Kety is to publish 4Q05 results on 2 February, before the session, followed by an analysts’ conference. We also expect management guidance for 2006 and new strategy details to be announced on that date, provided that they are approved in time by the supervisory board. Kety already provided a preview of the 2005 results on 14 December, estimating 4Q05 sales at PLN 190.1m, EBITDA at PLN 28.7m and net profit at PLN 15m.
Our estimates are in line with management guidance. We regard the 4Q05F results as fairly good, given the adverse macroeconomic environment for Kety, with a strengthening PLN vis-a-vis EUR and soaring aluminium prices. The rapid aluminium price growth (12% average price growth q/q) was particularly unfavorable, preventing Kety from passing along its higher raw material costs in prices to its customers. This has resulted in an estimated drop in EBIT of 13% y/y and a corresponding shrinkage of margins from 11.7% to 9.3%.
We believe that the release of 4Q05 figures, due to the earlier announcement of the preview, should have a neutral trading impact. Only a presentation of 2006 forecasts, which should include the results of damage caused by the fire in the flexible packaging division, could be a catalyst for the stock. However, uncertainty remains over Kety's macroeconomic assumptions, as management has historically tended to be very optimistic. Taking into account the damage caused by the fire, we do not expect 2006 EBIT and NI to beat 2005 figures. Therefore, we reiterate our Sell rating for Kety with a fair value of PLN 122.4 per share.