Azovzahalmash Reports 2007 Financials

At its AGM on Friday, Azovzahalmash (AZGM: BUY) reported its official 2007 financial results: sales of USD 485.0 mln (49.3% yoy), EBITDA of USD 13.5 mln (2.8% EBITDA margin), net income of USD 0.2 mln (0.04% net margin). Exports accounted for 75% of last year’s sales. Shareholders voted to reinvest all net income. The company’s number of seats on the supervisory board decreased from five to three: two from its major private shareholder (UPTK) and one from Azovmash (50% controlled by UPTK). Inna Perepelytsya: As we expected, Azovzahalmash continues to use tax optimization schemes. We estimate the company’s 2007 margins: EBITDA at 18.1% and net at 12.1%. We remain positive on the stock and expect the company will report real income starting in 2008-2009, as part of its main private shareholder’s strategic plans.