 Wagon Cyprus LTD Cyprus Investment company 100% 100% The Annual Report of Public Joint This Report may include forward-looking statements. Such statements may " UWC TP " LLC Sale of railcars, castings and RF components 100% 100% Stock Company «Research and contain words such as “suppose”, “believe”, “intend”, “anticipate”, “expect”, Ovilleno Holdings LTD Cyprus Investment company 99% 99% production corporation «United “will”, “may”, “forecast”, “plan”, and other words with similar meanings. All JSC “Heavy Engineering Works” RF Production of railcars 99% 99% “VNICTT” LLC RF Engineering and construction bureau 99% 99% Wagon Company» was tentatively statements included in this Report (other than statements of historical fact), Sale of railcars, castings and “TH “UWC” LLC RF components 99% 99% approved by the decision of the including, among other things, statements that refer to financial standing, LLC NPC Springs RF Production of springs 99% 99% TM-energo LLC RF Power generation 99% 99% UWC Board of Directors dated 29 business strategy, plans and intentions of management with regard to future TM-energoservice LLC RF Power generation 99% 99% June 2020 (Minutes No. 5-2020 of operational activities (including development plans and goals) are forward- TM-energomash, LLC RF Power generation 99% 99% TM-energoprom LLC RF Power generation 99% 99% the Board’s absentee meeting dated looking statements. Such forward-looking statements do not include JSC TAP “Titran-Express” RF Repair/production of railcars 99% 99% UW Forge Company LTD Cyprus Investment company 99% 99% 30 June 2020). The validity of data historical or current facts; they cannot be objectively verified, they are based “UWC Centrokuz” LLC RF Production of railcars 99% 99% Restadiana Ventures LTD Cyprus Investment company 99% 99% presented in this Report is confirmed on assumptions and are subject to their inherent risks (known and unknown) Organization of transportation of by the Company’s Audit Commission. and uncertainty. A number of important factors may lead to the fact that “UNICON 1520” LLC RF goods 99% 99% RAIL 1520 Cyprus Management actual results, indicators or achievements may differ dramatically from future Company LTD Cyprus Investment company 100% 100% “UWC Finance” LLC RF Issuance of debt securities 100% 100% In this Report, unless otherwise results, indicators or achievements, predictions, assumptions or forecasts RAIL 1520 Tank Cars (BVI) Holding LTD BVI Investment company 100% 100% specified, operational and economic contained in either express or implied form in such forward-looking RAIL 1520 Tank Cars Cyprus Holding performance indicators were statements. These forward-looking statements are only relevant as of the LTD Cyprus Investment company 99% 99% JSC “TikhvinСhemMash” RF Production of tank cars 99% 99% determined in accordance with IFRS. date of this Report. The Company expressly refuses (to the fullest extent JSC “TikhvinSpetsMash” RF Production of platform cars 100% 100% Holme Services Limited BVI Investment company 100% 100% permitted by law) to undertake any obligations in respect of any updates Pegadisa Management LTD Cyprus Investment company 100% 100% The analysis of the financial or changes in any forward-looking statements contained in this Report, RAIL 1520 IP LTD Cyprus Investment company 100% 100% Raygold Limited Cyprus Investment company 99.97% 99.97% performance should be viewed in the reflecting changes in forecasts contained in such statements or changes in AFCT Advanced Freight Car Development of production Technology Limited Cyprus technology for the plant 99.97% 99.97% context of the audited consolidated events, conditions or circumstances any such statements are based on. One Development of production DEANROAD Limited Cyprus technology for the plant 98.97% 98.97% financial statements of UWC for the should not unduly rely on such forward-looking statements when making Joint Stock Company “Tikhvin year ended on 31 December 2019 decisions related to the Company and/or its securities. Nothing in this Freight Car Building Plant” (TVSZ JSC) RF Production of railcars 99.97% 99.97% and prepared under IFRS. Report shall be construed as a forecast with respect to profit. United Wagon Europe GmbH Germany Investment company 99% 99% United Wagon Africa (PTY) South Africa Investment company 99% - Starfire Engineering, Inc. USA Engineering and construction bureau 99% 99% Rail Holding LTD BVI Investment company 100% 100% “RAIL1520 INVEST” LLC RF Operating lease of railcars 100% 100% Operating company providing SZIPK JSC RF utilities 99% 99%
136 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 137
12 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
AO Deloitte & Touche CIS 5 Lesnaya Street Moscow, 125047, Auditor’s Report Russia Tel: +7 (495) 787 06 00 Fax: +7 (495) 787 06 01 deloitte.ru and Consolidated Financial
Statement under IFRS
INDEPENDENT AUDITOR’ REPORT
o the hareho ders and the oard of irectors of ub ic oint toc ompan “ esearch and roduction orporation “ nited agon ompan ”
O
e ha e audited the accompan ing conso idated financia statements of ub ic oint toc ompan “ esearch and roduction orporation “ nited agon ompan ” the “Group” or “ Group” and its subsidiar the “Group” hich comprise the conso idated statement of financia position as at ecember and the conso idated statements of profit or oss and other comprehensi e income changes in e uit and cash f o s for and notes to the conso idated financia statements inc uding a summar of significant accounting po icies
In our opinion e cept for the effects of the matters described in the asis for ua ified pinion section of our report the accompan ing conso idated financia statements present fair in a materia respects the conso idated financia position of the Group as at ecember and its conso idated financia performance and its conso idated cash f o s for the ear then ended in accordance ith Internationa inancia eporting tandards “I s”
O
s disc osed in ote to these conso idated financia statements as at ecember and certain subsidiaries of the Group breached a number of financia and non financia co enants set out in the oan agreements ith ban s on comp iance ith these co enants ma resu t in negati e conse uences for the Group in particu ar the oans becoming ca ab e on demand he Group recei ed the documents confirming intention of some of the creditors not to re uest an ear repa ment of the e isting iabi ities after the reporting date ote he management of the Group assessed the probabi it of the ca for ear repa ment of these borro ings amounting to mi ion e cept for the oan inc uded in the disposa group of assets and re ated iabi ities presented separate in the conso idated statement of financia position ote and mi ion as at ecember and respecti e as o and therefore presented them in these conso idated financia statements as non current iabi ities in ine ith the initia repa ment terms set out in the oan agreements In our opinion according to the re uirements of I Presentation of financial statements the Group shou d ha e c assified these borro ings as current iabi ities in the conso idated statement of financia position and re ated notes to the conso idated financia statements because as at ecember and the Group did not ha e an unconditiona right to postpone the repa ment of these borro ings for at east months after the reporting date
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. © AO Deloitte & Touche CIS. All rights reserved.
138 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 139 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
“ ” Auditor’s es onsi ilities for the Audit of the inancial tate ents nternational Ethics tandards oard for Accountants’ Code of Ethics for Professional Accountants “ ” s at ecember and during e performed the following audit , the Group did not comply with procedures in respect to this key audit certain obligatory financial and non matter
financial covenants set out in the loan analyzed the management’s agreements s a result of non assessment of the risks related to the A compliance, the loans became payable on Group’s ability to continue as a going demand ote fter the reporting concern, including plans to eliminate date, the Group either received official conse uences of non compliance with confirmation from the banks not to covenants and to agree with the banks demand early repayment of the e isting a new set of covenants that would borrowings with the breached covenants, allow the Group to settle its debt or technically remedied the breaches liabilities in due course given the changes in the economic environment esides, an outbreak of after the reporting date and introduction of verified that after the reporting date restrictive measures, as well as a drop in the Group and its subsidiaries received world oil prices and depreciation of the documents confirming intention of all ussian uble against ma or foreign of the banks not to demand early currencies may have a negative impact repayment of the e isting borrowings on the Group’s consolidated financial with breached covenants position and its consolidated financial analyzed the management’s forecasts ’s goodwill impairment review performance in future ote and scenarios in respect of the Group’s future business development for The Group’s management performed an e ample, possible decrease in analysis of these negative factors and production output due to temporary assessed their conse uences by shutdown of production subsidiaries, considering possible scenarios of the li uidity volatility due to decreased prepared by the Group’s manageme current economic environment and operating cash inflows and assessed availability of funding sources and ability the reasonableness of key assumptions to obtain funding in the medium term, used in the forecasts given the and concluded that there is no significant negative developments in the business uncertainty regarding the Group’s ability environment in ussia and globally to continue as a going concern in the foreseeable future reviewed the completeness and appropriateness of the relevant urther details are disclosed in otes disclosures in the notes to the consolidated financial statements and to the consolidated financial statements e focused on this area because the used in management’s forecasts, assessment of whether the going concern assumption is applicable has a pervasive effect on the Group’s consolidated impairment models’ key assumptions financial statements esides, the management’s analysis to identify significant uncertainty regarding the Group’s ability to continue as a going concern re uires an assessment of the Group’s future financial performance amid the negative impact of world oil prices weakening and , as well as in assessing the Group’s ability to resolve loan portfolio restructuring issues and to comply with covenants in future
140 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 141 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
O I
anagement is responsible for the other information The other information comprises s part of an audit in accordance ith s, e e ercise professional udgment and the information included in the nnual eport and the uarterly report of the issuer for maintain professional s epticism throughout the audit. e also
the first uarter of but does not include the consolidated financial statements and dentif and assess the ris s of material misstatement of the consolidated financial our auditor’s report on those statements. The annual report and the uarterly report of the statements, hether due to fraud or error, design and perform audit procedures issuer for the first uarter of is e pected to be made a ailable to us after the date of responsi e to those ris s, and obtain audit e idence that is sufficient and appropriate this auditor’s report. to pro ide a basis for our opinion. The ris of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud ma in ol e ur opinion on the consolidated financial statements does not co er the other information collusion, forger , intentional omissions, misrepresentations, or the o erride of and e ill not e press any form of assurance conclusion thereon internal control.
