Naftogaz posts UAH 11 bln loss, fails to compromise with Gazprom

Обзоры по компаниям и отраслям 15.11.2013 Naftogaz of Ukraine (NAFTO), the state natural gas production and transportation monopoly, reported a 35% yoy drop in net revenue in 9M13 to UAH 49.3 bln, according to the company’s filing on November 14. The key reason for the decline was a 35% yoy drop in gas sales to end-consumers (to 19.55 bcm), while its gas transit segment was flat yoy in terms of both volume (at 62.51 bcm) and revenue. The holding’s EBITDA worsened to UAH -3.5 bln in 9M13 (vs. positive UAH 0.8 bln the same year-ago period), and its net loss worsened 1.3x yoy to UAH 10.6 bln. Naftogaz reported its payables rose UAH 5.2 bln YTD to UAH 17.5 bln, while receivables increased UAH 2.9 bln YTD to UAH 44.0 bln. The holding managed to decrease its interest-bearing debt by UAH 4.1 bln YTD to UAH 51.6 bln, while its cash balance deteriorated to UAH 0.1 bln as of end-3Q13, compared to UAH 1.7 bln at the year start. The same day, Gazprom Deputy CEO Vitaliy Markelov commented on the results of the meeting of Gazprom and Naftogaz top managers, highlighting that “the parties are far from resolving the issues.” He warned that the gas balance in Ukraine’s underground storage facilities is critically low, and Gazprom recommends the Ukrainian side to pump an additional 4 bcm of gas before the winter. “We are ready for compromises and hope that we will find a solution,” he concluded. Alexander Paraschiy: Naftogaz’s poor financials strengthens our argument that investors should treat its Eurobond solely as government bonds (refer to our note of November 7). The figures confirm the company’s weak balance sheet and its inability to pay its obligations without government support. Meanwhile, the government has explicitly guaranteed smooth repayment of Naftogaz notes. We believe such news creates a more attractive entry point to NAFTO bonds.