DTEK Energy operating profit increases 46% in 1Q19

Ukraine’s leading coal and power producer DTEK Energy
(DTEKUA) generated UAH 31.75 bln in net revenue in 1Q19, according to its
abridged quarterly financials. This is a 32% drop yoy that was caused by a
discontinued lease of two Kyiv-based heat and power stations and the spin off
of its electricity distribution segment last year. The company’s operating
profit increased 46% yoy to UAH 5.49 bln, implying its EBITDA advanced 11% yoy
to UAH 7.82 bln. DTEK Energy’s operating cash flow before working capital
changes advanced by 14% yoy to UAH 8.34 bln.

At the same time, its bottom line decreased 5% yoy to
UAH 4.11 bln in 1Q19, which is mostly a result of its foreign exchange gains
plummeting 73% yoy to UAH 0.76 bln.

DTEK Energy generated UAH 1.91 bln in net cash from
operations in 1Q19, down 68% yoy, mostly due to a buildup of its working
capital. Its decreased asset base resulted in a 19% yoy decline in investments
into purchases of its new PP&E, which reached UAH 1.59 bln. On top of that,
the company repaid UAH 1.53 of borrowings in 1Q19 (no repayments a year
before), thereby reducing its total cash balance by UAH 1.62 bln in the
quarter. Its net debt amounted to UAH 55.77 bln as of end-1Q19 (down 1% qoq,
down 3% yoy).

Alexander Paraschiy: It is hard to compare DTEK Energy’s 1Q19 and 1Q18 results, given that,
in fact, the company has gotten rid of many unstable assets. At the same time,
we have been expecting some bigger increase in the company’s EBITDA in the
quarter. As we highlighted before, the company’s 2Q19 results should be much
worse yoy due to lower achieved electricity prices. Most likely, its 1H19
EBITDA will turn out to be slightly weaker yoy. However, this does not change
our positive outlook on the DTEKUA Eurobond.