Bialetti Industrie SpA :BIA-IT: Earnings Analysis: For the six months ended June 30, 2017 : October 6, 2017

Bialetti Industrie SpA reports financial results for the half-year ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of EUR 79.28 million, Net Earnings of EUR -1.62 million.
  • Gross margins widened from 16.28% to 28.63% compared to the same period last year, operating (EBITDA) margins now 2.87% from 5.80%.
  • Change in operating cash flow of % compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2016-12-31 2016-06-30 2015-12-31 2015-06-30
Relevant Numbers (Semi-Annual)
Revenues 79.28 98.2 81.64 93.86 78.5
Revenue Growth (YOY) -2.9 4.63 4 3.18 11.69
Earnings -1.62 3.65 -0.3 5.1 -0.4
Earnings Growth (YOY) -432.24 -28.59 23.62 -10.05 64.43
Net Margin -2.04 3.71 -0.37 5.44 -0.51
EPS -0.02 0.03 -0.01 0.06 -0.01
Return on Equity -11.82 27.53 -2.39 58.1 -7.83
Return on Assets -1.85 4.32 -0.36 6.13 -0.48

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, BIA-IT’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if BIA-IT’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -19.27% and earnings by -144.39% compared to the previous period.

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 5.80% to 2.87%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 16.28% to 28.63%. For comparison, gross margins were 25.54% and EBITDA margins 16.15% in the immediate last period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

BIA-IT’s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days are now -127.86 days compared to -83.36 days for the same period last year.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BIA-IT’s year-on-year change in operating cash flow of % is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History

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Company Profile

Bialetti Industrie SpA engages in the manufacture and marketing of cookware made of aluminum, steel and ceramic, as well as small appliances and coffee machines & capsules. It operates through the following segments: Mondo Casa and Mondo Caffè. The Mondo Casa segment produces cookware and kitchen accessories, which carry the brands Aeternum by Bialetti, Rondine, Cem, and Girmi. The Mondo Caffè segment offers coffeemakers, espresso machines and coffee capsules. The company was founded on October 14, 2002 and is headquartered in Coccaglio, Italy.

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