Higher costs burden Zorpas results

A. Zorbas & Sons Pcl (ZRP) recorded a decline in first half 2006 profit on the back of higher costs for raw materials, labour and energy costs. Net profit fell 24.4% YoY to CYP 906.000 with EPS at 5.92 cent from 7.84 cent a year ago in the same period.

Total turnover was up 12.4% YoY to CYP 15.4 mln, boosted by the increase in the number of retail outlets to 43 from 34 in the first half of 2005, as well as higher number of customer visits to ZRP’s retail outlets and new additions in ZRP’s product range.

Gross Profit advanced by 4.0% YoY to CYP 5.62 mln, whilst gross profit margin deteriorated by 290bps to 36.4% in 1H06 from 37.5%. The decline in margins is due to increases in raw materials cost, energy costs and labour costs stemming from the annual payroll increases, and the increase in the average number of employees due to the higher number of retail shops.

Operating expenses rose by 14.7% YoY to CYP 4.58 mln amid rising energy and labour costs and higher depreciation charges stemming from the increase in the number of retail shops. However, as a percentage of turnover, total operating expenses increased marginally at 29.5%. EBIT came in lower at CYP 1.04 mln for a decline of 26.3%.

Net profit was negatively affected by increased financing charges of CYP 63k vs. an amount of CYP 29k, while positively affected by a lower effective tax rate (10% in 1H06 vs. 12% in 1H05).