RAK Cement (RAKCC) financial statements released on the ADX website this afternoon (why couldn't they release them with the Director's report on Thursday, which was opaque at best?). Profit rose for the 9 month period but fell for the third quarter which indicates something amiss, especially since it wasn't explained by the board report.
ADX 15 October 2009:
(RAKCC) Ras Al Khaimah Cement Company Discloses Board Report on 3rd Quarter 2009 Financial Result
ADX 18 October 2009 (pm):
(RAKCC) Ras Al Khaimah Cement Company discloses financial statements for the 3rd quarter, 2009
Income Statement summary
Sales AED 62m, down from AED 107m
Gross Profit AED 12.9m, down from AED 20.5m
Administrative expenses AED 3.9m, up from AED 2.6m
Share of profit of an associate AED 4.1m
Net Profit AED 12.5m, down about 30%, and would have been down about 50% if they hadn't realised AED 4.1m from "share of profit of an associate". I presume they sold a subsidiary during the quarter?
EPS 0.026, closing price today AED 1.34 so PE about 12.9 which looks expensive in current market conditions.
2009 M9 profit AED 63.6 m, up more than 50% from AED 40.5m for 2008 M9, mostly due to significant decreases in operating costs, but that didn't seem to carry through into Q3 of 2009. Did energy costs go up again?
09M9 EPS 0.131 which means PE of about 7.7 which looks better than for the quarter, but if costs are going up and revenue isn't then that PE might misrepresent what RAK Cement shares are worth, and the Q3 figure could be a better estimate.
Nothing obvious in statements to explain the falling profit for the third quarter, and board report released on 15 October 2009 did not explain (instead, it focused on the 9 month profit figure).
Current Assets
Trade and other receivables AED 106m (down from AED 189m)
Cash and equivalents AED 77m (down from AED 94m)
Current Liabilities
Trade and other payables AED 37m (down from AED 72m)
Short term borrowings AED 1.6 m (down substantially from AED 26.6m)
I have only repeated the more significant entries in the Balance Sheet. Nothing stands out as particularly worrying, and the reduction in short term borrowings is good to see. There appears to be more than enough cash to cover any short term obligations. _________________ UAE IPO list | posting guidelines
It is typical for companies to present/discuss their results the way they look better than before. RAKCC focused on nine-month results because their Q3 performance deteriorated. They would have emphasised quarterly results otherwise.
Following three emerge as the main reasons for fall in the profits in 2009Q3:
- Declining sales;
- Increasing admin expenses; and
- Increasing impairment of available-for-sale investments.
Compared to 2009Q2, the last quarter saw lower sales but higher cost of sales and higher admin expenses.
However, on a 9-month basis, the results look impressive Over 55% increase in net profits (AED40.5m in 2008M9 to AED63.6m in 2009M9) and in EPS (0.084 to 0.131).
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Over 55% increase in net profits (AED40.5m in 2008M9 to AED63.6m in 2009M9) and in EPS (0.084 to 0.131).