TMM reports 12% higher sales, doubled net loss yoy in 1H13

TMM Real Estate (TR61 GR) reported net revenue of USD 16.1 mln in 1H13 (+12% yoy), according to its September 27 release. The key revenue driver was 85% growth in sales of completed real estate property (to USD 10.3 mln). Revenue from provision of construction services to third parties decreased threefold yoy to USD 1.3 mln, and other sales decreased 10% yoy.

The company’s cost of sales increased 55% yoy in 1H13 and exceeded its revenue, which resulted in USD 0.5 mln gross losses (vs. USD 3.7 mln gross profit in 1H12). All the metrics below gross profit were also negative in 1H13: operating loss at USD 2.7 mln (vs. profit of USD 1.6 mln in 1H12) and net loss of USD 6.4 mln (+99% yoy). TMM’s operating cash flow was also negative, at USD -2.7 mln (vs. USD +4.1 mln in 1H12). The company’s total debt increased 7% YTD to USD 168 mln as of end-1H13.

Alexander Paraschiy: The company’s revenue data looks disappointing given that TMM commissioned two large projects in 1H13 (Soniachna Brama 2 and Green Town) and should have reported their accumulated pre-sales as revenue. As we calculated, pre-sales from these two projects contributed USD 3.6 mln to TMM’s 1H13 revenue, which is just 10% of total investments in these projects (based on our estimates).

Other disappointing factors are an unexpected jump in COGS (for which we have no explanation, so far) and a rapid decline in revenue from construction services. While the latter segment may improve radically, as TMM recently won a big construction tender (refer to our news from September 26), this segment alone is unlikely bring the company to a breakeven level.