Koor Industries
Conference Call, Q3 2008
November 10, 2008
Orit: Good morning, and welcome to the Koor Industries conference call. For your information, all the participants in the call can hear only. After the presentation there will be the possibility to ask questions. Instructions on how to get a turn to speak will be given at the appropriate time. For help during the call, please press the asterisk and zero buttons. Please be aware that this call is being recorded on Monday November 10, 2008. Before I hand over to Manno Kahana of Gelbart Kahana, I would like to point out that apart from historical data that will be provided, all the data and/or results mentioned in this call are forecasts including risks and uncertainties. The Company’s results may differ significantly on account of various factors, as detailed in the Company’s prospectus and its reporting to the regulatory authorities. I now hand over to Mr. Kahana. Mr. Kahana, please.
Manno Kahana: Good morning, Orit. Good morning everyone. Welcome to the Koor conference call to present the results of the third quarter of 2008. Yesterday Koor published its financial statements and we have also sent you the announcements to investors and the summary financial statements. Participants in this call and others who did not receive the announcements and summary financials are invited to call the offices of Gelbart Kahana Investor Relations. On the line with us on this conference call are Mr. Oren Hillinger, CFO of Koor Industries and Mrs. Avishag Peretz, the Company’s Comptroller. I would like to hand over to Mr. Oren Hillinger, the CFO, who will start with a review of the key events during the quarter. Oren, please.
Oren Hillinger: Thank you, Manno, and good morning to all of you. Welcome to our third quarter conference call. As Manno just said, yesterday afternoon we reported on the third quarter results, excellent ones that were mainly impacted by capital gains from the sale of Credit Suisse shares during the quarter as well as from the very good results posted by Makhteshim Agan. Our net profit for the quarter came to NIS 428 million, which is NIS 20 per share, as compared with NIS 489 million or NIS 27.6 per share in the corresponding period in the previous year, in the same quarter last year. Net profits in the 9 months of the year were NIS 312 million, being NIS 16.2 per share, while in the corresponding 9 month period in 2007 they were NIS 767 million, being NIS 45.3 per share. It is important to point out that the good results in the corresponding quarter in the previous year were mainly due to one-off capital gains of NIS 615 million from the sale of ECI.
As at September 30, the balance sheet date, our cash and short-term investments and that of our wholly owned subsidiaries came to NIS 3.8 billion. Outstanding borrowings from banks and from debenture holders were NIS 3.4 billion, providing a cash surplus in net assets of NIS 400 million. This amount does not take into account a payment on the balance sheet of NIS 62 million for the purchase of Credit Suisse shares, which occurred before the end of the quarter though we paid the amount only a day or two later. It is clear that this data is very far from Koor’s situation today, following the investment in Credit Suisse.
As at today, net debt, on account of the investment, come to NIS 3.9 billion. This balance does not take into account a dividend we are to receive in December from Makhteshim Agan. Following the announcement of a dividend of USD 50 million, we are expecting to receive slightly over USD 20 million.
If I have spoken about Makhteshim Agan, let me continue with Makhteshim Agan. We hold 41% of its capital, using the equity method. This quarter Makhteshim Agan posted very good results. Sales increased to USD 640 million, up 29% on the corresponding quarter in 2007, when sales were USD 497 million. Gross income also increased 30% from USD 162 million to USD 210 million. The gross margin also increased to 32.8% as against 32.5% in the corresponding quarter the year before. Net profit increased by 82% to reach USD 51 million, as compared with USD 27 million in the corresponding quarter in 2007. The results for the first nine months of 2008 were also excellent. Sales grew to over USD 2 billion, as compared with USD 1.6 billion in the previous year. This was also an increase of 28%. Net profit in this period also increased 38% from USD 152 million to USD 210 million. Makhteshim Agan attributes its good results to the high prices of agricultural produce, which in turn have been due to the rise in the standard of living, principally in East Asia; the increase in demand for oil substitutes that are plant-based, such as maize; and the continuing increase in the sales price of crop protection products.
Let me move on to a summary of other events that occurred at Koor during the third quarter, and firstly of course Credit Suisse. In the first half of the year, as we reported at the previous conference call and in our regular reports, Koor’s Board of Directors approved an investment in the shares of Credit Suisse of up to NIS 1.5 billion. In July the Board decided to increase the investment to NIS 3 billion. The Board also decided that implementation of the investment had to take place by taking advantage of purchase and sales opportunities, keeping an eye on the situation of the markets, and the Company’s assessment from time to time. During the quarter that has ended, Q3, our maximum investment in Credit Suisse reached NIS 1.9 billion. On account of the disposals we made we are showing in this quarter a capital gain of NIS 535 million. As at the balance sheet date, September 30, 2008, our holdings of Credit Suisse shares had dropped significantly and came to 420,000 shares, which are 0.04% of Credit Suisse’s share capital, for an inclusive investment of NIS 64 million. After the quarter end, on October 13, we signed an agreement with Credit Suisse whereby we invested in Credit Suisse CHF 1.2 billion by way of purchasing 34 million of Credit Suisse’s Treasury shares. These shares represented about 3% of the bank’s share capital following their issue to us. This process was part of a broader fund raising that Credit Suisse carried out at that time. Finance of this transaction came principally from our own resources, with CHF 900 million of the CHF 1.2 billion from our cash balances and the balance of CHF 300 million funded by a recourse loan we received from Goldman Sachs. At the time of the transaction we also announced our intention to invest an additional amount in Credit Suisse shares. A few days later, on October 20, we received a refund of CHF 16 million from Credit Suisse, as a result of a final calculation of price adjustment on account of our investment. During October we also managed to realize a small part of our holdings, and as a result of these disposals we posted a capital gain that will appear in Q4 of NIS 40 million.
As at today’s date, following the acquisition, investment and disposals we affected, we are holding 38.16 million Credit Suisse shares. These shares represent 3.4% of the bank’s share capital. As at today our investment in terms of cost comes to NIS 4.35 billion. Yesterday the Board of Directors decided that the investment in Credit Suisse can increase up to NIS 5 billion, as before in accordance with the Company’s decision to make the investment from time to time, according to the Company’s assessment of developments in the markets.
Another significant event during the quarter was the fund raising through a rights issue. In July we published a shelf report proposal to raise funds. As part of it we raised NIS 678 million, which represented 99.8% of the rights we had offered. If we also take into account the rights issue we did in Q2 for NIS 384 million, that brings the total rights issues to about NIS 1 billion since the beginning of the year.
To conclude, I would like to point out that our financial results, press releases and other information appear on our website, http://www.koor.com. It is also important to stress that there are accounting differences between the companies’ results and the results included in our consolidated figures. With that I will wind up my summary and will happily answer any questions you may have. Thank you.
Manno Kahana: Orit, let’s go over to the questions.
Orit: Now we continue to the questions and answers. If you want to ask a question, press asterisk and 1. To cancel the question press asterisk and 2. If you are listening using a speakerphone, please lift the receiver before dialing. Please wait while I gather your questions. I am going to repeat the instructions: to ask a question, press on asterisk and 1. Please wait while I gather together your questions. There are no questions at this stage. Before I hand back to Mr. Oren Hillinger to sum up, I would like to say that you can listen to a recording of the conference call on telephone 03-9255921, from about two hours time onwards. Mr. Hillinger, please.
Oren Hillinger: Thank you very much for having taken part in our conference call. I will be pleased to answer your questions directly if there are any further questions. Goodbye until the conference call for Q4 and the whole year. Thank you and have a nice day.
Spokesperson: Thank you, that concludes Koor Industries’ conference call. Thanks for taking part. Have a nice day.
|
