Kety is expected to publish preview of its 2Q07 results on Monday morning (25 June). We expect reported net profit to come in at PLN 20.6m for 2Q07, down 40% y/y. However, the main reason of the drop is PLN 19.8m of insurance compensation related to the fire the company received in 2Q06. On an adjusted basis we expect net profit to come in at PLN 21.2m and grow 15% y/y. The outlook for the results is rather mediocre on the levels of margins, in our opinion, however to some extent due to non-recurrent factors. Firstly, start of Ukrainian operations materially weighted on costs not yet contributing to sales. Secondly, the performance of Metalplast Zlotow, started to be consolidated at the end of April was very weak in 2Q07 and is expected to be improved in 2H07. The outlook for 2Q07 has not prompted any changes to our forecasts.
Sales are expected to be very strong and come in at PLN 315m, up 24% y/y. Contrary to previous quarters, we expect the best performance to come from packaging sector growing some 20% y/y, off a low base affected by the fire. We expect no material contribution from Ukraine, with a further delay coming from local bureaucratic hurdles. We also expect some PLN 7m contribution from recently acquired Metalplast Zlotow.
EBIT reported is expected to come in at PLN 28.1m, down 33% y/y, due to PLN 19.8m insurance compensation, Kety received after the fire in the base period. On an adjusted basis, also for the management option program in 1Q07, we expect EBIT to come in at PLN 28.7m and grow 31% y/y. We expect EBIT adjusted margin to come in at 9.1% in 2Q07, higher than 8.6% in 2Q06 depressed by the fire, but lower versus 9.5% in 1Q07. In our opinion, the quarter-on-quarter fall could be caused by (i) strengthening of PLN versus EUR (ii) start up costs of Ukrainian operations (iii) a zero result on EBIT at Metalplast Zlotow for the period of consolidation.
Net financial activity is expected to come at a loss of PLN 3m for 2Q007 versus a loss of PLN 1.7m in 2Q06 and a gain of PLN 1m in 1Q07. It should be coming from (i) zero result on hedging activity (ii) higher interest costs coming from MZ acquisition financing loan.