Sadovayas revenue rises 1.4x yoy, income 1.3x yoy in 2011

Sadovaya Group (SGR PW), an independent coal miner, filed its annual report for 2011 last Friday: revenue amounted to USD 90.1 mln (+38% yoy, +4% compared to management guidance), out of which USD 83.9 mln was revenue from coal sales (+33% yoy). EBITDA was USD 15.8 mln (+3% yoy, in line with guidance) and bottom line totaled USD 10.3 mln (+31% yoy, 22% below the guidance). Cash flow from operations was negative at USD 9.3 mln due to a USD 24 mln increase in working capital and cash balance declined by USD 31.3 mln yoy to USD 1.2 mln. The company’s debt balance grew 10% yoy to USD 18.6 mln, while its cost of debt dropped from 21.8% as of end-2010 to an estimated 9.5% as of end-2011.

Alexander Paraschiy: As the company pre-announced its 2011 financials a month in advance, the reported results did not add big surprises. The increased inventories and receivables by a significant USD 20 mln yoy were also anticipated, given the warm November-December 2011. The company’s achieved coal price, USD 66/t in 2011, was 16% higher yoy in local currency terms – in line with market price growth, suggesting the company was able to retain its customer base even in an environment of increasing concentration on the domestic coal market. With the 2011 results in hand, we believe the company should be able to slightly outperform its guidance for 2012.