Druzhkivka Machinery AGM approves USD 5 mln modernization program

At their AGM yesterday Druzhkivka Machinery (DRMZ: BUY) shareholders voted to direct 2007 profits of USD 5.1 mln into modernization. Shareholders formally approved 2007 financials (sales of USD 151.0 mln; EBITDA of USD 14.0 mln), which were made public in mid-April. The AGM also replaced SCM Ltd, the only organization with representation on the supervisory board with Ukrainian Machine Building Holding, which is related to SCM was passed control of SCM’s 65.26% stake in March. Regarding 2008 plans, Druzhkivka Machinery CEO Viktor Belik said that the company will try to maintain sales and net income at their 2007 level, and diversify export destinations further into the CIS and Vietnam. Inna Perepelytsya: We relate the management’s modest plans to political instability, which leads to delays in carrying out tenders for state orders. We believe that by the end of 2008, the state will fully finance equipment purchases for coal mines from the state budget (planned to be 14% higher than in 2007). Sales to state coal mines were 60-70% in 2007. We reiterate our BUY recommendation on the stock.