Sitronics First-Half Net Income Falls 27% on Costs
OAO Concern Sitronics, a Russian technology company planning to sell shares next year, said first- half profit fell 27 percent because of higher costs related to acquired companies.
Net income fell to $33.1 million from $45.3 million a year earlier, the Moscow-based company said in a statement on its Web site today. Sales rose 66 percent to $699.4 million under U.S. accounting rules.
Billionaire Vladimir Yevtushenkov's AFK Sistema, which controls Sitronics, plans to sell about 20 percent of the company in February. Sistema in June bought 51 percent of the telecommunications unit of Greece's Intracom Holdings SA (INTRK) for 120 million euros ($153 million), and said today it has an option to buy the rest.
``Telecommunications solutions remain the major generator of profit for Sitronics that to a high degree rely on sales to other companies within Sistema,'' said Konstantin Belov, an analyst with UralSib Financial Corp. in Moscow. ``It is good they are taking steps to decrease this dependency but the key issue is the Intracom Telecom consolidation and how it will bring profit.''
Sitronics said it reached a put option agreement for the remaining 49 percent of Intracom Telecom. The option kicks in two years after the acquisition of the 51 percent stake, and runs for 36 months. Under the agreement, the purchase price will be agreed by the parties or by an independent appraiser.
First-half operating income before depreciation and amortization, or Oibda, fell 19 percent to $85.3 million.
``Profit was hurt as the company almost quadrupled its assets over the year, which entailed significant additional costs,'' said Alexander Boreyko, a company spokesman.
Sitronics's costs increased 82 percent to $529.3 million. In addition, depreciation and amortization costs more than quadrupled to $22.5 million.
Sitronics, which develops software and makes telecommunications equipment, microelectronic components and consumer electronics, also said it had a $4 million operating loss in its consumer electronics unit and a $5.4 million operating loss in electronics manufacturing.
Revenue at the telecommunications solutions division, which accounts for more than 50 percent of Sitronics' sales, more than doubled to $351.9 million.
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