Hegmatan Cement Company released its 2Qfinancials for the fiscal year ending January 20, 2016. Holding 502,900 IRR mn capital, the company recognized 202 IRR EPS in the first half of the current year, covering 80% of its whole year estimated return (253 IRR). It is so while it had made 873 IRR EPS the year before. According to the statistics, its realized profit and profit margin recorded 63% and 10% falls, respectively compared to the similar period the previous year. Although this company targeted to reach 670 IRR EPS for its 1Q15 and recognized only 59 IRR for that period, it has reduced its whole year EPS to 253 in its latest financials. The reasons for such a 62% negative adjustment have been stated to be:
Global markets have been witnessing unexpected drops in commodity prices. China’s recession and its DGP reduction have contributed to the copper price downturn which has itself affected other correlated metals’ price movements. Zinc price, for instance, fell to below $1800 after 6 years to stand at $1,770. There are also some reliable analyses supporting its bearish trend to reach $1450. Metal ores are also in tumbling conditions specifically due to the recession prevailing China’s steel sector due to its construction reduction; since China imports its metal ores mainly from Australia and Brazil, Iran’s metal ores are experiencing worse conditions and any change in China’s gloomy economy can shake the global price of this material. However, in case of regulating proper laws to stop importing steel and its damping by China, any increase in the country’s production capacity and its local use can be imagined, paving the way for more local employment of metal ores and its export with lower prices. To add salt to the wound, petrochemical products’ prices are also subordinate to the oil price whose oscillations have portrayed a gloomy picture for these materials, too. All in all, such issues can end in the price reduction in mines, metal, and steel companies quoted on the Tehran Stock Exchange, being more than 40.
The capital market continues to feel the impact of the non-stop flow of information, which sometimes proves to be misinformation actually, especially through the numerous news agencies here and, of course, the social media. And as the confusion continues, so does the market’s inability to analyze independently the published data and verify those based on the economic realities. This mentality, clouded by the speculations and fast-moving rumors, is detrimental as market practitioners keep being distracted by facts and figures that make safe and sound judgments seem irrelevant, regarding macroeconomic factors that are underlying market conditions.
In a press conference, the TSE’s CEO talked about the factors causing recession in the capital In a press conference, the TSE’s chief executive officer spoke about the factors, causing recession in the capital market. As he believes, the liquidity crisis has been the major reason to the recently seen bearish trend bearing in mind that such circumstances and liquidity lack exist in other markets as well. Denying any political agenda behind price falls and institutional investors’ role in this regard, Qalibaf stated that if a share price fluctuates in the market and reaches an attractive point, investors automatically will become interested in buying them. Furthermore, although the trade volume witnessed downfall, less sales proposals are being offered. He hopes that after the removal of constraints and limitations over the stock market as a result of the nuclear deal, the market resumes its rather bullish trend. In this regard, the global bank published a report on Iran in respect of the post-sanction era, zooming in on the sanctions relief, they believe that Iran will be able to continuously increase its economic growth and positively use many created economic opportunities in the aftermath of the agreement.
Having released its 1Qreport for the fiscal year ending March 20, 2015, Iran Tire Company was obliged to adjust its current year’s budget; otherwise, it had to provide the organization with justifications on not modifying its predictions. In its response, the company stated that not only have not its production and sales volumes been reduced, but also the company is determined to increase such amounts. However, the variable of sales ratio per kilo is a function of the market and it has eventually resulted in the reduction of the sales value and consequently, its profitability. Among the stated reasons, the company authorities believe that due to the excess import of tire, i.e. the main problem for the companies active in this field, recession and tire price reduction in domestic markets have been witnessed since December 2014 which reached its climax in the first semester of the current year; this resulted in a sales drop and companies were forced to decrease their sales ratio per kilo. Nevertheless, according to Iran Tire company’s predictions and based on the sales trend in June and also the contract signed with Iran Khodro Automobile Manufacturing Company, this company will be able to realize the sales amount. This is why the company has not changed its sales volume forecast; however it had been made to reduce its total sales to its initial budget ratio in Rials.
