Coal Energy EBITDA falls 82% yoy in 9MFY14, reports large net loss

Steam and coking coal producer Coal Energy (CLE PW) reported weak 9MFY14 financials (June 2013 – March 2014) on May 26, which it attributed to falling coal market prices and hryvnia devaluation. The company’s revenue decreased 19% yoy to USD 84.7 mln in 9MFY14, while EBITDA plunged 5.5x yoy to USD 4.2 mln. Its bottom line plunged to a USD 26 mln loss compared to a USD 5 mln gain in 9MFY13.

Elevated financial costs, which jumped 4x to USD 21 mln, contributed to the adverse financial results, as well as additional costs of keeping mines idle of USD 10 mln (compared to USD 0.4 mln a year ago). Coal Energy reduced total debt 17% qoq to USD 97 mln during 3QFY14, while its debt-to-equity grew from 1.2x as of end-December 2013 to 2.1x as of end-March 2014. The company reported it was doing some trial deliveries of coal to export markets, but its export sales dropped 33% qoq in 3QFY14.

Roman Topolyuk: Coal Energy’s financials kept worsening in 3QFY14 as weakening market conditions were exacerbated by hryvnia devaluation, a currency in which the bulk of the company’s revenue is denominated. 39% of the company’s total debt is maturing in one year, which we suspect it could be struggling to repay and can have potential problems with its servicing. The ability of Coal Energy’s management to extend the maturity of its short-term loans and get some relief in interest payments will be a significant factor in the company’s business sustainability in 2014, as we don’t expect any market recovery by the year end. We think it’s a risky asset despite the stock trading at historically low levels.