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Albalact First Impression FY 2009 and 1Q 2010 results (neutral)

Dairy producer Albalact (ALBZ) held its Annual GSM on April 28, 2010. Following the GSM, Albalact released FY 2009 results (not made public until this date), 1Q 2010 results and 2010 guidance.

FY 2009 results: Sales reached RON 226 mn, up 19% yoy but below our estimates as sales weakened in the last quarters of the year and lower sales generated by the cheese business. Raw material costs increased 13% yoy as ALBZ continued its strategy to collect more milk from large producers rather than from individual producers (10.5% vs. 18% share in 2009). Other cost positions advanced at a slower pace than the top line (i.e. salaries, third party expenses). As a result EBIT came 38% higher yoy. Financial losses climbed 13% to RON 7.6 mn on other financial expenses and negatively impacted the bottom line. The net margin remained at a low level of 1.2% in spite of a 4.3-fold yoy increase in net profit to RON 2.6 mn. FY 2009 results were disappointing as sales momentum was lost in the final quarter (sales down 2% yoy) and operating margin although higher yoy remained low.

1Q 2010 results: Turnover advanced 4% yoy fuelled by higher sales of merchandise, while sales of own production were down 2% yoy. EBIT was 12% lower yoy on a moderate increase in costs (i.e. raw materials, salaries). ALBZ posted a financial gain of RON 1.6 mn vs. a loss of RON 2 mn in 1Q 09. As a result, the net profit more than doubled yoy to RON 4.6 mn. We view 1Q results as neutral as sales have not regained momentum as and the operating margin weakened slightly.

Outlook and recommendation: Albalact announced it targets a 15% yoy increase in sales in 2010, while the net profit is expected to reach RON 9.7 mn vs. RON 2.6 mn in 2009. Our estimates revealed a stronger increase in sales in both 2009 and 2010. In addition we expected better margins. We will review our estimates based on the released results and the new guidance for 2010. This would probably result in lower sales growth and lower margins than we initially forecasted. Our target price and recommendation for Albalact stock are under review.

Sursa: http://www.rciro.ro

Tags: sales results albalact

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