ElstarOils reported weaker-than-expected results for 4Q06, driven by deterioration of margins from traditional business lines of vegetable oils and fats following a rise in rapeseed prices, which has not been mirrored by a rise in rapeseed oil prices. The net profit of PLN 1.2m in 4Q06, down 53% y/y and 42% q/q, came in below our forecast of PLN 1.7m, by 32%, driven by higher financing cost relating to rapeseed stocks. The operating profit came in at PLN 2.8m, down 25% y/y but up 13% q/q, below our forecast of PLN 2.9m, by 4%.
The total revenues of PLN 69.7m in 4Q06, were up 63% y/y and 36% q/q, as reported before. The first sales revenues from ElstarOils new biodiesel production line would be seen only by 2007, following a delay in putting the installations on stream and due to red tape. We have cut our earnings forecast for 2007 already, accounting for later date of launching of biodiesel production. Overall, we view ElstarOils 4Q06 financial results as a negative trigger for the stock price. Nonetheless, we reiterate our Hold rating for the stock. Having completed its investment program and safeguarding rapeseed stocks for next year, ElstarOils remains the front runner among the prospective biofuel producers.