n connection ith our audit of the consolidated financial statements our responsibility is btain an understanding of internal controls rele ant to the audit in order to design to read the other information after it is pro ided to us and to consider hether there are audit procedures that are appropriate in the circumstances, but not for the purpose any significant inconsistencies bet een the other information and the consolidated of expressing an opinion on the effectiveness of the Company’s internal controls. financial statements or our no ledge gained in the course of the audit and hether the aluate the appropriateness of the accounting policies used and the reasonableness other information potentially contains other material misstatements of accounting estimates and related disclosures made b management. Conclude on the appropriateness of management’s use of the going concern f based on the reading of the nnual eport and the uarterly report of the issuer for the assumption and, based on the audit e idence obtained, hether a material first uarter of e conclude that it contains material misstatements e are re uired uncertaint e ists related to e ents or conditions that ma cast significant doubt on to communicate the matter to those charged ith go ernance the Group’s ability to continue as a going concern. If we conclude that a material uncertaint e ists, e are re uired to draw attention in our auditor’s report to the R T related disclosures in the financial statements or, if such disclosures are inade uate, to modif our opinion. ur conclusions are based on the audit e idence obtained up to the date of our auditor’s report. o e er, future e ents or conditions ma cause anagement is responsible for the preparation and fair presentation of the consolidated the Group to cease to continue as a going concern. financial statements in accordance ith and for such internal controls as management determines is necessary to enable the preparation of consolidated financial aluate the o erall presentation, structure and content of the consolidated financial statements that are free from material misstatement hether due to fraud or error statements, including the disclosures, and hether the consolidated financial statements represent the underl ing transactions and e ents in a manner that n preparing the consolidated financial statements management is responsible for achie es fair presentation. assessing the Group’s ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless e communicate ith those charged ith go ernance regarding, among other matters, management either intends to li uidate the Group or to cease operations or has no the planned scope and timing of the audit and significant audit findings, including an realistic alternati e but to do so significant deficiencies in internal controls that e identif during our audit.
Those charged ith go ernance are responsible for o erseeing the Group’s financial e also pro ide those charged ith go ernance ith a statement that e ha e complied reporting process ith rele ant ethical re uirements regarding independence, and to communicate ith them all relationships and other matters that ma reasonabl be thought to bear on our Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements independence, and here applicable, related safeguards.
ur ob ecti es are to obtain reasonable assurance about hether the consolidated rom the matters communicated ith those charged ith go ernance, e determine those financial statements as a hole are free from material misstatement hether due to fraud matters that ere of most significance in the audit of the consolidated financial statements or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance of the current period, and are therefore the e audit matters. e describe these matters is a high le el of assurance but is not a guarantee that an audit conducted in accordance in our auditor’s report unless law or regulation precludes public disclosure about the ith ill al ays detect a material misstatement hen it e ists isstatements can matter or hen, in e tremel rare circumstances, e determine that a matter should not arise from fraud or error and are considered material if indi idually or in the aggregate be communicated in our report because the ad erse conse uences of doing so ould they could reasonably be e pected to influence the economic decisions of users ta en on reasonabl be e pected to out eigh the public interest benefits of such communication. the basis of these consolidated financial statements
etel in gor le andro ich ngagement eader
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ntit R udit firm eloitte Touche
tate Registration ertificate o. issued b ertificate of tate Registration o. . , issued b osco osco nterdistrict nspectorate of the Russian inistr of Registration hamber on ctober . Ta ation o. on a . rimar tate Registration umber rimar tate Registration umber ertificate of Registration in the nified tate Register of egal ddress rbat treet, osco , , Russian ederation ntities eries o. , issued b osco nterdistrict nspectorate of the Russian inistr of Ta ation o. on o ember .
ember of elf Regulated Organization of Auditors “Sodruzhestvo” ssociation , R .
142 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 143 s part of an audit in accordance ith s, e e ercise professional udgment and maintain professional s epticism throughout the audit. e also
dentif and assess the ris s of material misstatement of the consolidated financial statements, hether due to fraud or error, design and perform audit procedures responsi e to those ris s, and obtain audit e idence that is sufficient and appropriate to pro ide a basis for our opinion. The ris of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud ma in ol e collusion, forger , intentional omissions, misrepresentations, or the o erride of internal control. btain an understanding of internal controls rele ant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls. aluate the appropriateness of the accounting policies used and the reasonableness of accounting estimates and related disclosures made b management. Conclude on the appropriateness of management’s use of the going concern assumption and, based on the audit e idence obtained, hether a material uncertaint e ists related to e ents or conditions that ma cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertaint e ists, e are re uired to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inade uate, to modif our opinion. ur conclusions are based on the audit e idence obtained up to the date of our auditor’s report. o e er, future e ents or conditions ma cause the Group to cease to continue as a going concern. aluate the o erall presentation, structure and content of the consolidated financial statements, including the disclosures, and hether the consolidated financial statements represent the underl ing transactions and e ents in a manner that achie es fair presentation.
e communicate ith those charged ith go ernance regarding, among other matters, 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices the planned scope and timing of the audit and significant audit findings, including an significant deficiencies in internal controls that e identif during our audit.
e also pro ide those charged ith go ernance ith a statement that e ha e complied ith rele ant ethical re uirements regarding independence, and to communicate ith them all relationships and other matters that ma reasonabl be thought to bear on our independence, and here applicable, related safeguards. C S C C A rom the matters communicated ith those charged ith go ernance, e determine those “R S ARC A R C C R RA “ A C A ” matters that ere of most significance in the audit of the consolidated financial statements
of the current period, and are therefore the e audit matters. e describe these matters C S A S A F R F R SS A R C R S C in our auditor’s report unless law or regulation precludes public disclosure about the F R AR C R matter or hen, in e tremel rare circumstances, e determine that a matter should not (in millions of Russian Rubles, unless otherwise indicated) be communicated in our report because the ad erse conse uences of doing so ould reasonabl be e pected to out eigh the public interest benefits of such communication. ote
Continuin operations
Revenue etel in gor le andro ich Cost of sales ngagement eader ross profit
pril Selling general and administrative expenses Share of profit loss of associates and oint ventures Other operating expense income net Impairment of non current non financial assets ntit R udit firm eloitte Touche oss on fair value ad ustments less costs to sell of assets held for
tate Registration ertificate o. issued b ertificate of tate Registration o. . , issued b osco sale osco nterdistrict nspectorate of the Russian inistr of Registration hamber on ctober . peratin profit Ta ation o. on a . rimar tate Registration umber inance income rimar tate Registration umber ertificate of Registration in the nified tate Register of egal inance costs ddress rbat treet, osco , , Russian ederation ntities eries o. , issued b osco nterdistrict oreign exchange loss gain net nspectorate of the Russian inistr of Ta ation o. on rofit loss before income ta o ember .
ember of elf Regulated Organization of Auditors “Sodruzhestvo” Income tax expense benefit ssociation , R . rofit loss for the ear from continuin operations iscontinued operations
rofit for the year from discontinued operations
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te s that ill not e reclassified su se uentl to rofit or loss Gain on revaluation of property plant and e uipment eferred tax liability on revaluation of property plant and e uipment
Other comprehensive income
A C R S C SS
arnin s loss per share
rom continuing and discontinued operations
eighted average number of ordinary shares outstanding asic and diluted earnings loss per share R
rom continuing operations
eighted average number of ordinary shares outstanding asic and diluted earnings loss per share R
he notes on pages form an integral part of these consolidated financial statements.
