15 November 2011
Coal miner Sadovaya Group (SGR PW) reported a y-o-y reduction in all key financial indicators in 3Q11. Revenue was down 12% y-o-y to USD 19.0 mln, while net income nearly halved y-o-y to USD 2.1 mln. In 9M11, revenue was up 53% y-o-y to USD 62.4 mln, EBITDA grew 14% y-o-y to USD 14.2 mln, and net income grew 25% y-o-y to USD 9.9 mln. The company said it sold 873 ths mt of coal in 9M11, 72% of its annual plan. Sadovaya also updated on its waste recycling business: the company now plans to construct four recycling factories of up to 3.6 mln mt processing capacity, and is awaiting approval from the EBRD to finance the project on November 22. Alexander Paraschiy: Despite a weak quarter, the company should easily fulfill its FY2011 sales target (USD 84.2 mln), as it met 74% of its annual revenue plan in 9M11. However, FY2011 EBITDA and net income guidance (USD 26.8 mln and USD 17.9 mln, respectively) do not look achievable. The key reason is that Sadovaya postponed the launch of coal waste recycling. However, as the company revised upward its waste recycling capacity plans, we believe the company will outperform its earlier announced profit outlook for 2012.