KazTransOil: net profit for 9M2017 increased by 12% yoy.

Altynay IbraimovaNovember 22, 2017

Yesterday KazTransOil published consolidated financial statements for 9M2017. According to the data, revenue and cost of production increased by 7% yoy, respectively. Nevertheless, due to a lower than in the past period impairment loss and profit growth in the joint venture, net profit increased by 12% yoy.

As a result of 9M2017, the total revenue was T165bn. Revenue growth was mainly due to a 7% increase in revenues from transportation of crude oil (84% share).

The cost price increased by 7% yoy due to an increase in depreciation costs by 26% yoy and staff costs of 3% yoy.

The increase in operating profit by 13% yoy to T55bn was achieved due to the growth of other operating income by 48% and lower compared to the previous period of the impairment loss of fixed assets. Thus, the loss from depreciation of fixed assets for 9M2016 amounted to T9bn, while during the reporting period the loss fell to T39mn.

At the same time there is an increase in general and administrative expenses by 6% and a significant increase in other operating expenses by 7 times. Other operating expenses amount to T3.6bn, which is insignificant in comparison with general and administrative expenses of T9.4bn and their increase was caused by an increase in costs related to the sale of inventories.

The company received a loss on the exchange difference of T285mn against T1.5bn in 9M2016. At the same time, an increase in the share in the profit of the joint venture by 2.5 times allowed to obtain a profit before tax of T61 bn, which is 18% higher than the level of the previous period. Net profit for 9M2017 grew by 12% yoy and amounted to T48bn.

Fig. 1. Selected financial indicators

bn tenge

9М2016

9М2017

yoy

2Q2017

3Q2017

qoq

Revenue

    154  

    165  

7%

54

     57  

6%

Gross profit

     64  

     62  

-3%

20

     22  

12%

Operating profit

     48  

     55  

13%

17

     20  

20%

Net profit

     43  

     48  

12%

16

     15  

-4%

Source: Company data

Our opinion

The revenues and cost of KazTransOil as a whole fit into our annual forecasts. At the same time, operating profit is inferior to the expected levels due to higher other operating expenses. As a result of our conversation with the Company, we attribute this increase to one-time costs. With the exception of one-time items, KazTransOil results are in line with our expectations, and we maintain our Buy recommendation for KTO shares.