144 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 145 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
“ “ ” Report on Compliance
(in millions of Russian Rubles, unless otherwise indicated) with Principles and Recommendations of the
roperty plant and e uipment Right of use assets Corporate Governance Code repayments for property plant and e uipment and intangible assets Intangible assets Goodwill eferred tax assets Investments in associates and oint ventures oans receivable ong term trade receivables from the sale of railcars This Report on compliance with corporation «United Wagon Company» as part of preliminary approval of the Restricted cash principles and recommendations Annual Report 2019 on 29 June 2019. Other non current assets of the Corporate Governance
Code was considered by the Board The Board of Directors confirms that the information provided in the Report Inventories of Directors of Public Joint Stock contains full and accurate data on the Company conformance with principles rade and other receivables A receivable Company «Research and production and recommendations of the Corporate Governance Code for 2019. repayments to suppliers and other assets repaid income tax oans receivable Restricted cash Cash and cash e uivalents
Assets held for sale
Share capital issued Additional paid in capital Reserve on revaluation of property plant and e uipment Accumulated deficit
ong term loans and borrowings onds Advances received ease liabilities eferred tax liabilities inance lease liabilities inancial liabilities under leasebac transactions Accrued expenses for employees remuneration
Short term loans and borrowings onds Advances received and other current liabilities rade and other payables ease liabilities inance lease liabilities inancial liabilities under leasebac transactions
iabilities directly associated with assets classified as held for sale
Restated as per the final estimate of the allocation of the ac uisition cost of a subsidiary ote .
he notes on pages form an integral part of these consolidated financial statements.
146 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 147 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
The company shall ensure equal and fair attitude to all shareholders while exercising their rights to participate 1.1 in the company’s management process
1.1.1 The company provides its shareholders with the 1. The company’s internal document regulating the Compliant most favourable conditions for their participation in procedures of holding the general meeting is approved by the general meeting, for elaborating a reasonable the general meeting of shareholders and available to the opinion on the general meeting's agenda matters, public. coordination of activities, and an opportunity 2. There are several opportunities to communicate with the to express their opinion on the issues under company, such as hot line, emails, forum on the Internet; consideration the shareholders may use them to express their opinion and submit their questions on the agenda matters in the course of preparation to the general meeting. In the reporting period, these procedures were followed by the company before each general meeting
1.1.2 Procedure of notification on holding the general 1. The notice on holding the general meeting of Compliant meeting and submitting materials for the general shareholders is published on the website at least 30 days meeting provides the shareholders with an prior to the general meeting. opportunity to prepare for the meeting properly 2. The notice on holding the meeting contains the information about the place of the meeting and the documents required to access the meeting location. 3. The shareholders could get information on the names of those who proposed the agenda matters and the candidates to the company’s board of directors and audit commission
1.1.3 In the course of preparation and holding of 1. In the reporting period, the shareholders had an Compliant the general meeting, the shareholders had an opportunity to submit their questions to members of opportunity to have free and timely access to the the company’s executive bodies and board of directors information on the meeting and materials thereto, before and in the course of the annual general meeting of submit their questions to the executive bodies and shareholders. board members, and communicate with each other 2. The opinion of the board of directors (including special opinions, included in the minutes) on each agenda matter of the general meeting held in the reporting period was included in the list of materials submitted for the general meeting of shareholders. 3. The company provides the shareholders, who are entitled to, with an access to the list of persons entitled to participate in the general meeting, as soon as this list becomes available to the company, for all general meetings within the reporting period
1.1.4 The shareholders did not face any unjustified 1. In the reporting period, shareholders could submit Compliant difficulties while exercising their right to call the their proposals to be added to the agenda of the annual general meeting, propose candidates to the general meeting, within at least 60 days past the end of the management bodies and submit the issues for the calendar year. agenda of the general meeting 2. In the reporting period, the company did not refuse to accept the issues to be added to the agenda and proposals on the candidates to the company’s bodies due to misprints and other insignificant imperfections in the shareholders’ proposals
148 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 149 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
1.1.5 Each shareholder had an opportunity to exercise 1. The company’s internal document (internal policy) Partially compliant Each Company shareholder has an opportunity to exercise their right of vote in the their right of vote in the most simple and easy way contains provisions stating that each participant of the most simple and easy way. general meeting may request a copy of his/her ballot paper The issue of including norms specifying the ability of each participant of the General certified by the counting board until the end of the meeting Meeting of Shareholders to ask for a copy of their filled ballot paper attested by the counting board, to the Regulation on the General Meeting of Shareholders of the Company lies within the competencies of the General Meeting of Shareholders of the Company. Thus, adding specified changes to the Regulation is performed as per the decision of the General Meeting of Shareholders
1.1.6 The company's procedure of holding the general 1. In the reporting period, in the course of general Partially compliant In accordance with Russian legislation, general meetings of shareholders for the meeting provides all attendees with equal meetings of shareholders held in presentia (in the joint results of 2019 can be held in absentia (Federal Law No. 115-FZ of 7 April 2020 opportunities to express their opinion and ask their presence of shareholders), there was enough time for “On Amendments to certain legislative acts of the Russian Federation regarding questions delivering reports on the agenda matters and enough time the unification of the content of annual reports of state corporations (companies), for their discussion. public not-for-profit companies, as well as the identification of features of regulating 2. Candidates to the company’s management and corporate relations in 2020 and on suspension of the provisions of certain legislative supervision bodies were available so that the shareholders acts of the Russian Federation”). could ask them questions at the meeting when these Thus, in 2020, General Meetings of Shareholders of the Company will be held in candidates were put to vote. absentia. 3. While making decisions related to preparation and When holding in praesentia meetings, persons present at the meetings have equal holding of the general meetings of shareholders, the opportunities to share their opinion and ask questions. Candidates to the Company’s board of directors considered the possibility to use the management and supervisory bodies are available so that the shareholders can ask telecommunication means so that the shareholders them questions at the meetings when these candidates were put to vote. could have remote access to the general meetings in the There have been no suggestions from the Company’s shareholders to hold General reporting period Meetings of Shareholders using telecommunication tools to provide shareholders with remote access to participate in the General Meetings of Shareholders. If such suggestions are made, the Company will need to assess the costs associated with holding General Meetings of Shareholders in this format
1.2 All shareholders had equal and fair opportunities to participate in the company’s profit by receiving dividends
1.2.1 The company developed and introduced a 1. The company’s dividend policy was developed, Compliant transparent and clear procedure for defining the approved by the Board of Directors and disclosed. amount of dividend and its payment 2. If the company’s dividend policy uses the indicators of the company’s statements to define the amount of dividend, then the consolidated indicators of the financial statements are taken into consideration
1.2.2 The company does not make a decision to pay 1. The company’s dividend policy has direct indication of Compliant dividends, if such decision formally does not break financial/economic circumstances which should result in any restrictions imposed by law and is commercially non-payment of dividends unjustified and may result in misperception of the company’s performance
1.2.3 The company excludes worsening of the dividend 1. In the reporting period, the company did not take any Compliant rights of the current shareholders actions which could result in worsening of the dividend rights of the current shareholders
150 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 151 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
1.2.4 The company is committed to prevent shareholders 1. To prevent shareholders from using other ways of Non-compliant Due to the changes of the Company’s shareholder composition, the issue regarding from using other ways of getting profit (revenue) getting profit (revenue) at the company’s expense than the control mechanisms providing timely identification of and approval procedure at the company’s expense than dividends and dividends and liquidation cost, the company’s internal for transactions with parties affiliated (related) with the current shareholders (persons liquidation cost documents contain the control procedures which allow entitled to manage the votes represented by voting shares), will be addressed in the timely identification and the procedure of approving the course of considering RPC UWC’s strategy transactions with the parties who are affiliated (related) with the current shareholders (persons entitled to manage the votes represented by voting shares), when the transactions are not considered to be interested-party transactions by law
The corporate governance system and practice ensure equal conditions for all shareholders 1.3 who own the shares of the same category (type), including minority shareholders and foreign shareholders, and equal attitude of the company to them
1.3.1 The company created prerequisites for fair attitude 1. In the reporting period, the procedures used to control Compliant to each shareholder on the part of the company's potential conflicts of interests of the current shareholders management and supervisory bodies to prevent were efficient, and the board of directors paid needed abuse on the part of the large shareholders towards attention to the conflicts among shareholders, if any the minority shareholders
1.3.2 The company does not take actions which result or 1. There are no quasi-treasury shares or they were not Compliant may result in artificial re-allocation of the corporate involved in voting in the reporting period control
