Jelfa profit in line with predicted goals
Pharmaceutical producer Jelfa has posted a net profit of zl. 12.8 million ($2.98 million) for the first half of 2000, an increase of 18.5% from the same period last year.
That performance puts Jelfa on a solid footing to meet its goal set in June of zl. 31 million ($7.2 million) in net profit by the end of 2003. The company said it intended to spend zl. 165 million ($38.4 million) to restructure the firm over the next three years.
"In general, it (the new strategy) will make better use of the company's opportunities," said Leonard Staroszczyk, an analyst at Fortis Securities Polska.
"The first-half results are good and show that its (Jelfa's) sales in Poland and abroad have improved," said Monika Cebula, an analyst with COK Banku Handlowego.
Jelfa exports for this year are expected to amount to $11 million, or 22% of total sales of about zl. 215 million ($50 million).
But Cebula said that visible improvement in the company's results would only begin to appear in 2002, after Jelfa allocates zl. 10 million ($2.3 million) for staff cuts. The company wants to reduce its number of employees from 1,250 this year to 850 in 2001. Already this year the company has set aside more than zl. 4 million ($930,000) for staff restructuring.
"The company's financial situation is better than a year ago and if we have to factor in the zl. 4 million ($930,000) reserve (set aside for employee layoffs), the situation would be even better," Cebula said. "Jelfa has great financial resources and the restructuring won't require it to go into debt."
Once the effects of restructuring take effect, a strategic investor is expected to buy a stake in Jelfa, whose liquidity is good, Cebula said. At present, about 55% of the company's shares are floating on the Warsaw Stock Exchange (WSE) and the company doesn't have a strategic investor. The state treasury owns a 35% stake and wants to introduce a strategic investor, according to Cebula. The remaining 10% of shares are owned by two insurers, Powszechny Zaklad Ubezpieczen (PZU) and PZU Zycie. "Certainly it won't happen in the near future, but maybe by the end of 2001," Cebula said.
Until then, the company has a lot of work to do. To make the effects of restructuring visible, not only does Jelfa have to decrease its number of employees, it also has to scale back its number of products (135) and sell off certain properties, Cebula said.
What is important, analysts said, is that the management board participates actively and has the support of the state treasury. Cebula said there was no need to expect any conflicts between the state treasury and the managing board as happened in the case of the previous managing board. Jelfa's management board changed at the beginning of the year.
In accordance with its new strategy, the company's goal is to increase sales from zl. 201 million ($46.7 million) last year to zl. 270 million ($62.8 million) in 2003, and net profit from zl. 10.6 million ($2.47 million) in 1999 to zl. 31 million ($7.21 million) in 2003.
While Jelfa admitted that its three-year strategy is an ambitious one, Fortis' Staroszczyk expressed reservations.
"It's not too ambitious," he said, adding that one of Jelfa's main goals is to reduce employment. "It's a very tricky problem, Staroszczyk said. "And that's why the company is being careful about its predictions."
According to Staroszczyk, Jelfa could top zl. 220 million ($51.1 million) in sales this year, slightly more than the company's predictions (zl. 215 million).
Jelfa closed Friday at zl. 37.7, down zl. 0.5 since the start of the year.
