Stirol's 2006 Net Income Down 53% yoy

According to Interfax, in 2006, Stirol’s (STIR: SELL) net income dropped 53% yoy to USD 45.5 mln. Vladimir Nesterenko: This is 29% less than our projection of USD 63.8 mln. The decrease is definitely attributable to a sharp increase in the company’s cost of raw materials (natural gas). However, we could not compare Stirol’s margins to our forecasts, as the release did not provide clear net sales data. The news did mention that the company’s “sales” increased by 13.4%, but there was no indication whether the figure represented net or gross sales, consolidated or not. Reported sales could be inflated due to consolidation of Stirol’s subsidiary trading company, Chemo Invest Trade LLP (U.K.), in contrast to 2005 when it was not. If this is the case, Stirol’s reported net income cannot be directly compared to 2005, since it would include the trader’s margins. We’ll clarify the issue and follow up shortly.