The shareholders are provided with reliable and efficient tools to register their rights on shares 1.4 and the opportunity to transfer their shares in a free and easy way
1.4.1 The shareholders are provided with reliable and 1. Quality and reliability of the company’s registrar Compliant efficient tools to register their rights on shares and operations on keeping the register of securities owners the opportunity to transfer their shares in a free and complies with the needs of the company and its easy way shareholders
The board of directors carries out strategic management of the company, 2.1 defines the fundamental principles and approaches to organisation of the company’s risk management and internal control system, controls performance of the company’s executive bodies and performs other key functions
2.1.1 The board of directors is responsible for making 1. The board of directors has special powers specified Compliant decisions on appointment and dismissal of members in the Charter to appoint and dismiss members of the of the executive bodies, including due to improper executive bodies and define the terms of employment performance of their duties. The board of directors agreements with them. also controls the compliance of the company’s 2. The board of directors has considered the report(s) of executive bodies with the approved strategy of the sole executive body and members of the collective business development and main directions of the executive board on implementation of the company’s company’s operations strategy
2.1.2 The board of directors sets the main targets of the 1. In the reporting period, the board of directors Compliant company performance for the long term, evaluates considered the matters related to the progress of and approves the key performance indicators and implementing and updating the strategy, approval of the key business objectives of the company, evaluates company’s financial and operational plan (budget), and and approves the strategy and business plans for the consideration of criteria and indicators (including interim main areas of the company’s operations indicators) of implementation of the company’s strategy and business plans
152 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 153 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
2.1.3 The board of directors determines the principles and 1. The board of directors determined the principles and Compliant In accordance with the requirements of existing legislation, the Risk Management approaches to organisation of the risk management approaches to organisation of the risk management and and Internal Control Policy of PJSC «RPC UWC» was drafted and approved in 2018 and internal control system in the company internal control system in the company. 2. The board of directors evaluated the company’s risk management and internal control system in the reporting period
2.1.4 The board of directors determines the company’s 1. The company developed and implemented and the Compliant policy on remuneration and/or reimbursement of board of directors approved the policy (policies) for costs (compensation) to members of the board of remuneration and reimbursement of costs (compensation) directors, executive bodies and other key managers to members of the board of directors, executive bodies and of the company other key managers of the company. 2. In the reporting period, the board of directors considered the items concerning the above policy (policies) at the board meetings
2.1.5 The board of directors plays a key role in preventing, 1. The board of directors plays a key role in preventing, Compliant identifying and managing the internal conflicts identifying and managing internal conflicts. among the company’s bodies, shareholders, and 2. The company established a system for identification of employees transactions related to the conflict of interests, and a system of measures to manage such conflicts
2.1.6 The board of directors plays a key role in ensuring 1. The board of directors approved the regulation on Compliant the company’s transparency, timely and full information policy. disclosure of the information and free access of 2. The company defined the persons who are responsible shareholders to the company’s documents for the implementation of the information policy
2.1.7 The board of directors controls implementation of 1. In the reporting period, the board of directors Compliant the corporate governance practices in the company considered the issue of the corporate governance practices and plays a key role in the essential corporate events in the company of the company
2.2 The board of directors reports to the company’s shareholders
2.2.1 Information on the activities of the board of directors 1. The annual report of the company for the reporting Compliant is disclosed and provided to shareholders period contains the information on attendance of meetings of the board of directors and board committees by individual directors. 2. The annual report contains information on the main results of operations of the board of directors in the reporting period
2.2.2 Chairman of the board of directors is available for 1. The company has a transparent procedure which allows Compliant communication with the company’s shareholders the shareholders to send the suggested matters and their opinion on them to the chairman of the board of directors
154 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 155 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
The board of directors is an efficient and highly professional management body 2.3 of the company which makes objective and impartial statements, and takes decisions which meet the interests of the company and its shareholders
2.3.1 Only persons with unchallenged business and 1. The procedure of evaluating efficiency of the board Compliant The Remuneration and Nomination Committee evaluates the candidates to the personal reputation, skills, knowledge and of directors’ performance includes the assessment of Board of Directors and submits its recommendations to the General Meeting of expertise required to make decisions related to the professional qualification of the board members. Shareholders when the matter on electing members to the Board of Directors is competence of the board of directors and necessary 2. In the reporting period, the board of directors (or considered for efficient performance of its functions, may be its nomination committee) performed the assessment elected to the board of directors of candidates to the board of directors in terms of the required expertise, knowledge, reputation, the lack of conflict of interests, etc.
2.3.2 Members of the company’s board of directors are 1. In the course of all general meetings of shareholders Compliant elected using a clear and transparent procedure in the reporting period with the agenda matter on enabling the shareholders to get enough information electing the board members, the company provided the about candidates to assess their personal and shareholders with the biography of all candidates to the professional qualities board, results of their evaluation made by the board of directors (or its nomination committee), and the information on the candidate conformance with the independence criteria in accordance with the recommendations 102–107 of the Code and the written consent of the candidates to be elected to the board of directors
2.3.3 The board of directors has a balanced membership, 1. In the course of evaluation of performance of the board Compliant Analysis of the Board of Directors on the required professional qualifications, including the balance of qualifications, expertise, of directors, carried out in the reporting period, the board expertise and business skills is provided in the Annual Report of the Company knowledge and business skills, and enjoy confidence of directors analysed its own needs related to professional of shareholders qualifications, expertise and business skills
2.3.4 The number of members of the board of directors 1. In the course of evaluation of the board of directors Partially compliant In 2020, the Company’s Board of Directors will seek to conduct a self-assessment allows to arrange the board operations in the most carried out in the reporting period, the board of directors aimed at determining the effectiveness of its work, as well as the work of the efficient way, including the possibility to establish considered the issue of conformance of the number of Committees under the Board of Directors and members of the Board of Directors the board committees, and provides the significant board members with the company needs and interests of minority shareholders of the company with an shareholders opportunity to elect to the board the candidate
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
2.4 The board of directors comprises a sufficient number of independent directors
2.4.1 An independent director is a person with sufficient 1. In the reporting period, all independent board members Compliant professional skills, expertise and independence to complied with all independence criteria stipulated in have their own opinion, who can make objective recommendations 102–107 of the Code or were accepted and diligent statements, independent from the to be independent ones by the decision of the board of influence of the company’s executive bodies, groups directors of shareholders or other interested parties. It should be noted that normally a candidate (elected board member) is not considered to be independent if they are related to the company, its major shareholders, counterparty or competitors of the company, or the state
2.4.2 Evaluation of the conformance of the candidates to 1. In the reporting period, the board of directors (or Compliant the board of directors with the independence criteria the nomination committee of the board of directors) is carried out, and the analysis of compliance of the determined its opinion on independence of each candidate independent members of the board of directors with to the board of directors and submitted its statement to the the independence criteria is made on a regular basis. shareholders. In the course of evaluation, the substance shall be 2. In the reporting period, the board of directors (or the over the form nomination committee of the board of directors) at least once analysed the independence of the current Board members who are specified in the Annual Report as independent directors. 3. The company has developed procedures which define the necessary actions of the board member if they stop being independent, including the obligation to timely notify the board of directors thereof
2.4.3 Independent directors represent at least one third of 1. Independent directors represent at least one third of the Partially compliant The Company’s Board of Directors comprises 2 independent directors the elected board of directors board of directors
2.4.4 Independent directors play a key role in preventing 1. Independent directors (who have no conflict of interests) Non-compliant In accordance with the practice, established in the Company for decision-making internal conflicts in the company and company’s tentatively evaluate the significant corporate actions related on the issues related to performing material corporate actions, members of the performing material corporate actions to the possible conflict of interests, and submit the results Company’s Board of Directors who are not independent vote equally with the of evaluation to the board of directors independent directors in the Company’s Board of Directors and, when making decisions, including on the issues related to the possible conflict of interest, rely on the opinion of the independent directors
Chairman of the board of directors contributes to the most efficient implementation 2.5 of the board of directors’ functions
