Sadovaya cuts EBITDA by 20% in 3Q12, 4Q to be much worse

Coal miner Sadovaya Group (SGW PW) reported a 42% yoy decrease in revenue to USD 36.3 mln in 9M12, EBITDA declined 48% yoy to USD 7.3 mln, and the bottom line was cut more than 3x to USD 3.3 mln. In 3Q12, revenue declined 30% qoq to USD 9.0 mln, EBITDA dipped 20% qoq to USD 2.4 mln, and net income plunged 4x to USD 0.5 mln. Net debt grew 15% to USD 38.7 mln as of end-September, compared to end-June. Finished goods inventories increased 30% to USD 5.5 mln during the quarter. The Group stated that production at Sadovaya mine remains suspended due to weak demand, repairs are continuing at the Rassvet-1 Mine, and no guidance was offered regarding an expected resumption of coal mining.

Roman Topolyuk: As the reported financials imply,　the 31% qoq decrease in　coal sales　to　134　kt　in 3Q12　was exacerbated by　a 12% increase in　the　cost of goods sold per tonne, while selling price inched up 2% to USD 67 per tonne. Thus, the unexpected hike in profitability in 2Q12 proved to be unsustainable. With two mining subsidiaries remaining idle in mid-November, as well as an enrichment facility operating in testing mode, the 4Q12 financials will worsen sharply.