Bogdan Motors 1Q13 net loss down 27x yoy

Bogdan Motors (LUAZ UK) reported a 27x yoy squeeze in its net loss to UAH 3.0 mln in 1Q13, according to Interfax, citing the company’s financials released on May 13.

The company’s revenue fell 3.4x yoy to 253.0 mln, while gross profit declined 5.5x yoy to UAH 13.8 mln with a gross margin of 5.4% (down 3.5 pp. yoy). The company reported a UAH 12.2 mln operating profit in 1Q13 vs. a UAH 24.8 mln loss from operations last year.

On the operational side, Bogdan reported a 4.1x decline in vehicle production to just 1,175 units in 1Q13. Management expects an overall 25% yoy increase in production to about 16,800 vehicles in 2013, based on preliminary sales agreements.

Roman Dmytrenko: The slower pace of its sales decline, as compared to production, indicates that Bogdan’s dealership segment (Korean car imports to Ukraine) is partially offsetting production/export losses after the Russian government imposed a protectionist recycling fee on imported vehicles in September, thus squeezing Bogdan-made cars out of the market. In this respect, management’s guidance of 25% yoy production growth for 2013 seems overly optimistic.

We are also concerned by the sustainability of the company’s dealership segment performance, considering that 60% mom local car market growth in March was mainly attributed to a sales rush ahead of an additional duty imposed on imported cars in Ukraine. With the duty validated in April, we now expect to see some pullback in new car sales that will erode Bogdan’s revenue even further. Overall, we expect Bogdan to report another year of losses in 2013.