2.5.1 Chairman of the board of directors is elected from 1. Chairman of the board of directors is an independent Partially compliant Until March 2019, the Chairman of the Board of Directors was an independent among the independent directors, or a senior director, or a senior independent director is elected from director. independent director is elected from among the among the elected independent directors. Functions of the Chairman of the Board of Directors are specified in the Regulation elected independent directors to coordinate 2. Role, rights and liabilities of the chairman of the board for the Board of Directors of the Company. operations of independent directors and to ensure of directors (or the senior independent director, if any) are Since March 2019, the Chairman of the Board of Directors has been a non-executive cooperation with the chairman of the board of duly specified in the internal documents of the company director directors
2.5.2 Chairman of the board of directors ensures positive 1. Efficiency of performance of the chairman of the board Non-compliant In 2020, the Company’s Board of Directors will seek to conduct a self-assessment environment at the meetings, free discussion of the of directors was evaluated in process of the evaluation of aimed at determining the effectiveness of its work, as well as the work of the agenda issues and control over implementation of efficiency of the Board of Directors in the reporting period Committees under the Board of Directors and members of the Board of Directors the decisions made by the board of directors and the Chairman of the Board of Directors
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
2.5.3 Chairman of the board of directors takes required 1. Obligation of the chairman of the board of directors Compliant measures to timely provide the board members with to take measures in order to timely provide the board the information required to make decisions on the members with the materials on the agenda matters of the agenda items board of directors is specified in the internal documents of the company
Members of the board of directors act in good faith and rationally in favour of the company 2.6 and its shareholders using sufficient information awareness, due care and diligence
2.6.1 Board members make decisions based on all 1. Internal documents of the company stipulate that a Compliant information available to them, without the conflict board member shall notify the board of directors if they of interests, with consideration of equal attitude to face a conflict of interests for any agenda item of the board the company’s shareholders and with the standard of directors or committee of the board of directors before business risk the start of discussion on such agenda item. 2. Internal documents of the company stipulate that a board member shall abstain from voting on an item regarding which they have a conflict of interests. 3. The company has a procedure helping the board of directors to get professional consultations on the items within the board competence, at the company’s expense
2.6.2 Rights and obligations of the board members 1. The company has developed and disclosed an internal Compliant are clearly specified in internal documents of the document defining the rights and obligations of the board company members
2.6.3 Members of the board of directors have enough 1. Individual attendance of the meetings of the board Compliant time to perform their duties of directors and its committees, and the time spent for preparation to the meetings are taken in consideration in process of evaluation of the board of directors in the reporting period. 2. In accordance with the internal documents of the company, the board members shall notify the board of directors on his/her intention to enter in management bodies of other companies (other than the company’s controlled and affiliated companies), and the fact of appointment
2.6.4 All members of the board of directors have equal 1. In accordance with internal documents of the company, Compliant opportunities to access the documents and board members are entitled to get access to the information of the company. Newly elected board documents and make requests on the company and its members are provided with sufficient information controlled entities, and the company’s executive bodies on the company and operations of the board of shall provide such information and documents. directors as soon as possible 2. The company has a formal procedure of introductory actions for newly elected board members
The efficient operation of the board of directors is guaranteed by meetings of the board 2.7 of directors, preparation to them and participation of the board members therein
2.7.1 Meetings of the board of directors are held when 1. The board of directors held at least six meetings in the Compliant and if required, with consideration of the scale of reporting period operations and the company’s objectives at a specific period of time
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
2.7.2 The company's internal documents set a procedure 1. The company has an approved internal document Compliant for preparing for and holding meetings of the board specifying the procedure for preparing and holding of directors to provide the board members with an meetings of the board of directors, in particular, defining opportunity to duly prepare to such a meeting that a notice on holding a meeting shall be sent, as a rule, at least 5 days prior to the meeting
2.7.3 The form of the board of directors meeting is 1. The company’s charter or an internal document stipulates Compliant defined depending on the importance of agenda that the most important items (according to the list set in items. The most important items are decided at recommendation 168 of the Code) shall be considered at meetings held in praesentia meetings of the board of directors held in praesentia
2.7.4 Decisions on the most important matters of the 1. The charter of the company stipulates that decisions on Partially compliant Quorum for a meeting of the Board of Directors is no less than a half of the elected company's operations are made at the board the most important matters set in recommendation 170 of members of the Company’s Board of Directors. of directors meeting by a qualified majority or a the Code shall be made at the board of directors meeting Decisions at the meeting of the Company’s Board of Directors are approved by majority of votes of all elected board members by a qualified majority of at least three fourths of votes, or a a majority vote by the members of the Board of Directors who participate in the majority of votes of all elected board members meeting
The board of directors establishes committees for preliminary consideration 2.8 of the most important items related to the company’s operations
2.8.1 An audit committee, comprising independent 1. The board of directors has established an audit Partially compliant The Company has an established Audit Committee comprising two independent directors, has been established for preliminary committee, comprising only independent directors. directors with experience and knowledge in preparation, analysis, evaluation and consideration of matters related to the control 2. The company’s internal documentation specifies audit of accounting (financial) statements. over financial and operational performance of the objectives of the audit committee, including those set in In the reporting period, meetings of the Audit Committee were held less than once a company recommendation 172 of the Code. quarter. In future, meetings of the Audit Committee will be held in sufficient number 3. At least one member of the audit committee, being as required an independent director, has knowledge and expertise in preparation, analysis, evaluation and audit of the accounting (financial) statements. 4. In the reporting period, meetings of the audit committee were held at least once a quarter
2.8.2 For preliminary consideration of matters related 1. The board of directors has established a remuneration Partially compliant The Company has an established Remuneration and Nomination Committee to development of the efficient and transparent committee. comprising two independent directors. remuneration procedure, a remuneration committee 2. The chairman of the remuneration committee is an The Chairman of the Remuneration and Nomination Committee is the Chairman of has been established, comprising independent independent director other than the chairman of the board the Board of Directors directors and headed by an independent director of directors. other than the chairman of the board of directors 3. The company’s internal documentation specifies objectives of the remuneration committee, including those set in recommendation 180 of the Code
2.8.3 For preliminary consideration of issues related to HR 1. The board of directors has established a nomination Compliant planning (succession planning), professional staff committee (or its tasks, set in recommendation 186 of the and efficient performance of the board of directors, Code are implemented by another committee), most of its a nomination (appointment, HR) committee has been members are independent directors. established, and most of the committee members 2. The company’s internal documentation specifies are independent directors objectives of the nomination committee (or another committee with the combined functions), including those set in recommendation 186 of the Code
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
2.8.4 With consideration of the scale of operations and 1. In the reporting period, the board of directors Compliant the risk level, the company's board of directors has considered an issue of compliance of its committees’ checked that the membership of its committees members with the objectives of the board of directors fully complies with objectives of the company's and objectives of the company’s operations. Additional operations. Additional committees have been either committees have been either already established or already established or considered to be unnecessary considered to be unnecessary (strategy committee, corporate governance committee, ethics committee, risk management committee, budget committee, HSE committee, etc)
2.8.5 The membership of the committees is such as to 1. Committees of the board of directors are headed by Partially compliant The Chairman of the Audit Committee is an independent director. ensure comprehensive discussion of tentatively independent directors. The Chairman of the Remuneration and Nomination Committee is the Chairman of considered issues with consideration of dissenting 2. The company’s internal documentation (policies) the Board of Directors opinions stipulates provisions stating that persons who are not members of the audit committee, nomination committee and remuneration committee may attend meetings of the committees only upon the invitation of the chairman of this committee
2.8.6 Chairmen of the committees inform the board of 1. In the reporting period, chairmen of the committees Compliant directors and its chairman on the performance of reported to the board of directors on the performance of their committees on a regular basis the committees on a regular basis
The board of directors arranges quality evaluation of operations of the board 2.9 of directors, its committees and the board members
2.9.1 Quality assessment of operations of the board of 1. The self-assessment or external assessment of the Non-compliant In 2020, the Company’s Board of Directors will seek to conduct a self-assessment directors is aimed at defining the efficiency level work of the board of directors conducted during the aimed at determining the effectiveness of its work, as well as the work of the of operations of the board of directors, board reporting period included an assessment of the work of the Committees under the Board of Directors and members of the Board of Directors, committees and board members, conforming their committees, individual members of the board of directors, through regulation of this procedure and the assessment procedure by an external operations to the company's development needs, and the board of directors as a whole. organisation (consultant) activating operations of the board of directors and 2. The results of the self-assessment or external assessment identifying the areas for further improvement of the board of directors conducted during the reporting period were reviewed at an in-person meeting of the board of directors
