Muskita Alumnim Industries (MAI) beat market expectations by reported a 42% jump in net profit in the first quarter of 2006 on the back of a healthy increase in sales and its ability to contain costs.
Total turnover increased 22.9% year-on-year to CYP 8.78 mln from CYP 7.15 mln a year ago in the same period, on the back of strong export sales to Europe and local sales to the booming construction industry.
The contribution of local revenues to total sales remain at high levels and stand at 62.5% compared to 61.6% in 1Q’05. European export sales reached CYP 3.23 mln compared to CYP 2.74 mln in 1Q’05 (+17.6%).
Muskita’s gross profit advanced by 14.4% to CYP 2.65 mln, from CYP 2.32 mln a year ago.
Gross profit margin from local operations decreased significantly from 36.3% to 31.1% in 1Q’06 mainly due to the increase in the average cost of primary aluminium from USD 1,901 per ton to USD 2,420 per ton in 1Q06, as well as the higher energy costs and labour production costs, Egnatia Financial Services reported. Margins from European sales improved from 26.2% in 1Q05 to 28.7% due to the price effect, i.e. the additional cost of higher raw material and energy prices were passed on to the end consumers successfully.
Overall, declining margins were primarily attributed to the increase in the average cost of primary aluminium (+27.3% YoY), as well as the higher energy and labour production costs. EBITDA remained strong and rose by 21.1% YoY to CYP 1.99 mln, with a marginal deterioration in margins from 23.0% in 1Q05 to 22.7%.
Total expenses were marginally contained by 0.1% YoY to CYP 1.08 mln on the back of lower administration expenses (-6.4% YoY) stemming from production plant efficiencies.
In terms of turnover, total expenses were contained from 15.2% in 1Q05 to 12.3%.
The bottom line was positively affected by a reversal in net finance charge of CYP 110k in 1Q05 to a net income of CYP 25k due to lower interest paid on loan facilities, higher interest received on cash balances, and a positive impact from FX adjustments.
Net Profit surged by 41.7% to CYP 1..432.632 from CYP 1.011.275 in 1Q’05 and CYP 4.6 mln for the whole of 2005.
Egnatia Financial Services highlighted MAI’s expanded capacity base in Cyprus which led to actual cost containment and improved productivity. Despite the positive impact from the CYP 100k relating to FX translation gains Egnatia remain positive for MAI’s future performance. “Our Target Price of CYP 0.78 and Buy recommendation remain unchanged,” Egnatia said.
