Naftogaz revenue falls 39% yoy, net loss jumps 2.3x yoy in 1H13

Naftogaz of Ukraine (NAFTO), a natural gas production and transit state holding company, reported a 39% yoy drop in its IFRS-based revenue to USD 4.77 bln. The decline was caused by 41% yoy fall in volume of gas sold to 15.80 bcm and 11% yoy decrease in gas transit volume to 39.35 bcm in 1H13. The gas monopoly’s negative EBITDA deepened 3.7x yoy to -USD 0.59 bln, and net loss grew 2.3x yoy to USD 1.25 bln in 1H13.

In 2Q13 alone, Naftogaz generated USD 1.43 bln in revenue (down 52% yoy), USD 2 mln in EBITDA (vs. USD 129 mln in 2Q12) and a USD 281 mln net loss (up 7.3x yoy). The volume of gas sold decreased 2.3x yoy to 3.78 bcm in 2Q13, while gas transit volume fell by a moderate 4% yoy to 19.06 bcm.

Alexander Paraschiy: These results imply Naftogaz is losing its market share in the domestic gas market, whereas privately owned Ostchem is gaining more clients, mainly on a significant increase in Russian gas imports this year. Naftogaz’s profit expectedly worsened with Ostchem taking the profitable niche of industrial consumers, while the state company remains saddled with the loss-producing sectors of households and heating companies.

As soon as more private companies start importing gas (including DTEK), we expect Naftogaz’s revenue and profit will further deteriorate in 2H13. The amended budget of Naftogaz stipulates the state holding will receive a UAH 10.7 bln (USD 1.33 bln) equity injection in 2H13, in addition to the USD 1 bln it received in January 2013. At the moment, we are not sure that this subsidy will be enough for the holding to fully cover its cash deficit for 2013.