Avgol: The corona crisis has boosted net profit to $ 18 million – the capital market

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Non-woven fabric maker


Abgul
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Abgul


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Reported a 1% increase in revenue, along with a jump in net income, as a result of a dramatic improvement in gross and operating profitability and a decrease in financing expenses. Avgol shares are trading near all-time highs and are correcting all the declines of March, the stock opened the morning with a jump of about 11% but since then realizations have been recorded. The company is traded at a market value of about NIS 1.3 billion and a multiplier of 5 on the net profit of the current quarter.

Company revenue In the first quarter of 2020, they amounted to about $ 103 million, an increase of about 1% compared to the revenues of the corresponding quarter last year, which amounted to about $ 101.5 million. The company has for the first time manufactured fabrics used to make masks, medical gowns and other products for medical purposes at the company’s sites in Barkan, China, Russia and India.

Bottom line the company reported Pure profit Of about $ 18 million, a jump of about 600% compared to a net profit of about $ 2.5 million in the corresponding quarter. The jump in net income is attributed to a large increase in the gross profit margin of 33.4% compared to 17.3% in the corresponding quarter. In the other expense items, the company presented additional savings – management and general 27%, sales and marketing 17%, financing expenses 28%. In total, operating and financing savings of about NIS 3.5 million compared to the corresponding quarter.

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Gross profit In the current quarter, it amounted to approximately $ 34.4 million, compared to a gross profit of approximately $ 17.5 million in the corresponding quarter, a jump of approximately 102%. The jump is attributed to new agreements with suppliers and also to an increase in demand and high prices for non-woven fabrics used to manufacture medical products and hygiene products used to deal with the corona crisis.

Operating profit Amounted to approximately $ 26.7 million on an operating profit margin of approximately 26%, compared with $ 8.5 million operating profit in the corresponding quarter last year on an operating profit margin of approximately 8.5%.

Financing expenses Amounted to about $ 3.8 million, compared to financing expenses which amounted to $ 5.3 million in the corresponding quarter last year. The decrease in financing expenses in the quarter is mainly due to the approval of eligibility for the grant of approximately $ 0.9 million that Abgul India received from the local government for the construction of the plant in India.

Company CEO, Shahar Rahim: “In the first half of the year and with the outbreak and spread of the corona plague, Avgol displayed its strength and power in the way it responded to the uncertain situation created in the markets, and in the creative way in which Avgol leveraged the unexpected crisis in its favor. At the same time operating and exploring new areas and markets, Abgul, together with the rest of the world, faced the challenges posed by the corona plague, which affected all areas of the company’s operations and production sites.

“Avgol was able to recover quickly from the closure of the company’s plant in China, during the first quarter, and returned to full operational activity as early as March with a rapid entry into a new market of nonwoven fabric for face masks and other PPE products. Higher for new customers With the spread of the corona epidemic globally, these capabilities were immediately adopted at all company sites, in order to support the high demand created in the local markets for non-woven fabrics that will be used to manufacture medical products, including masks, medical gowns and sterile wipes.

“During the period, Avgol also continued to support and increase the demand from its global customers, which enabled them to cope with the increase in demand for their products. All this despite the production and logistics challenges created in light of local governments’ increase in demand for personal protection products. Despite this, the company has done everything in its power to continue to support its customers and prove its commitment to long-term partnerships with them, including through the transportation of products from other regions, despite the high logistics costs and great complexity that results.

“At the same time, Avgol trained one line at the Barkan site to create MB fabric used for face masks around the world, and it began commercial production and sales as early as April 1, 2020. In addition, the company expanded its production lines in China and India to produce MB products to support local demand. Develop similar capabilities on sites in Russia and the US. Moreover, following the company’s decision to leave the Barkan plant by the end of 2020, we decided to move one of the hygiene lines that closed in Barkan to the Dimona plant, and operate it as a Meltblown line for fabric production for face masks and other MB applications. We anticipate completing this transition by the end of the third quarter of 2020. All of the information provided above, combined with the flexibility of the Abgol team worldwide who responded quickly and smoothly to market changes, led to strong performance in this quarter.

During the period, Avgol identified new opportunities and new areas, especially in the medical industry, with long-term engagement potential. Was unique and stemmed from unique market trends and demand / supply conditions around the world. Avgol does not expect these profit levels to repeat themselves. ”

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