As a result of its business activities carried out in 2017 MONBAT AD reports profit before taxes in the amount of BGN 7 147 000 which represents a profit decrease by 64,52 % compared to the profit before taxes generated in 2016 in the amount of BGN 20 142 000.
The individual net profit of MONBAT AD as at 31.12.2017 is in the amount of BGN 6 352 000 and registers a profit decrease by 64.91% compared to the company’s individual net profit for 2016 which is in the amount of BGN 18 103 000.
The drop in EBITDA, EBIT, pre-tax profits, and post-tax profits for 2017 compared to 2016 are mainly driven by the reduction in volumes of batteries sold (about 12% on an annual basis). In addition, partial effect of the drop is also caused by the policy of the Company in 2016 for formation of buffer stock of lead and lead alloys and buffer stock of lead-acid batteries in the lower season of the year, which in view of the dynimics of the LME lead index (further described in the lower paragraph ) resulted in a lower weighted average cost of direct material costs of the manufactured batteries and a lower cost of sales in 2016 compared to 2017.
The main reason for the drop in volumes was the considerable rise in the London Metal Exchange lead index at the end of 2016 and beginning of 2017
Lead-acid battery producers tend to transfer the cost of the batteries to the end clients by indexing batteries sales prices. Accordingly, the sharp rise in lead prices affected negatively the demand for batteries during the first six months of 2017. MONBAT AD predominantly sells batteries on the aftermarket to a large dealer network. However, the latter were well stocked during the discussed period and accordingly refrained from additional purchases at the end of the winter (February and March 2017 which is part of the high season for this business) and also during the low season (April-August 2017).
The drop in battery volumes sale has been almost entirely offset by the rise in the battery end prices which led to less than 1% y/y drop in battery sale revenues.
The latter volumes drop led to decline in Earnings before interest, taxes, depreciation and amortization (EBITDA) and net income on an unconsolidated level in 2017 vs. 2016. Additionally, Start AD sells its products to MONBAT at cost plus a fixed mark-up which in the current higher lead prices period reflected in higher EBITDA and net income for Start AD at the expense of MONBAT’s individual results.
The above mentioned negative trend in the volumes of the sold batteries and the corresponding deterioration of gross profit and EBITDA in MONBAT’s lead-acid battery manufacturing division was fully offset by the positive results of the recycling subsidiaries of MONBAT AD and on consolidated basis EBITDA, EBIT, net income before taxes and net income in 2017 increase compared to 2016.
As at 31.12.2017 MONBAT AD reported individual net sales revenues in the amount of BGN 350 564 000 which represents an increase by 2,26% compared to the net sales revenues generated in 2016 in the amount of BGN 342 830 000.
The generated sales revenues on the domestic market on an individual basis in 2017 were in the amount of BGN 109 217 000 (the generated sales revenues on the domestic market include technological waste and scrap, sold by Monbat Recycling Bulgaria and materials and other goods sold to other related parties) and represent 31,15 % of the total sales, and the generated revenues from abroad including intra-community supplies were in the amount of BGN 241 347 000 and represents 68,85 % of the net sales revenues of the company.
For the period 01.01.2017 - 31.12.2017 major market for MONBAT AD was France with EUR 21 073 100 sales revenues which represents 17,08 % of the total revenues from abroad of the company on an individual basis.
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