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The Mercator Medical Group takes advantage of the two-digit growth potential

Review of the Mercator Medical Group’s business and financial situation after Q1 2017 and prospects for subsequent repo…

Review of the Mercator Medical Group’s business and financial situation after Q1 2017 and prospects for subsequent reporting periods.

The Mercator Medical Group – despite the unfavourable market environment – was able to increase revenues in Q1 2017 by as much as 24% YOY, above the result for the entire record-breaking year 2016 (for more information, see here).

We are pleased with our sales force which contributed to the very strong growth trend in the scale of our business. We are treating current margins as a temporary issue, it affects the whole industry”, said Witold Kruszewski, Member of the Management Board for Finance at Mercator Medical S.A.

At the same time, he pointed out that – according to conservative estimates – Q1 financial results cleaned from the effect of the strong dollar (which places a strain on the distribution segment) and the effect of expensive latex (which places a strain on the production segment) would be much better YOY. The EBITDA result would increase by 22%, and the net profit by as much as 45% (for details, see the presentation available below).

The doubled prices of latex and the strong appreciation of the dollar have been a “black swan” for our industry in recent months. Despite this, our result remained positive”, emphasised Leszek Michnowski, Vice President of the Management Board of Mercator Medical S.A.

The dollar is already the cheapest in the last 12 months – it’s already below PLN 3.8, and latex prices are stabilising, which allows us to assume that market prices of gloves will also reflect the cost of the raw material. The second half of the year looks promising”, added Witold Kruszewski.

The company representatives presented details concerning the ongoing construction of the second gloves factory in Thailand, including the production scheme and current state of the works. Unlike the first factory, the new one will manufacture gloves of synthetic latex, and not natural latex. This will allow Mercator to achieve market diversification and to complement its portfolio of products from the key segment of medical gloves. The first production line should be launched in August, and full capacity should be available from the second half of next year. This year will also see the launch of production at the new nonwoven products manufacturing plant in Pikutkowo, Poland. And that will happen even before the Thai factory starts to operate.

We have already completed the construction of the nonwoven products manufacturing plant. Production will start in June and we expect to start formal sales in September, bearing in mind we need to obtain the necessary certifications. This small plant is built to the highest standard and will allow us to respond very flexibly to the needs of our customers, mainly hospitals. Moreover, we will be able to reduce the value of working capital, because so far this assortment came to us from China”, said Leszek Michnowski.

Currently, Mercator’s share price stands at PLN 19, while – after the publication of the estimated results for Q1 2017 – Vestor DM maintained the “buy” recommendation, setting the target price at PLN 25.1.

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