Egnatia expects lower profits from Muskita

Muskita Aluminium Industries Pcl (MAI) has issued a negative profit warning on its first half results, due August 25, 2005 on the

back of increased depreciation charges from the operation of the Company’s new production plant.

In a flash note made on MAI, Egnatia Financial Services expects total turnover to increase by 6% year-on-year to CYP 14.7 mln, mainly because of robust activity in the local construction sector.

Regarding profitability, Egnatia expect gross profit to reach CYP 5.0 mln down by 5.2% YoY, yielding a gross profit margin of 34.2% (410bps lower than 1H04 gross profit margin) due to higher costs relating to the Company’s new plant which until fully utilized is expected to negatively impact the cost line.

Specifically, the higher depreciation charges associated with the new plant operated in mid November 2004 will burden profitability at all levels. In addition, Egnatia anticipate gross profit margins from European sales to be negatively impacted by increased competition from European rival companies.

At the operating level, Egnatia expect operating expenses to increase by 9.6% YoY to CYP 2.3 mln. Total operating expenses as a percentage of total sales are forecast to deteriorate by 60bps on the back of higher payroll expenses (recruitment of highly skilled employees), rising fuel and electricity costs as well as higher depreciation charges.

Consequently, Egnatia anticipate Net Profit to decline by 9.8% YoY to CYP 2.3 mln in 1H05 and net profit margin to deteriorate substantially by 280bps to 16.1%.