Komsomolets Donbasa has strong 2011, stronger 1Q12

DTEK Mine Komsomolets Donbasa (SHKD UK), Ukraine’s fourth largest energy coal miner, released its 2011 annual report yesterday. Revenue increased 28% yoy to USD 191 mln, on a 4.5% yoy increase in its average coal price (to USD 57/t). At the same time, coal mining grew just 3.3% yoy to 4.26 mmt (7.4% of total energy coal mined in Ukraine). All the mined coal was reportedly supplied to related parties: DTEK Trading and DTEK Vostokenergo. Production costs increased 11% yoy to USD 45.2/t (vs. Ukraine’s average of USD 109.6/t). Finally, Komsomolets Donbasa reported a 59% yoy increase in 2011 EBITDA to USD 71 mln (EBITDA margin of 37%), and positive net income of USD 15 mln (vs. USD 3 mln loss a year ago). In 1Q12, its EBITDA margin was 47% (EBITDA was USD 32 mln), with net income nearly reaching the FY11 number: USD 14 mln.

Alexander Paraschiy: Komsomolets Donbassa remains one of the most cost-efficient mines in Ukraine due its scale effect and technology advantages. At the same time, the mine’s huge exposure to related parties does not allow its minority shareholders to fully benefit from its cost efficiency. For reference, the achieved average price for Komsomolets’ coal was at a 17% discount the price of Sadovaya Group (SGR PW, USD 69/t in 2011), which focuses on the same coal grade. The 1Q12 data suggests the company is starting to sell its coal closer to the market price, but we will see whether this trend continues.