Market Comment - In the Spotlight (Manos Chatzidakis)

   Market Comment

Greek stocks came under strong selling pressure on Thursday, following a strong decline in other European markets which fell under the pressure of negative international developments, such as the collapse of Banco Espirito Santo in Portugal, the new default by Argentina and geopolitical developments in Ukraine and the Middle East.

The composite index of the market fell 2.16 pct to end at 1,169.01 points, after falling as much as 2.49 pct during the session. The index ended July with a loss of 3.73 pct, for a net gain of 0.54 pct so far this year. Turnover was a moderate €84.44 million. Ahead of Moody’s credit rating announcement we expect a volatile session today.

  

 In the Spotlight

Greece/Retail sales: National Statistical Authority announced that May 2014 turnover index in retail trade declined 8.5% y-o-y, resuming its usual downward after a 3.9% rise in April (the first positive growth in retail sales since June 2010). In terms of volume, though, May 2014 retail sales were down by a softer 3.8% y-o-y (-5.6% y-o-y excluding automotive fuel).

Volume wise, clothing & footwear and books-stationery posted increases of 3% and 3.3% y-o-y, respectively. All other sectors recorded lower y-o-y sales in May: food/beverage/tobacco (-17.8% y-o-y), furniture/home appliances (-11%), department stores (-9.7%), supermarkets (7.3%), pharmaceutical/cosmetics (-5.2%) and fuel/lubricants (-4.4%).

Greece Privatizations/Intralot: HRADF (Greek state asset development fund) announced that Intralot submitted a binding offer for a 20-year concession to operate horse-race betting in Greece.

Titan (Results Q2/Η1 2013): Titan Q2/H1 results were in line with consensus estimates. Flat bottom line was driven by US operations (+14%) and the re-launch of the public works in Greece (+22%). On the other hand gas shortages in Egypt (-26%) and soft demand in SE Europe (+3%) weighed negatively on the results. Despite the mixed geographical performance we see some qualitative and quantitative sequential improvements which provide some optimism for the following H2.

Key points:

¡  Consolidated turnover reached €571m, posting a 4% increase compared to the first half of 2013. EBITDA stood broadly unchanged at €89m, whereas net profits after taxes and minorities stood at €3m, compared to €22m losses in the same period last year.

¡  The weakening of local currencies against the Euro had an adverse impact on first half results. At stable exchange rates, turnover and operating profitability would have increased by 7% and by 4%, respectively.

¡  The period April – June 2014 was the 9th consecutive quarter of top-line growth, as turnover in the second quarter increased by 2% to €319m. EBITDA dropped by €6.5m to €58.5m, due to a €14m reduction in the operating contribution of Egypt. NPAT rose to €14m from €5m in 2013.

¡  Interest and Financial costs reduced in Q2 by €5.7mn or 24.4% at €17mn

¡  Net debt reduced to €490mn vs €541 in Q1 (€509mn on Dec. 31.2013.). Positive development is attributed to FCF generation of €74mn.

¡  According to the press release management remains optimistic for US market and Greece while the group proceeds with an investment to secure energy supply at lower prices in Egypt which will return utilization capacity to normal levels.

Titan	Results H1 2014
In thous. euro	2013	2014	Δ
Sales	549,331	571,221	4.0%
Q2	314,095	319,427	1.7%
EBITDA	88,254	88,997	0.8%
(% Sales)	16.07%	15.58%	-49 bps
Q2	64,983	58,524	-9.9%
(% Sales)	20.69%	18.32%	-237 bps
Net Income	-21,799	2,908	113.3%
(% Sales)	-3.97%	0.51%	+448 bps
Q2	5,268	13,919	164.2%
(% Sales)	1.68%	4.36%	+268 bps

Overall a quarter with many positive readings. However we point out that valuation at current levels has incorporated more than a turn around and at the same time profitability improvements has shown a slower pace than initially anticipated due to the adversities in Egypt.

Papoutsanis (Results H1 2014):   During the first half of 2014 turnover increased by 14%, and profits after tax reached 267 thousand euros, thanks to continuing efforts towards achieving new collaborations, expanding existing ones, and controlling production costs and other expenses. In specifics:

¡  Hotel amenities sales, during the first half of 2014,  increased by 15% as a result of the higher tourist arrivals in Greece as well as a new co-operation with the sector's largest company, through which the Company's products are sold to international hotel chains.

¡  Olivia cosmetics line, based on the Greek olive tree, is being distributed to new markets abroad and increases market share in Greece as it penetrates further Greek pharmacies.

¡  20% of first half 2014 sales are attributed to PAPOYTSANIS' branded products, 23% to hotel amenities and the remaining 57% to third party manufacturing and private label sales.  Exports at 4.1 million Euros, accounted for 45% of total turnover, compared to 38% corresponding period of 2013.

According to the company’s announcement in the 3rd quarter of 2014 (and following an earlier announcement by the Company) a 10 years period collaboration with a foreign contract manufacturing customer is expected to come to an end. However, management estimates that this will not slow down the growth of the company, as during the second half of the year turnover is expected to be higher than the corresponding 2013 period as well. .

Papoutsanis	Results H1 2014
In thous. euro	2013	2014	Δ
Sales	8,059	9,164	13.7%
Q2	4,753	5,335	12.2%
EBITDA	1,076	1,262	17.3%
(% Sales)	13.35%	13.77%	+42 bps
Q2	740	752	1.6%
(% Sales)	15.57%	14.10%	-147 bps
Net Income	245	267	9.0%
(% Sales)	3.04%	2.91%	-13 bps
Q2	208	168	-19.2%
(% Sales)	4.38%	3.15%	-123 bps

Other Q2/H1 results

Trastor	Results H1 2014
In thous. euro	2013	2014	Δ
Sales	2,264	2,105	-7.0%
Q2	1,073	1,066	-0.7%
EBITDA	330	-303	-191.8%
(% Sales)	14.58%	-14.39%	-2,897 bps
Q2	-534	-1,042	-95.1%
(% Sales)	-49.77%	-97.75%	-4,798 bps
Net Income	11	-418	-3900.0%
(% Sales)	0.49%	-19.86%	-2,034 bps
Q2	-806	-1,084	-34.5%
(% Sales)	-75.12%	-101.69%	-2,657 bps