2.9.2 The work of the board of directors, its committees, 1. The company hired an external organisation (consultant) Non-compliant In 2020, the Company’s Board of Directors will seek to conduct a self-assessment and the members of the board of directors shall be to conduct an independent assessment of the quality of aimed at determining the effectiveness of its work, as well as the work of the assessed on a regular basis and at least once a year. work of the board of directors at least once during the last Committees under the Board of Directors and members of the Board of Directors, In order to provide an independent assessment three reporting periods through regulation of this procedure and the assessment procedure by an external of the quality of work of the board of directors, organisation (consultant) companies shall hire an external organisation (consultant) at least once every three years
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
The company’s corporate secretary shall ensure effective ongoing interaction with shareholders 3.1 and the coordination of the company’s actions to protect the rights and interests of shareholders and support the effective work of the board of directors
3.1.1 The corporate secretary shall have the knowledge, 1. The company has adopted and disclosed an internal Compliant experience, and qualifications sufficient to perform document — the regulation on the corporate secretary. its assigned duties and an impeccable reputation, 2. The company’s website and the annual report contain and shall enjoy the confidence of shareholders biographical information about the corporate secretary with the same level of detail as is given for members of the company’s board of directors and executive management
3.1.2 The corporate secretary shall be sufficiently 1. The board of directors approves the appointment, Compliant independent of the company’s executive bodies and dismissal, and additional remuneration of the corporate have the necessary powers and resources to fulfill secretary the tasks assigned to it
The level of remuneration paid by the company shall be sufficient in order to attract, motivate, and retain individuals who have the skills and qualifications required by the company. Remuneration 4.1 for members of the company’s board of directors, executive bodies, and other key managers shall be paid in accordance with the remuneration policy adopted by the company
4.1.1 The level of remuneration the company offers 1. The company has adopted an internal document(s) — a Compliant members of its board of directors, executive bodies, policy (policies) on remuneration for members of the board and other key managers shall provide additional of directors, executive bodies, and other key managers, motivation for them to work effectively, thus enabling which clearly defines the approaches to remuneration for the company to attract and retain skilled and these individuals qualified specialists. The company shall also avoid paying remuneration that is higher than required and avoid an unjustifiably large gap between the level of remuneration for these individuals and the company’s employees
4.1.2 The company’s remuneration policy shall be 1. During the reporting period, the remuneration Partially compliant The Company has implemented the Regulation on Incentives for members of the developed by the remuneration committee and committee reviewed the remuneration policy (policies) Board of Directors approved by the company’s board of directors. and the practice of its (their) introduction and, if necessary, With the support of the remuneration committee, presented the relevant recommendations to the board of the board of directors shall monitor the introduction directors and implementation of the remuneration policy at the company and, if necessary, review and make changes to the policy
4.1.3 The company’s remuneration policy shall contain 1. The company’s remuneration policy (policies) contains Compliant transparent mechanisms for determining (contain) transparent mechanisms for determining remuneration levels for members of the company’s remuneration levels for members of the company’s board board of directors, executive bodies, and other of directors, executive bodies, and other key managers and key managers and shall also regulate all forms of also regulates (regulate) all forms of payment, benefits, and payment, benefits, and privileges granted to these privileges granted to these individuals individuals
4.1.4 The company shall determine the policy for the 1. The company’s remuneration policy (policies) or other Compliant reimbursement of expenses (compensation), internal documents establishes (establish) rules for the which specifies the list of expenses subject to reimbursement of expenses of members of the company’s reimbursement and the level of service which board of directors, executive bodies, and other key members of the company’s board of directors, managers executive bodies, and other key managers may seek. Such a policy may be an integral part of the company’s remuneration policy
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
The remuneration system for members of the board of directors shall ensure 4.2 that the directors’ financial interests are consistent with the shareholders’ long-term financial interests
4.2.1 The company shall pay fixed annual remuneration to 1. Fixed annual remuneration was the only monetary Compliant In 2019, no decision to pay the remuneration to members of the Company’s Board members of the board of directors. form of remuneration paid to members of the board of of Directors was made The company shall not pay remuneration for directors for their work on the board of directors during the participation in individual meetings of the board or reporting period committees of the board of directors. The company shall not employ forms of short-term motivation or additional material incentives for members of the board of directors
4.2.2 Long-term ownership of the company’s shares 1. If an internal document(s) — the company’s remuneration Compliant The UWC remuneration policy does not provide for the provision of the Company’s is most conducive to ensuring that the financial policy (policies) — provides (provide) for the provision shares to members of the Board of Directors interests of members of the board of directors of the company’s shares to members of the board of are consistent with the long-term interests of directors, clear rules that aim to encourage long-term shareholders. Moreover, the company does not make share ownership should be provided and disclosed for the the right to sell shares conditional upon achieving ownership of shares by members of the board of directors certain performance indicators, and the members of the board of directors do not participate in option programmes
4.2.3 No additional payments or compensation shall be 1. The company does not offer any additional payments or Compliant provided in the event of the early termination of compensation in the event of the early termination of the the powers of members of the board of directors powers of members of the board of directors in connection in connection with a change in control over the with a change in control over the company or other company or other circumstances circumstances
The remuneration system for the company’s executive bodies and other key managers 4.3 shall ensure that remuneration depends on the results of the company’s operations and their personal contribution to the achievement of these results
4.3.1 Remuneration for the company’s executive bodies 1. During the reporting period, annual performance Non-compliant In 2020, the Company is committed to developing a system of variable remuneration and key managers shall be determined in such a way indicators approved by the board of directors were used for the Company’s key employees as to ensure a reasonable and justified correlation to determine the size of the variable remuneration for between the fixed portion of the remuneration and members of the company’s executive bodies and other key the variable component of the remuneration, which managers. depends on the results of the company’s operations 2. During the latest assessment of the system of and an employee’s personal (individual) contribution remuneration for members of the company’s executive to the end result bodies and other key managers, the board of directors (remuneration committee) made sure that the company applies an effective ratio of the fixed portion of remuneration and the variable portion of remuneration. 3. The company has a procedure in place to ensure that bonuses that were wrongly received by members of the company’s executive bodies and other key managers are returned to the company
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
4.3.2 The company shall introduce a long-term incentive 1. The company has introduced a long-term incentive Non-compliant Incentives for members of executive bodies and other key managers of UWC using programme for members of the company’s executive programme for members of the company’s executive the Company’s shares are not provided. The Company will review the relevance of bodies and other key managers using the company's bodies and other key managers using the company’s shares implementing the long-term incentive programme for members of executive bodies shares (options or other derivative financial (financial instruments based on the company’s shares). and other key managers using the Company’s shares (financial instruments based on instruments for which the company’s shares are the 2. The long-term incentive programme for members of the Company’s shares) after considering the Strategy of PJSC «RPC UWC» base asset) the company’s executive bodies and other key managers stipulates that the right to sell shares and other financial instruments used in such a programme shall take effect no earlier than three years after they are granted. Moreover, the right to sell them is dependent on the achievement of certain indicators in the company’s operations
4.3.3 The amount of compensation (golden parachute) 1. The amount of compensation (golden parachute) paid Compliant paid by the company in the event of the early by the company in the event of the early termination termination of the powers of executive bodies or of the powers of executive bodies or key managers key managers at the company’s initiative and in the at the company’s initiative and in the absence of any absence of any unscrupulous action on the part of unscrupulous action on their part did not exceed double said executive bodies or key managers shall not be the fixed component of annual remuneration during the more than double the fixed component of annual reporting period remuneration
The company shall have an effectively functioning risk management and internal control system 5.1 that is designed to provide reasonable assurance that the company’s goals shall be achieved
5.1.1 The company’s board of directors shall determine 1. The functions of the company’s various management Compliant In accordance with the requirements of existing legislation, the Risk Management the principles of and approaches to the bodies and departments within the risk management and and Internal Control Policy of PJSC «RPC UWC» was drafted and approved in 2018 establishment of the risk management and internal internal control system are clearly defined in the company’s control system within the company internal documents / relevant policies approved by the board of directors
5.1.2 The company’s executive bodies shall provide for 1. The company’s executive bodies ensured the distribution Compliant An independent risk management unit is operating in UWC. The risk management the establishment and continued functioning of of functions and powers with respect to risk management unit keeps the Risk Chart, as well as establishes and maintains the relevant status of an effective risk management and internal control and internal control among the managers (heads) of the risk management policy, which the Company’s functional units use to identify system at the company departments and units that are accountable to them and minimise the risks. Moreover, the risk management unit regularly provides information to UWC’s management about current risks and monitors implementation of measures for their hedging
