Consolidated Bakeries is reporting strong growth in profit in the second quarter, a continuation of increased profits experienced in the first quarter of the year. The strong growth is as a result of robust revenue growth in both quarters of the year. Revenue for the six months increased by 30.69 percent to reach $329 million and for the quarter by 40.46 percent over the same periods last year to reach $157 million. “The increases reflect real growth in volumes across our key items and primarily a result of activities in distribution and market programmes,” management stated.
Profit after corporation taxes which increased 172 percent in the first quarter more than tripled in the second quarter moving from $4 million in 2012 to $12 million for the first six months and net profit went up by 191 percent to $24 million. Helping with the improvement was a 55 percent gross profit margin, a big improvement over the 42 percent in the first quarter last year and year to date margin is 56.5 percent versus 52 percent in 2012. Operating expenses climbed sharply by 53 percent in the quarter and 31 percent for the six months period.
The improvement in revenues and profit is impressive. The concern that exists is that the results for the six months to June last year showed impressive numbers but there were losses in the last half, thus reducing what appeared to be acceptable results. The second half of the year tends to be a bit weaker for sales and profits for bakeries. As such, the impressive profits seen in the six months may not match the results in the second half.
Working capital was in a healthy state with current assets of $169 million compared to $46 million in current liabilities. Inventories are low at $16 million and receivables at $57 million seems to be well under control. Shareholders’ equity is $495 million and debt financing of only $23 million.
Depending on how the second half pans out, the stock could show some appreciation in the next two quarters. Earnings per share is only 11 cents to June, so at best, the full year earnings will be around 20 cents. At this rate, it won’t cause investors to run and grab the stocks, even at the current trading price of $1.35.
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