Coal Energy doubles monthly coal production in May, still 17% lower yoy

Steam and coking coal miner Coal Energy (CLE PW) more than doubled its total coal production in May to 24.8 kt (+118.6% m/m), though it was still lower 17% yoy. The company produced 105 kt of coal in 11FY15 (ending in June), which is an 83% yoy decline. The company’s operating performance continues to be constrained, as 80% of its mining assets are located on the occupied territory of Donbas and dangerous working conditions and logistics disruptions remain.

Roman Topolyuk: Coal Energy is on track to recovery with coal in high demand, but the company is still operating at a reduced capacity load because of the ongoing military conflict in Donbas. A substantial part of Coal Energy’s operations has been in coal trading, which might generate positive EBITDA, but it might be insufficient to cover fixed costs in its mining segment and service its USD 71 mln debt (the details of its trading segment haven’t been disclosed in its monthly reports). We believe the company won’t be able to reach a sustainable level of operations until a lasting peace is established in the region.