Centrenergo improves sales 35% yoy, EBITDA 8% yoy in 9M12

Centrenergo (CEEN UK), the state-controlled Ukrainian electricity generator, reported 35% yoy growth in 9M12 revenue to UAH 6.91 bln, caused mainly by growth in production (+32% yoy). A decline in the average coal price allowed the company to improve EBITDA 8% yoy to UAH 742 mln, while a 7x increase in tax expenses caused a 8% decrease in the company’s bottom line to UAH 458 mln in 9M12. For 3Q12 alone, the company reported 22% qoq growth in revenue (on a 36% qoq increase in power output), while lowered tariffs forced it cut EBITDA 8% qoq and net income 20% qoq.

Alexander Paraschiy: Centrenergo’s slight deterioration in profitability in the third quarter was broadly expected, as the company’s sticky tariffs failed to compensate for cost inflation. We expect the trend will worsen in 4Q, when producers’ tariffs seasonally decline in Ukraine, while Centrenergo’s financials so far this year suggest it will end 2012 with a profit. What is worrying is that most operating profit for the period has been stuck in working capital: receivables grew UAH 561 mln YTD, and cash balance remained low at UAH 22 mln, thus limiting the company’s liquidity on the eve of the peak power production season.