Zaporizhtransformator AGM: CEO Announces Merrill Lynch Loan, Release of IFRS Accounts

Zaporizhtransformator (ZATR: BUY) shareholders, at their AGM yesterday, approved the company’s 2007 financial results: sales grew 101% yoy to USD 412 mln, net income 3.7 times yoy to USD 85 mln (margin of 20.7%), and EBITDA 3.2 times yoy to USD 123 mln (margin of 29.8%). Zaporizhtransformator management forecasted sales to rise 80% yoy in 2008 and production to increase by 35% yoy to more than 50 mln GVA in 2008. CEO Ihor Kleiner disclosed that Zaporizhtransformator had taken out a three-year USD 285 mln loan from Merrill Lynch in October 2007 to expand production capacities. As part of the loan agreement, Merrill Lynch had required the company to adopt IFRS – by April 30, audited IFRS accounts must be made publicly available, according to the CEO. The AGM decided to postpone a decision on dividend payouts until IFRS financials are available; the EGM is expected in May. Inna Perepelytsya: All theheadline financial data as well as plans for 2008 were publicly available since late January, and we have already taken them into account in our upgrade note of February 1, 2008. Net debt/equity of 1.4x based on 2007 financials is higher than its international peers’ median of 0.7x. The company’s planned growth implies the net debt/equity ratio decreasing to this level in 2008, where it was at eoy 2006.