5.1.3 The company’s risk management and internal control 1. The company has approved an anti-corruption policy. Compliant See the comments to principles 5.1.2 system shall provide an objective, fair, and clear 2. The company has established an accessible way of picture of the current situation at the company and informing the board of directors or the audit committee of its prospects and also ensure the completeness and the board of directors about violations of the law, internal transparency of the company’s financial statements procedures, and the company’s code of ethics and the advisability and acceptability of risks taken by the company
5.1.4 The company’s board of directors shall take all 1. During the reporting period, the board of directors or Compliant The UWC Annual Report presents an assessment of the effectiveness of the necessary and sufficient measures in order to be the audit committee of the board of directors conducted Company’s risk management and internal control system confident that the risk management and internal an assessment of the effectiveness of the company’s risk control system in effect at the company complies management and internal control system. Information with the principles of and approaches to its on the main results of this assessment is included in the organisation, and that it functions effectively company’s annual report
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
The company shall make arrangements for an internal audit in order to conduct 5.2 a systematic independent assessment of the reliability and efficiency of the risk management and internal control system and corporate governance practice
5.2.1 The company shall establish a separate structural 1. The company has established a separate structural Compliant unit or hire an independent external organisation to internal audit unit that is functionally accountable to conduct an internal audit. the board of directors or audit committee, or hired The functional and administrative accountability of an independent external organisation with the same the internal audit unit are differentiated. The internal accountability principle in order to conduct an internal audit unit is functionally subordinated to the board audit of directors
5.2.2 The internal audit unit performs the efficiency 1. During the reporting period, the effectiveness of the Compliant assessment of the internal control system, the risk internal control and risk management system was assessed management system, and the corporate governance as part of the internal audit. system 2. The company uses generally accepted approaches to internal control and risk management
The company and its performance are transparent for shareholders, 6.1 investors and other stakeholders
6.1.1 The company shall develop and introduce an 1. The company’s board of directors approved the Compliant The Company fully discloses information in a timely manner in accordance with the information system that ensures effective information company’s information policy that was drafted taking into Regulation on Information Disclosure by Issuers of Issuable Securities (approved by cooperation between the company, its shareholders, account the recommendations of the Code. the Bank of Russia on 30 December 2014 as No. 454-P) investors, and other stakeholders 2. The Board of Directors (or one of its committees) reviewed issues related to the company’s compliance with its information policy at least once during the reporting period
6.1.2 The company shall disclose information on its 1. The company discloses information on the corporate Compliant corporate governance system and practice, including governance system at the company and the general detailed information on its compliance with the principles of corporate governance employed by the principles and recommendations of this Code company, including on the company’s Internet website. 2. The company discloses information about members of the executive bodies and the board of directors and the independence of the board members and their membership in the committees of the board of directors (in accordance with the definition given in the Code). 3. If there is an entity that controls the company, the company publishes the controlling entity’s memorandum regarding the entity’s plans for corporate governance at the company
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No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
The company shall disclose full, up-to-date, and reliable information about itself 6.2 in a timely manner so that its shareholders and investors can make well-informed decisions
6.2.1 The company shall disclose information in 1. The company’s information policy describes the Compliant The Company fully discloses information in a timely manner in accordance with the accordance with the principles of regularity, approaches and criteria for determining information that Regulation on Information Disclosure by Issuers of Issuable Securities (approved by consistency, and efficiency as well as the principles could have a significant impact on the company’s valuation the Bank of Russia on 30 December 2014 as No. 454-P) of accessibility, reliability, completeness, and and the value of its securities as well as procedures that comparability ensure the timely disclosure of such information. 2. If the company’s securities circulate on organised foreign markets, the disclosure of material information in the Russian Federation and in such markets is carried out simultaneously and equivalently over the course of the reporting year. 3. If foreign shareholders own a significant number of shares in the company, information was disclosed not only in Russian, but also in one of the most common foreign languages during the reporting year
6.2.2 The company shall avoid a formal approach to the 1. During the reporting period, the company disclosed Compliant disclosure of information and shall disclose material annual and semi-annual financial statements prepared in information on its operations, even if the disclosure accordance with IFRS. The company’s annual report for of this information is not stipulated by the law the reporting period includes annual financial statements prepared in accordance with IFRS along with an audit report. 2. The company discloses full information on its capital structure in accordance with Recommendation 290 of the Code in the annual report and on the company’s Internet website
6.2.3 As one of the most important instruments in 1. The company’s annual report contains information on Compliant the company’s information cooperation with its key aspects of the company’s operations and its financial shareholders and other interested parties, its results. annual report shall contain information that makes 2. The company’s annual report contains information on it possible to assess the results of the company’s the environmental and social aspects of the company’s operations over the course of the year operations
The company shall supply information and documents based on the requests of shareholders 6.3 in accordance with the principles of equal and unhindered access
6.3.1 The company shall provide information and 1. The company’s information policy describes the Compliant documents based on requests from shareholders simplified procedure for providing shareholders with in accordance with the principles of equal and access to information, including information about legal unhindered access entities controlled by the company, based on requests from shareholders
174 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 175 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
6.3.2 When the company supplies information to 1. During the reporting period, the company did not deny Compliant shareholders, it shall ensure a reasonable balance any requests from shareholders for information, or such between the interests of specific shareholders refusals were justified. and the interests of the company itself, which 2. In cases determined by the company’s information policy, is interested in preserving the confidentiality of shareholders are warned about the confidential nature of important commercial information that may have a the information and pledge to keep it confidential significant impact on its competitiveness
Actions that have or could have a significant influence on the structure of the company’s share capital and its financial situation and, consequently, 7.1 on the position of shareholders (major corporate actions) shall be conducted under equal conditions that ensure the observance of shareholders’ rights and interests as well as those of other stakeholders
7.1.1 The following is classified as major corporate actions: 1. The company’s charter specifies a list of transactions or Partially compliant The Company’s Charter and the Policy for Approving Transactions and Other Issues the reorganisation of the company, the acquisition of other actions that constitute major corporate actions and of PJSC «RPC UWC» and the companies belonging to the PJSC «RPC UWC» group 30 or more percent of the company’s voting shares criteria for their determination. The adoption of decisions of entities provide for a list of transactions which are major corporate actions. (acquisition), the conclusion of major transactions concerning major corporate actions falls within the purview The adoption of decisions concerning material corporate actions falls within the by the company, an increase or reduction in the of the board of directors. In cases where the performance purview of the board of directors. Thus, in accordance with the provisions of the company’s charter capital, the listing or delisting of of these corporate actions directly falls within the purview Company’s Charter, determination of priority areas of the Company’s operations and the company’s shares as well as other actions that of the general meeting of shareholders by law, the board the principles of forming and using its property also falls within the purview of the could lead to a significant change in the rights of of directors provides relevant recommendations to board of directors. shareholders or a violation of their interests. The shareholders. In cases where the performance of these corporate actions directly falls within company’s charter shall provide a list of transactions 2. The company’s charter regards major corporate actions the purview of the general meeting of shareholders by law, the board of directors (criteria) or any other actions that constitute major as at least: the company’s reorganisation, the acquisition provides relevant recommendations to shareholders corporate actions, and assign consideration of these of 30 or more percent of the company’s voting shares actions to the company’s board of directors (acquisition), the conclusion of major transactions by the company, an increase or decrease in the company’s charter capital, and the listing and delisting of the company’s shares
7.1.2 The board of directors shall play a key role 1. The company has a procedure whereby independent Non-compliant The Company’s Board of Directors plays a key role in carrying out major corporate in decision-making and the preparation of directors declare their position on major corporate actions actions. The Company complies not only with current legislative requirements but recommendations concerning major corporate prior to their approval also with the Code — the Policy for Approving Transactions and Other Issues of PJSC actions and rely on the positions of the company’s «RPC UWC» and the companies belonging to the PJSC «RPC UWC» group of entities independent directors was approved and is being implemented
