Ocean Glass reports 40% drop in earnings 3Q 2003

In line with expectations, Thai glassware manufacturer Ocean Glass recorded a 3Q 2003 net profit of THB 29 million down 40% year-on-year. The fall in earnings was blamed on higher production costs and…

In line with expectations, Thai glassware manufacturer Ocean Glass recorded a 3Q 2003 net profit of THB 29 million down 40% year-on-year. The fall in earnings was blamed on higher production costs and lower output following the recent 80-day plant shutdown for the overhaul of the smelter and cold repair facility. The firm“s 3Q 2003 sales increased 8% year-on-year, but the cost of goods sold went up 26% year-on-year due to higher production costs. As a result, the company“s gross margins, dropped from 43% in 3Q 2002 to 34% in 3Q 2003. Sales and administration expenses rose 22% year-on-year from the booking of a THB 10 million provision for obsolete stock. Kim Eng Securities (Thailand) expects to see strong 4Q 2003 earnings of around THB 100 million with the Ocean Glass smelter working at full capacity again and the arrival of the traditional peak season for sales. Furthermore, Kim Eng believes the company“s operational costs will go down with improved efficiency, higher production yield and lower cost per unit after the overhaul of its smelter and cold repair facility. If the company achieves the aforementioned 4Q 2003 earnings, the company“s full-year 2003 earnings would be THB 224 million, or EPS of THB 11. The company produced very strong January to September 2003 cash flow of THB 277 million (THB 13.40 per share), up 33% year-on-year. The company is expected to generate solid cash flow of around THB 16 per share for the full year. Given this cash flow and no short-term major investment, OGC is expected to be able to pay a dividend of THB 7, representing an 8% yield at the current share price.