DTEK EBITDA decreases 11%, profit plunges 60% yoy in 1H13

Integrated coal and power holding DTEK (DTEKUA) increased its revenue 19% yoy to UAH 42.9 bln in 1H13, according to its interim report released on September 17. The holding’s only revenue driver was a consolidation effect, as not all of its currently controlled assets were consolidated back in 1H12. At the same time, the holding’s EBITDA decreased 11% yoy (UAH 0.9 bln yoy) to UAH 7.0 bln, mostly driven by a decrease in profit from trading operations and its loss of generous compensation from the state for inefficient heating tariffs that DTEK enjoyed last year. The latter factor slashed EBITDA by UAH 1.3 bln yoy.

Meanwhile, the holding’s operating cash flow before working capital changes underwent an even bigger decline: -21% yoy to UAH 6.1 bln in 1H13. DTEK’s operating profit decreased 38% yoy to UAH 3.4 bln, while net profit fell 60% yoy to UAH 1.2 bln.

The holding’s total debt as of end-1H13 amounted to UAH 23.3 bln and net debt stood at UAH 19.9 bln. With LTM EBITDA of UAH 16.0 bln, its Net Debt/LTM EBITDA ratio amounted to 1.2x. DTEK planned to increase its CapEx 13% yoy in 2013 to UAH 11.6 bln, while it spent about UAH 4.7 mln on CapEx in 1H13.

At a conference call yesterday, the company’s management outlined a plan to increase coal production to about 41 mmt in 2013 (vs. 39.7 mmt in 2012) and keep its power production level flat yoy (power output declined 5% yoy in 1H13). The holding also expects to fully cover losses from its heat generation segment with state compensation for inefficient heating tariffs (in 1H13, the heating segment generated UAH 0.07 bln in operating losses vs. UAH 1.2 bln in operating profit in 1H12).

Alexander Paraschiy: The holding’s bottom line was below our expectations, basically because we overestimated the amount of compensation for heating losses, and its trading segment delivered smaller profitability than we initially expected. Based on the provided numbers, and assuming state compensation for heating losses will be incomplete in 2H13, we see the holding will generate UAH 86.0 bln in revenue in 2013 (+10% yoy), while its EBITDA will reach UAH 14.2 bln (-15% yoy). With its outlined CapEx program in 2013, we expect the holding’s Total Debt/Consolidated Cash Flow will grow to 1.6x by end 2013 (from estimated 1.3x in end-2012), still safe from the 3.0x covenant.