7.1.3 When carrying out major corporate actions 1. The company’s charter has criteria that is lower than the Compliant that affect the rights and legitimate interests of minimum criteria envisaged by legislation for classifying the shareholders, equal conditions shall be ensured for company’s transactions as major corporate actions taking all of the company’s shareholders. If there are not into account the peculiarities of the company’s activities. sufficient mechanisms stipulated by law to protect 2. During the reporting period, all major corporate actions the rights of shareholders, additional measures were approved prior to their implementation protecting the rights and legitimate interests of the company’s shareholders shall be taken. In this case, the company shall not only be guided by compliance with the formal requirements of legislation, but also by the principles of corporate governance outlined in this Code
176 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 177 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
No. Corporate governance principles Criteria for evaluating the compliance with the corporate Status of compliance with the Explanation of the deviations from the criteria for evaluating the conformance governance principle corporate governance principle to the corporate governance principle
The company shall establish a procedure for the conclusion of major corporate actions that enables shareholders to promptly obtain complete information about these actions 7.2 which provides them with the opportunity to influence these actions and guarantees the observance of and an adequate level of protection for their rights when taking such actions
7.2.1 Information about major corporate actions shall be 1. During the reporting period, the company promptly Compliant disclosed along with an explanation of the reasons disclosed information about its major corporate actions in for, the terms of, and the consequences of such detail, including the reasons and deadlines for such actions actions
7.2.2 The rules and procedures associated with the 1. The company’s internal documents provide for a Partially compliant The rules and procedures associated with the Company’s implementation of major company’s implementation of major corporate procedure to hire an independent appraiser to determine corporate actions are enshrined in the Company’s internal documents. actions are enshrined in the company’s internal the value of property being alienated or acquired in a If there is a need to involve an independent appraiser to determine the value of documents major transaction or a related-party transaction. the Company’s property/shares, an independent appraiser will be involved in 2. The company’s internal documents provide for a accordance with the procedures established in the Company, applicable to the procedure to hire an independent appraiser to estimate the Company’s procurement activities cost of acquiring and buying back the company’s shares. 3. The company’s internal documents provide for an expanded list of the grounds on which members of the company’s board of directors and other persons envisaged by law are deemed to be interested in a transaction by the company
178 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 179 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Glossary
Industrial Site — a group of industrial Slack adjuster — a device that is part of brake rigging. It is needed to Lignosulfonates — salts of Oleum — a solution of sulfuric anhydride SO3 in 100% sulfuric acid. It is used enterprises of RPC UWC located in compensate for brake pad wear during operation. lignosulfonic acids and products in the industry for the production of sulfuric acid, caprolactam, and many Tikhvin, Leningrad Region. made from the technological other substances. Lean production — an enterprise management concept based on the constant processing of raw wood materials. JV — joint venture. desire to eliminate all types of losses. It involves the optimisation of each It is used in the production of Homologation procedure — the improvement of an object or technical employee and the maximum focus on the customer. concrete and drilling fluids, binder characteristics in order to meet a consumer’s standards and requirements. It 5S — one of the lean production tools components, dyes, and a number of also refers to documentary evidence of such compliance. to maintain order in the workplace. Big bag — a container made from polypropylene fabric with a load capacity other products. It determines the most rational from 300 to 3,000 kg, which has from one to four loops (slings). Axle load — the load on the rails from the wheel set of a railcar loaded to full arrangement of tools and materials, Critical equipment — critical capacity. which is visualised using markings, ”VNICTT” LLC — All-Union Research and Development Center for Transport equipment that does not have configurations, and charts. Technology. backups or has a high load Flat car — a railcar that is designed to transport long loads (timber, pipes, and and whose failure would stop metal structures), containers, and large-sized equipment, among other things. ERP System — a system used to Sodium hydroxide, caustic soda — caustic water-soluble alkali. It is used in production. manage an enterprise’s resources food, cosmetics, pulp and paper, and oil refining industries. Gondola car — the most common type of freight car. It is designed to transport and assets. Gross weight — the sum of the load bulk and piece cargo that does not require protection from precipitation (iron Glycols — a class of organic compounds used in industry as solvents and capacity and tare (empty railcar). ore, crushed stone, coal, grain, etc.). Motion Control — a Motion Control plasticisers, antifreeze, as well as brake and hydraulic fluids. 18-9836 bogie with a 25-tf axle load Tare weight — own weight of an A3-format project — a production system tool used to engage staff in problem created by Amsted Rail designers Load capacity — the largest mass of cargo that a railcar can transport. empty railcar. solving. It links the problem, cause, elimination method, experiment, specifically for use under railcars as assessment, and monitoring of the results. part of freight trains on 1,520-mm Intermediate depot maintenance — railcar repairs that are carried out Standardised work principle — gauge tracks. It has an improved between major repairs to restore serviceability and the overhaul operation life the most efficient sequence of Sulfuric acid (H2SO4) — a highly reactive acid, and contact with this acid leads suspension system for better riding with the replacement or restoration of individual components. operations based on a person’s to the carbonisation of wood, sugar, and other organic substances. It is used qualities and bogie stiffness, which movement, which ensures quality in the production of mineral fertilisers, chemical fibers, dyes, and batteries, in reduces bogie, wheel and rail wear. Kaizen — the practice of continuous improvements to production processes, and safety and is documented the processing of ores of rare metals and industrial organic synthesis as well business processes, and management which involves all personnel. with standardised work forms. as in the oil, metalworking, textile, leather, food, and other industries. TPM (Total Productive The principle makes it possible to Maintenance) — a methodology used Coal tar — a complex mixture of organic compounds that occurs during the determine the load of personnel, Side bearing — an additional lateral support between the frame of a railcar to improve the equipment efficiency production of blastfurnace coke. Benzene, toluene, naphthalene, coal oils (tar, identify losses that increase the and the bogie that keeps the body from tipping over under asymmetrical through analysis, maintenance, and a anthracene), and other products are obtained from coal tar. cycle time of the product being loads. continuous reduction of losses (zero manufactured, and level the flow of breakdowns, zero defects, and zero Overhaul — an obligatory type of repair that is performed to restore the production line. TSI Standards (Technical Specifications for Interoperability) — the accidents) with the involvement of all serviceability and full or close to full restoration of a railcar with the specifications developed by the European Union Agency for Railways (ERA) personnel in the process. replacement or repair of any of its components and parts, including basic Multimodal shipping — the shipping and approved by the resolution of the European Commission, aimed at ones. of a freight consignment using ensuring the compatible trans-European rail system. UIC (French — Union Internationale multiple types of transport (e.g. des Chemins de fer, English — CAM — сarbamide-ammonia mixture. water, rail, and road). LPG — liquefied petroleum gas. International Union of Railways, Russian — Международный союз Box car — a railcar that is closed on all sides and designed to protect cargo RPC — Research and Production Tandem railcar dumper — a special facility for automated unloading of railcars железных дорог) — an international from precipitation and damage. It is used to transport food, household Centre. with bulk cargo (ore, coal, grain). organisation that brings together appliances, building materials, equipment, and paper, among other things. national railway companies to jointly solve problems concerning the development of railway transport.
180 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 181 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report 5. Corporate Social Responsibility 6. Corporate Governance Appendices
Tank container — transport Bogie — the chassis of a railcar, which supports its movement on the tracks. It equipment aimed at safe includes the frame, wheelsets, spring suspension system (to soften the blows Contact Information transportation of cargo by road, and reduce the amplitude of the car’s oscillations), and the braking system. rail and sea within the country and abroad, as well as loading-unloading M&R — maintenance and repairs. Public Joint Stock Company «Research and production operations and temporary storage corporation «United Wagon Company» (PJSC «RPC UWC») of liquid and freezing safe and JSC TAP “Titran-Express” — JSC Tihvin Assembly Plant “Titran-Express”. 10 Arbat St., Moscow, Russia, 119002 hazardous cargo. It has a frame (frame elements), and a tank or tanks TikhvinSpetsMash — JSC “TikhvinSpetsMash”. Tel.: +7 (499) 999-15-20 equipped with operating devices which enable to use it properly. TikhvinChemMash — JSC “TikhvinChemMash”. Fax: +7 (499) 999-15-21
[email protected] TVSZ — JSC “Tikhvin Freight Container flat car — a flat car that is designed for the transport of large- Car Building Plant”. capacity containers and equipped with specialised units for their attachment https://www.uniwagon.com/en/ (flat car supports). Uncoupled car repair (TOR in Russian) — a repair performed to Hopper car — a self-unloading railcar with a body in the form of a funnel and Contact information for investors restore a freight car’s operating floor-based hatches for the transport of bulk cargo (coal, grain, ore, cement, capacity with the replacement or and fertiliser). Directorate for Corporate Finance and Investor Relations restoration of individual parts. The [email protected] railcar is uncoupled from the train Tank car — a railcar for the transportation of liquid cargo (oil and petroleum and transferred to specialised tracks products, liquefied natural gas, acids, alkalis, etc.) as well as fine powders for this purpose. (flour, talc, etc.). Contact information for shareholders Corporate Relations Directorate
Contact information for media Corporate Communications Directorate
Registrar Joint Stock Company “Independent Registrar Company R.O.S.T.” Office IX, 18 bldg. 5B, Stromynka St., Moscow, 107076
Tel: +7 (495) 780-73-63
Fax.: +7 (495) 780-73-67
https://www.rrost.ru/en/
182 Annual Report of PJSC «RPC UWC» for 2019 www.uniwagon.com 183 1. UWC Profile 2. Strategic Report 3. Operational Overview 4. Financial Report
184 Annual Report of PJSC «RPC UWC» for 2019