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Abgul
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The developer of hygiene products and medical products reports very weak results in the fourth quarter. Net income amounted to only $ 2.4 million, compared to approximately $ 8.3 million in the previous quarter, a decrease of 71% in net income. Compared to last year, this is a 33% decrease in net profit from $ 3.6 million.
On the other hand, in annual terms, this is a 200% jump in net profit, which stood at $ 36.9 million in 2020, compared to about $ 12.3 million. Why then are these bad reports? Because almost all of the profits were recorded in the previous three quarters, most in the first half of the year, following “revenue from fabrics for high-profit medical products” —that is, corona masks, so that upon completion of the corona revenue may decline.
The company’s annual revenues decreased in 2020 to $ 383 million, compared to about $ 414 million in 2019, a decrease of 7.5%. Revenues in the fourth quarter amounted to NIS 96 million, an increase compared to $ 93.4 million in the previous quarter, but a decrease compared to revenues of NIS 102 million in the fourth quarter last year.
EBITDA in the fourth quarter of 2020 amounted to approximately $ 17.6 million, an increase of $ 1.5 million compared to the corresponding period last year – but a fall of 20% compared to the previous quarter. EBITDA in 2020 amounted to $ 89.4 million, compared to $ 64 million in 2019. The increase in profit and profitability in 2020 was mainly due to the increase in demand for fabrics used in the manufacture of products for medical and hygienic uses as a result of the global corona crisis (as mentioned – Corona masks)
Cash flow from operating activities in 2020 amounted to approximately $ 101.5 million, Compared to $ 20.8 million in the same period last year. The increase in cash flow was mainly due to the decrease in the volume of customer balances on the balance sheet as a result of the non-recourse reduction of $ 12.2 million during the period (during the corresponding period last year, the volume of factoring decreased by $ 39.3 million). Excluding changes in production volumes and discounting of customer balances during the period and during the corresponding period last year, cash flow from operating activities during the period amounted to $ 89.3 million, compared to $ 60.1 million during the corresponding period last year.
During 2020 the company decided to move a production line from Israel to India to save costs, as the wages paid to workers in India are significantly lower, the company plans to complete the project by the end of the year. In addition, this week the company’s board of directors approved an investment of about $ 70 million, including the construction of a building and warehouse, the purchase of a new line and complementary equipment for the production of products for the medical market, in Russia, which the company says is a fast-growing market.
During the first quarter of 2020, Avgol renewed agreements with major customers. Some of the agreements are for a period of one year and others for a period of two years. According to the company, the agreements include expected growth in sales volume, which is accompanied by discounts on prices given. The Company was able to offset some of the impact of the price discounts by improving the raw material purchase agreements signed for 2020 and by continuing to improve the Company’s operating efficiency.
The company’s CEO, Shahar Rahim: “Avgol continued to demonstrate in the fourth quarter, similar to the entire 2020, the resilience and strength of the company during the Corona crisis. During the year, the company presented its commitment to stability and growth in changing market conditions. One of Avgol’s main goals is to continue to identify and realize opportunities in innovative areas and products in the hygiene market and in tangent markets, while placing special emphasis on the field of sustainability, out of a desire to be partners and take part in improving the environment and life. 2020 is a year in which the main task has been to ensure the continuity of business activity both for us at the global level and for our customers, and we are proud that we have met the task with great success.
“At the beginning of 2021 we see that the high demand for non-woven fabrics continues even more, however we see that there are global problems in the ability to supply polypropylene regularly, both due to severe weather events and high demand exceeding supply. This trend causes a significant price increase that began in the quarter “Wednesday of 2020 and continues more sharply in January and February, especially in North America. We continue to follow developments closely, to ensure the continuity of production and supplies.”
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