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Mercator Medical after Q3 2016: record-breaking results and large investments in capacity growth

The manufacturer of single-use medical gloves had another successful quarter. The growth potential of the scale of oper…

The manufacturer of single-use medical gloves had another successful quarter. The growth potential of the scale of operations and generated profits is significantly increased by investments in production capacity and geographic expansion.

Summary of consolidated financial results Q3 2016:

million PLN YOY
Revenues 68.1 +8.0%
EBITDA 7.3 +11.4%
Operating profit 5.4 +8.2%
Net profit 5.1 +105.0%
Operating cash flow 8.1 +254.8%
Assets 206.2 +28.4%
Equity 116.8 +70.5%

Consolidated revenues of Mercator Medical increased by 8% YOY and reached PLN 68.1 million, EBITDA – by 11%, PLN 7.3 million, and net profit – by as much as 105%, to PLN 5.1 million. EBITDA profitability increased to nearly 11%, and at the net level – to 7.5%.

The doubling of the net profit is related to the devaluation of the Russian rouble, which was reflected in the financial costs of Q3 2015. In Q3 2016, we no longer recorded one-off events. We are particularly pleased with the increased revenues and EBITDA, despite the high comparative base associated with the launch of production capacity in Thailand last year, as well as with the 3.5 times higher cash generated from operating activities”, said Witold Kruszewski, Member of the Management Board for Finance at Mercator Medical S.A.

During the three quarters of 2016, the Mercator Medical Group recorded PLN 197.1 million in revenues (+19% YOY), generated PLN 19.6 million of EBITDA result (+15% YOY) and PLN 11.6 million of net profit for shareholders of the parent company (+43% YOY). Operating cash flow increased compared to the same period last year from PLN -0.6 million to PLN +10.8 million.

The everyday hard work of Mercator Medical’s international team composed of nearly 600 people on the quality and optimisation of production, maximisation of sales or increased efficiency and margins is producing tangible results. However, our current results are only a foretaste of what we will be able to show thanks to the completion of the current investments in the production capacity in Thailand (nitrile gloves, the fastest growing market segment) and in Poland (nonwoven products), for which we intend to devote a total of nearly PLN 111 million. I am very optimistic about the next periods and the possibilities of taking advantage of business opportunities in the growing global market, which is already worth some USD 4.5 billion in respect of medical gloves alone”, said Wiesław Żyznowski, PhD, President of the Management Board, Mercator Medical SA.

We are also working on expansion in Western Europe, and our goal for the next two years is also to be in the first three suppliers of medical gloves in all our markets in Central and Eastern Europe”, said President Żyznowski.

Similarly to Q3 2016, during the other three quarters the Mercator Medical Group achieved high sales growth – by 28% and 37% YOY, respectively – in its distribution activity (approximately 70% of total revenues). Increase in the EBITDA margin is also important – by 4.6 percentage points and 2.2 percentage points respectively – which resulted from a stabilised USD/PLN exchange rate; it had a particularly positive effect on the profitability of sales made on the basis of tender contracts. At the same time, the analysis of the financial parameters of the latex glove manufacturing segment YOY should take into account the above-average profitability achieved by the company in this segment in 2015.

Significant events of Q3 2016 include the public issue of 1.8 million new shares in September, which gave Mercator Medical S.A. PLN 30.6 million net for the construction of a factory in Thailand. Although cash from the issue of shares had already been received by the company in Q4 of the current year, at the end of September the net debt/EBITDA ratio had a safe, low value of 1.5, which confirms the ability to finance development investments with external capital without further issues of shares, and indicates the possibility of a dynamic increase in the rate of return on equity (ROE).

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