27 October 2011
Centrenergo (UX: CEEN UK, BUY) and Zakhidenergo (UX: ZAEN UK, BUY) reported 3Q11 financials on October 25. Centrenergo`s revenues were up 33% y-o-y to USD 251.6 mln in 3Q11, its EBITDA margin increased to 20%, up 14 pp y-o-y. Zakhidenergo reported 57% y-o-y growth in sales to USD 242.6 mln in 3Q11, and EBITDA margin of 8%, down 2 pp y-o-y. Yegor Samusenko: All GenCos reported strong EBITDA margins, reflecting surprisingly high electricity tariffs in 3Q11 which remained almost flat from 2Q11, when they posted their best earnings. While the price of coal, a key cost component, increased in 3Q11, the growth (approximately 7%) took place only since September, affecting only one month of operations in 3Q11. For Centrenergo, the spike in EBITDA margin to 20% in 3Q11 was fueled by a one-off tax benefit of USD 18 mln (7% of 3Q11 sales). Zakhidenergo’s revenue growth of 57%, the highest in the sector, is attributable to highest electricity output growth. We expect 4Q11 results to be weaker, as the coal price increase since September will be fully accounted for in the cost side, while electricity prices should decrease due to seasonally higher share of lower-paying household consumers in the consumption structure. Nevertheless, we increase our forecasts of GenCos EBITDA margins in 2011E sector-wide by 1.5x-2x, reflecting unexpectedly strong profitability figures in 3Q11.
GenCos` key 3Q11 financials, USD mln
CEEN DNEN DOEN ZAEN
Revenue 251.6 291.1 133.3 242.6
y-o-y, pp 33% 28% 33% 57%
Gross margin 15% 18% 11% 11%
y-o-y, pp 7% 2% 3% -4%
EBITDA 51.3 48.5 10.8 20.1
mgn 20% 17% 8% 8%
y-o-y, pp 14% 4% 3% -2%
Net Income 47.4 31.5 6.1 14.2
mgn 19% 11% 5% 6%
Source: Company data, Concorde Capital