Westa reports weakened financials in 1H12

Westa ISIC (WES PW), the CIS’ leading car battery producer, reported a 12% yoy decline in battery sales to 1.56 mln conventional units in 1H12. Revenue fell 33% yoy to USD 43.8 mln, EBITDA declined 6.5x yoy to USD 2.4 mln, and net losses doubled yoy to USD 13.5 mln. Net debt remained unchanged YTD at USD 178 mln. The company noted the existence of deferred demand for car batteries, which will allow it to increase sales in 2H12. Westa expects to sell 5.6-5.7 mln conventional batteries in 2012 (up 10-12% yoy). The company said it is planning to commission its VRLA battery facility and start offering new products in September 2012. Westa will hold a conference call to discuss its results today at 15:00 Warsaw time.

Alexander Paraschiy: Westa’s reported financials were broadly discouraging, as they show Westa was unable to control battery prices despite its leading position on the CIS market. Implied prices for Westa batteries fell 24% yoy in 1H12 compared to just an 18% decrease in global lead prices and raw material costs per Westa battery. We expect the company will be able to leverage increased demand for batteries in 2H12 to raise battery prices by 10-15%. On the other hand, we do not see the company’s plan to raise battery sales in 2012 as feasible: the company’s outlook implies it should sell 4.0-4.1 mln conventional batteries in 2H12, which exceeds its production capacity by 5%-8%. All in, we expect the company will not increase battery sales in 2012, and will not break even this year. We do expect Westa will significantly improve its financials in 2013 though, if prices for lead (and batteries) will improve and its new VRLA batteries will find reasonable demand.