Centrenergo reports weak 1H19 results

State-controlled power generation company Centrenergo
(CEEN UK) posted 1H19 net revenue of UAH 7,259 mln, or 9% less yoy, according
to its financial report. Its gross profit was negative at UAH 201 mln in 1H19
(down from positive number of UAH 635 mln a year ago). The company reported UAH
1,150 mln of “other operating losses” in 1H19 (up  9x yoy, most likely due
to one-off costs, e.g., writing off or the provisioning of some receivables)
which resulted in a huge reported 1H19 operating loss (UAH 1,390 mln, vs.
profit of UAH 554 mln in 1H18) and net loss (UAH 1,197 mln vs. net profit of
UAH 439 mln in 1H18).

The company’s 1Q19 results were much better, with an
operating profit of UAH 38 mln and net income of UAH 30 mln amid a 3% yoy
decline in net revenue.

Alexander Paraschiy: The radical
weakening in Centrenergo’s P&L in 2Q19 is attributed to much weaker
achieved electricity prices (on average, all Ukrainian thermal power plants got
about a 16% yoy weaker price for their electricity in the quarter). In 2H19,
the situation is likely to improve as now thermal power plants are operating on
a partially deregulated market and are selling their electricity at higher
prices. Nevertheless, unless the company has some large one-off profit in 2H19,
its full-year net income will be negative and it won’t pay any dividends next
year.

The company’s weak 2Q19 results confirm our
expectations that its bigger peer, DTEK Energy (DTEKUA) will also report weak
quarterly financials.