Westa revenue falls 40% yoy on 26% yoy drop in prices in 1Q12

Westa (WES PW), the CIS’ leading car battery producer, reported financial and operating results for 1Q12: net revenue was down 40% yoy to USD 20.7 mln, on a 19% yoy decrease in battery sales to 726 ths conventional units. The company explained its weaker delivery figures by high accumulated battery stockpiles with traders at the beginning of the year, caused by an unexpectedly warm winter. Westa estimated dealers increased sales of Westa-made batteries 15% yoy to 1 mln conventional batteries in 1Q12, partially via destocking, and sees delayed demand of 0.5-0.7 mln conventional units later this year. The company thus forecasts its battery sales will grow 1.2x-1.3x yoy to 6.0-6.5 mln conventional batteries in 2012. The company’s EBITDA shrank 7x yoy to USD 1.4 mln in 1Q12, and net loss grew 5x yoy to USD 9.1 mln. Westa’s end-1Q12 net debt, USD 183 mln, was down 38% yoy, but grew 3% YTD. The company is planning to hold a conference call today at 15:00 Warsaw time.

Alexander Paraschiy: Though the first quarter is barely indicative of Westa’s full-year performance (as most of sales happen in 2H), the top line result is still disappointing. It implies the company’s average battery price fell much faster than prices for lead (the key battery cost and price determinant). Westa’s average price amounted to USD 28.5/conventional battery in 1Q12, which is down 26% yoy and 3% qoq. For comparison, lead prices on LME fell just 15% yoy and grew 4% qoq in 1Q12. Hopefully this will reverse in 2H12: the company’s anticipation of postponed demand should make battery prices stronger than lead quotes. Another concern is that Westa still has not commissioned its promised VRLA facility, and did not indicate any timeline for its commissioning.