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Transelectrica First Impression 4Q 2010: Bottom line hit by provisions

The power grid operator Transelectrica (TEL) provided its 4Q 2010 results, but without the breakdown of revenues or detailed information on costs. While revenues and quantities transported came in above expectations, profitability disappointed as the company recorded large provisions for receivables.

Quantities above estimate: The quantity transported reached 15.4 TWh, 2.8% higher than expected. Total sales were higher by 8.2% than our estimate at RON 698 mn, but we believe this is partially the result of higher than expected pass-through revenues (balancing).

Provisions impact operating profit: We do not expect significant differences between grid losses costs and our estimate. Regarding the other cost items, salaries costs came in 15% lower than our estimate at RON 37 mn and third parties costs (incl. maintenance) stand marginally higher than our forecast. Depreciation for the quarter reached RON 72 mn, 7% higher qoq and 5% above our estimate. We expect the company commissioned new investments in 4Q 2010 which drove higher the depreciation expenses over the quarter

Transelectrica recorded provisions for receivables worth RON 57 mn, on receivables outstanding for more than 270 days. These drove the operating profit some 34% lower than we anticipated at RON 22 mn and 40% below consensus estimate. Financial losses of RON 15.3 mn, somewhat higher than we foresaw, lowered the net profit to RON 4.7 mn, 77% below our forecast.

Transelectrica's 2010 reported profit reached RON 9.9 mn. Taking into account the 90% pay-out ratio required by the state, we estimate the dividend per share at around RON 0.122.

Outlook and recommendation: We do not believe the level of provisions would remain at this level going forward, therefore we expect to see a gradual improvement in profitability over the coming years from the very low level of the last two years. We will review our estimates to take into account the released data. We view the results as neutral and we keep our 'reduce' recommendation, but place our RON 19.6 target price under review.

Sursa: http://www.rciro.ro

Tags: higher estimate provisions transelectrica

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