Ukrtelecom posts USD 46 mln profit in 2012, USD 351 mln debt due in 2013

Ukraine’s biggest fixed-line telecom firm Ukrtelecom (UTLM UK) reported on Feb. 25 its 2012 bottom line was UAH 367 mln (USD 46 mln) under IFRS. A year before, the company posted a UAH 137 mln loss under UAS and UAH 21 mln income under audited (consolidated) IFRS financials. The company’s 2012 revenue unexpectedly increased to UAH 6,948 mln (2.7% higher compared to UAS-based 2011 revenue and 5.8% higher compared to the consolidated IFRS-based result). Ukrtelecom’s EBITDA amounted to UAH 1,696 mln, up 2.5% compared to the 2011 UAS-based result (+13.5% vs. the 2011 consolidated IFRS result).

The company’s net debt decreased over the year to UAH 2,567 mln from UAH 2,749 mln. Its long-term debt balance fell to UAH 4 mln as of end-2012 from UAH 1,918 mln as of end-2011, mostly due to  its reclassification into “current portion of long-term debt”. Total short-term debt (including a portion of long-term debt) almost doubled yoy to UAH 1,816 mln (USD 351 mln) as of end-2012.

Alexander Paraschiy: Based on the full year result, the company’s 4Q12 looks unexpectedly weak in terms of its bottom line: net profit for the quarter only amounted to UAH 19 mln (vs. UAH 223 mln in 3Q12) and EBITDA was 20% weaker qoq – and that’s despite the company reported 21% higher revenue qoq. The 4Q12 revenue spike is unprecedented, suggesting Ukrtelecom made a lot of adjustments in its full-year results compared to its interim reporting. In particular, Ukrtelecom might have added back the financial results of its mobile division, which it stopped consolidating since the beginning of 2012.

Ukrtelecom’s increase in the current portion of its long-term debt to USD 299 mn as of end-2012 from USD 92 mln as of end-2011 is a negative surprise to us. Recall, the company took a USD 250 mln credit line from Sberbank in October 2011, explaining that part of the debt is redeemable in 3 years (i.e. in 2014) and another part in 5 years. The fact that Ukrtelecom re-classified this debt as “current portion of long-term” might suggest it has broken some covenants under the Sberbank loan. Whatever the reason of re-classification is, we see it increases the company’s solvency risk.