Luhanskteplovoz net income drops 22% yoy in 2012

Luhanskteplovoz’s (LTPL UK) net profit dropped 22.4% yoy to UAH 55.8 mln in 2012, according to preliminary IFRS results in the company’s AGM announcement released on March 11. Its AGM will be held on April 11 and the agenda contains an item approving significant deals.

Roman Dmytrenko: The company’s 2012 locomotive output grew 53% yoy to 156 units, while annual revenue rose only 6% yoy, according to the company’s pre-closing update in November. As the year’s full financials have yet to be published, the reason for the bottom-line decline is unclear. In our view, the company’s profitability became a victim of transfer-pricing as most inputs for its locomotives are sourced from related Transmashholding and the finished products are supplied to an indirectly related entity, Russian Railroads.

The significant deals item in the company’s AGM agenda gives its shareholders, voting against such deals, an option to sell shares to the issuer at a price no less than UAH 1.89 per share, based on our estimates.