DTEK Energy revenue falls 20% qoq, EBITDA 43% qoq in 2Q16

Ukraine’s leading utility holding DTEK Energy (DTEKUA) reported a 20% qoq decrease in net revenue to UAH 25.3 bln in 2Q16, according to its preliminary report released on Sept. 1. Its operating costs (net of wages) decreased 24% qoq to UAH 19.2 bln, which enabled reporting only a 3% qoq decline in gross profit (before wages). Its EBITDA fell much sharper, by 43% qoq to UAH 1.2 bln, which seems to be a result of provisioning of bad receivables, which rose 73% qoq to UAH 0.75 bln. Net of provisioning, DTEK’s EBITDA decreased 24% qoq to UAH 2.0 bln. This result is generally confirmed by DTEK’s operating cash flow before working capital change, which fell 21% qoq to UAH 1.7 bln in 2Q16.

DTEK Energy’s CapEx for the quarter was UAH 1.5 bln (broadly flat qoq) and its debt balance also remained nearly unchanged qoq at UAH 72.6 bln. Its average monthly cash balance was UAH 1.15 bln in 2Q16.

The preliminary data suggests DTEK’s revenue advanced 25% yoy to UAH 57.0 bln and EBITDA increased 15% yoy to UAH 3.4 bln in 1H16.

Alexander Paraschiy: DTEK’s claimed 2Q16 results look too poor to be true, in our view. In particular, the holding’s 20% qoq decrease in revenue cannot be explained by a decrease in sales of power generated (which should have decreased by 8-10% qoq, we estimate), by the performance of its coal-mining segment (we detected no decrease in coal sales, meanwhile coal exports rose 83% qoq) nor by power distribution (which only fell 12% qoq). What we can state confidently is that DTEK’s final 2Q16 results will be much stronger, on much better electricity and coal pricing. Thus far, we are keeping our neutral view on DTEKUA Eurobonds.