Sidpec result robust despite first tax load

Earnings at Egypt's Sidi Kerir Petrochemicals were taxed for the first time in the first quarter but it didn't stop better than expected results for the company.

A big tax bite has not slowed Egypt's Sidi Kerir Petrochemicals.

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The company, majority-owned by the Egyptian government, reported robust results this week despite paying taxes on its earnings for the first time since it was established in 1997.

First-quarter earnings at the maker of a material used in shopping bags, toys and bottle caps were taxed at a rate of 20 per cent.

The company, which is also known as Sidpec, reported a pre-tax first-quarter net profit of 273 million Egyptian pounds.

That was up 28 per cent from the same period last year and 15 per cent up on the December quarter.

But even when tax is taken into account, which leaves the company with net earnings of about 218m pounds, analysts were pleased with the earnings per share (EPS), one measure of profitability.

In a note to investors, analysts at Alembic HC Securities said EPS at Sidpec was 0.42 pounds a share, much higher than a consensus estimate of less than 0.3 pounds a share.

The analysts read this as an indication that the company's top line was solid.

Revenue for the quarter was about 567m pounds, up 20 per cent from the same period a year ago and 10 per cent higher than in the previous quarter.

Alembic HC raised its target price to 17 pounds a share from 16.20 pounds and retained an "overweight" rating on the stock.

The analysts said the stock was trading at a "significant discount" to its peers.

"The results brushed aside concerns that sales and earnings would be lower as a result of the political unrest and the introduction of taxes this year," said the note to investors.

Sidpec's dividend yield, on average, has remained at 10 per cent over the past five years - far higher than its peers.

Half of the company's earnings are derived from exports, a proportion that analysts say eases the economic disruption from Egypt's month-long revolution.

Yesterday, Sidpec shares closed more than 1 per cent higher at 13.85 pounds on the Egyptian Exchange.