Gostomel Glass Reports Drop In 2006 Net Income

At its AGM on Wednesday Gostomel Glass (GSKZ) reported a slight increase in net revenues – by 2.2% to USD 47.7 mln. Profitability turned out significantly lower compared to our expectations. GSKZ’ EBITDA decreased by 27% to USD 11.3 mln due to an increase in gas prices and higher repair costs assigned to production. The company’s net income dropped to USD 0.8 mln from USD 8.5 mln last year, additionally the USD 1.6 mln one-time corporate profit tax levied on sale of shares of Kostopolsky Glass in 1Q06 also squeezed profits. The company’s management says gas consumption by the third furnace will be 40% lower after repairs, while its capacity will increase by 20%. In 2007 GSKZ plans to increase production by 24% to USD 57.6 mln – slightly above our expectations, while they expect net income to make up USD 3.6 mln – significantly below what we expected due to intensifying competition on the market. We will update our target on the company shortly.