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Alumil Rom Industry 2Q 2011 - 1H figures broadly confirm our FY forecasts

Alumil Rom Industry made public its 2Q 2011 results under RAS and some key 1H 2011 indicators under IFRS. 2Q sales contracted 11% yoy and were significantly bellow our estimates.

We had forecasted a rebound in yoy terms on slightly better market conditions (retailers' expansion) and mostly on a base effect, considering the already depressed 2Q 10 level. Margins came bellow our estimates on higher costs of raw materials (aluminium), but were better on yoy terms on lower costs.

Margins were better on cost cuts: Operating costs were kept under tight control, with salaries expenses were down 8% yoy as the headcount cuts continued, while third party expenses were almost flat yoy (+2% yoy). As a result of higher price of aluminium (about +20% yoy), raw material costs increased by 16% yoy. Margins of merchandise improved by 500 bps yoy and led to an overall improvement in operating margins. Financial items has a minor positive impact (+RON 0.4 mn).

1H 2011 (IFRS): We refer to the 1H 2011 IFRS figures since quarterly results under IFRS were not made available. 1H revenues were 2.7% lower yoy at RON 26.3 mn. However COGS decreased by 10% yoy to RON 8.8 mn (mostly on headcount reduction and improved production efficiency). Sales & distribution costs were 17% lower yoy. Tight costs control helped Alumil bring the operating result into positive territory (RON 0.8 mn vs. a negative RON 0.6 mn result in 1H 10). The net profit stood at RON 1.3 mn (vs. a loss of RON 1.4 mn in 1H 10), which is broadly in-line with our full year estimate. Our valuation model is based on IFRS figures.

Outlook and recommendation: The 2Q results offer a mix picture, with sales contracting significantly, but margins improving on yoy terms as a result of the sharp cost cutting measures undertaken by the company. The recent easing in aluminium price should aid Alumil post better margin in the second part of 2011. We intend to update our estimates to include 2Q developments. We place our recommendation and target price for Alumil under review.

Sursa: http://www.rciro.ro

Tags: alumil costs margins under figures

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