Sadovaya deepens net loss in 3Q13

Sadovaya Group (SGR PW) reported USD 1.3 mln in revenue for 9M13 compared to USD 36.3 mln a year ago, and a net loss of USD 26.2 mln vs. a 9M12 profit of USD 3.3 mln. Quarterly revenue fell 14% qoq to USD 0.5 mln in 3Q13, while its net loss widened to USD 19 mln from USD 3 mln in 2Q13. The company’s mines remained idle during 3Q13. Its enrichment complex produced 15.5 kt of coal from waste in 3Q, thus bringing 9M13 coal production to 25.5 kt from 380 kt a year ago. The company reported it wasn’t able to make interest payments in September on an EBRD loan and is discussing restructuring with the EBRD. Previously, Sadovaya reported it wasn’t able to service debt from other banks. During the quarter, the company reduced its borrowings by USD 1.9 mln to USD 39.9 mln, but its debt-to-equity ratio grew to 2.0x, as of September, from 0.93x as of the year-start. Sadovaya plans to sell 24 kt of coal in 4Q13.

Roman Topolyuk: Sadovaya’s announced sales plans for 4Q13 aren’t likely to crucially improve the company’s financial position in any way because its future revenue will be outweighed by the cost of keeping its mines idle. The company’s ability to continue as a going concern will depend on its lenders’ flexibility and willingness to participate in therestructuring.