Sadovaya EBITDA plunges 4x yoy to USD 1 mln in 1Q12

Sadovaya Group (SGR PW) reported an EBITDA decrease of 76% yoy to USD 1.1 mln in 1Q12, while EBITDA margin squeezed to 7.7%, compared to 22.9% in 1Q11. Revenue went down 29% yoy to USD 14.6 mln on a 33% decrease in coal sales, which was partly compensated by a 6% yoy increase in selling prices to USD 75/t. COGS per ton grew faster than coal prices: +7% yoy. Selling expenses per ton skyrocketed 11.2x and general expenses per ton tripled. Net income fell 78% yoy to USD 0.7 mln, but remained positive only due to finance income of USD 0.9 mln for the period.

Roman Topolyuk: Sadovaya’s 1Q12 financials were expectedly weak after a significant decrease in mining and sales in 1Q12. Selling price growth was eaten up by cost inflation and an increase in fixed costs per ton. The financial income the company recognized in 1Q12 depends on the repayment of receivables, purchased under a factoring contract, by January 2013, and carries a risk of impairment if a deferral in payment occurs, meaning a possibility of future losses. Though we expect Sadovaya will soon report a mom improvement in operating results in April, we do not see a reversal in profitability until the company launches its first waste recovery facility, which is currently scheduled for July 2012.