WESTA reports USD 31 mln loss on 38% yoy sales drop in 2012

Leading CIS car battery maker WESTA ISIC (WES PW) reported a 38% decrease in 2012 net revenue to USD 106.6 mln. Sales decreased on reportedly worsened market conditions, which forced the company to cut down on both production and sales of car batteries 25% yoy (to 4.1 mln and 3.8 mln conventional units, respectively). WESTA reported it doesn’t expect any rebound in demand in 1H13, while it revealed its hopes that 2H13 will be stronger yoy. 

The company’s loss for the year amounted to USD 31.4 mln in 2012 (vs. a profit of USD 1.4 mln a year before). The company’s EBITDA dropped 3.6x yoy to USD 7.8 mln, while remaining broadly in line with its operating cash flow before working capital changes (USD 7.5 mln). WESTA’s total debt increased  2% yoy to USD 198.1 mln and net debt increased 13% yoy to USD 195.1 mln.

WESTA’s auditors reported as the basis for their qualified opinion that the company might have underreported its transactions with related parties, and that the auditors were unable to verify counted inventories as of end-2011. On top of that, auditors emphasized their doubt that the company will be able to continue as a going concern.

Alexander Paraschiy: The company’s weak results were broadly expected: while we over-estimated its revenue for the year (by 8%), the company’s EBITDA appeared to be slightly better than we anticipated (USD 3.45 mln). But the figures themselves aren’t as important as the fact that they indicate a real risk for the company to be able to service its debt which, contrary to expectations and promises, is continuing to grow. So, far, the company does not look investable.