DTEK ups sales 2.1x yoy in 1H12, worsens margins

DTEK (DTEKUA) reported its 1H12 financial results yesterday: revenue rose 107.6% yoy to USD 4.7 bln, EBITDA grew 55.8% yoy to USD 977 mln, and net income increased 11.2% yoy to USD 303 mln. DTEK’s gross margin declined to 16.5% in 1H12, compared to 25.9% a year before, and its EBIT margin slid to 14.5% from 22.7% in 1H11. Net debt stood at USD 1.56 bln as of end-June 2012. The company estimated its net debt to EBITDA ratio at 1.05x, up from 0.63x at the end of 2011.

Roman Topolyuk: The growth in DTEK’s 1H12 financials is explained by the integration of newly acquired enterprises. The company’s profitability came under pressure, fully in line with our expectations, as the company integrated low-margin power distribution businesses. For instance, newly integrated Kyivenergo alone posted a negative EBITDA of USD 86 mln and net losses of USD 98 mln for 1H12, eating away a quarter of DTEK’s profit. Though, we note that Kyivenergo’s effect on DTEK’s consolidated profit will be extremely positive in 2H12, as Kyivenergo is going to receive USD 280 mln in compensation for its past losses from the city of Kyiv (refer to our news of July 25). DTEK’s net debt to EBITDA ratio remains in safe territory so far (compared to its Eurobond covenant of 3x), though we expect this ratio to grow on continuing CapEx programs: DTEK spent USD 524 mln in 1H12, and plans to outlay a further USD 824 mln in 2012.