Daily analyst comments
Kamaz posts negative FY 2008 IFRS results
02.07.09 10:12
The FY 2008 IFRS report from Kamaz has turned out to be expectedly weak, given the sharp downturn in sales in October-December and a substantial upturn in steel prices in 1H 2008. Growth in receivables caused a major increase in sales costs. In our opinion, due to the sharp drop in sales, the truck maker could close FY 2009 in the red.
On July 1, Kamaz (RTS: KMAZ) announced its FY 2008 financials audited to IFRS. Company revenue grew by 1.8% y-o-y to USD 3.9 billion, operating profit declined by 41% y-o-y to USD 253 million, and net profit plunged 86% y-o-y to USD 43 million.
Table 1. Kamaz: key financials FY 2008 vs. FY 2007, USD million
We are downbeat on the FY 2008 IFRS report from Kamaz. The company’s revenue scarcely changed from the FY 2007 level, up just 1.8% in US dollars and 0.9% in rubles, as vehicle output at Kamaz dropped 3.1%. At the same time, the truck manufacturer’s expenses went up 7.1% due to an upturn in steel prices. As a result, the company’s gross profit plunged 21.6%.
On the downside, we also note a 30.5% increase in sales costs. The main reasons for this were the need to accumulate provisions to cover an upturn in receivables, and intense competition with foreign rivals after Russian ruble strengthened in 1H 2008. On the upside, we note the company’s efficient control over administrative expenses, which grew by only 4% y-o-y.
In our opinion, Kamaz will close FY 2008 at a loss due to a drop in sales: in 1Q 2009, Kamaz posted a 60.7% y-o-y downturn in sales. At the same time, a downward trend in steel prices could help the company reduce manufacturing costs.
The fair value of Kamaz is USD 1.31 per share with a 38% upside and a BUY rating.