According to the Tile and Ceramics Production Association, consumption ratio has dropped by 30% due to the recession dominating the construction sector in the country resulting in the increase of stored goods volume; export has been proposed as the only solution to reduce this amount. After the removal of sanctions, thus, the export volume and its conditions will improve and the received money can be transferred to the country with more ease and speed which can itself circulate new blood to this sector’s body resulting in a probable new life.
During a meeting on the effects of sanctions relief on the insurance industry, opportunities and threats on August 9, 2015, the Day Insurance Company’s CEO delivered a speech. According to him, Day Insurance Company was not on its path towards success in terms of variables of level, i.e. ratios of insurance sales and damage over the period of 2011-2013. The non-observance of professional insurance principles resulted in the delivering of improper insurance services and products and the signing of risky contracts. Despite their initial attractiveness due to gaining high insurance fees, the difficulty and bitterness of severe damages imposed heavy losses on the insurers. At the end of 2013 and due to changes in the company’s management, however, the bearish trend of Day Insurance Company was stopped, beginning to experience an amending trend. In fact, the company managed to settle its delayed debts, attract new clients and significantly increase incomes. Besides, the company could avoid risky and negative portfolios in addition to controlling the costs. In other words, although the company did not gain any return from its insurance operations and portfolio, its successful performance in this time period resulted in the end of recession and quick improvements which along with the fast sales growth led to the return of other performance indices to the industry’s norms and mean. The company’s recent performance proves the continuance of this improvement and Day Insurance Company is approaching the top insurance companies in the country. The continuance of high sales ratio along with the reduction of damage ratio have contributed to the creation of a beneficial portfolio for the company which can be considered as a platform for the company’s profitability and income boom in the future besides its profitability in the current year. Of the Day Insurance Company’s important accomplishments in 2014, the following can be named:
While the global decline in prices has turned into a great concern for domestic industrial and mining companies, investors are wondering which shares will suffer the most from these significant falls. According to experts, profit margins in these sectors have reached to a minimum and there is more concern over more price declines; China’s economy, its recession and less consumption ratio are regarded as the main reason for prices’ decline. In order to survive such declines and fluctuations, shareholders and market activists are advised to pay more attention to the prices of the raw materials and their sales; in other words, those companies which buy their products at global prices but sell them at local prices are safe; however, those companies which buy their products at local prices and sell them at global prices are susceptible to greater losses. As a result, investors must be very much careful about companies which are directly influenced by global price changes, especially those with low profit margins, high leverages and more sensitive to fluctuations.
Despite the expectancy of a mild bullish trend for the market and at least an increase in share prices for the listed companies enjoying a proper fundamental status after the nuclear agreement, the significant decline of the overall index and shares’ value shocked market activists. Authorities’ insufficient attention has been expressed as the reason to this bearish trend due to not owning any formulated plan and just talking about the capital market support with no actual walking. To add salt to the wound, we witnessed heavy share supplies by authorities to control investors’ likely emotional behaviors which were also resulted in the decline of trades’ value. Factors such as digesting the positive effects of the nuclear deal on the market, the release of 1Q2015 reports of the companies, the meetings, etc. have been mentioned as the causes of this negative trend while some other experts regarded such reasons only as excuses since such information was not new and most market activists were already aware of the negative profitability of those firms. Under such circumstances, it seems that unless a solution has been found, the market will again suffer the problem of liquidity crisis and by witnessing severe and harsh fluctuations, traders in markets parallel with the stock market will not have any motivation to inject liquidity into that.
While most stakeholders regard the halting of 5 important companies’ tickers unnecessary, the corresponding authority explained the reasons. Esfahan’s Mobarakeh Steel Company, Mellat Bank, Gol- Gohar Iron Ore Company, Refineries and Metals are the important and major tickers being halted since May, when the market was facing the least volume of trades. Regarding the halting of Esfahan’s Mobarake Steel Company, Ali Beik- Zade stated that this company’s EPS has dropped from 700 to 200 IRR and the company is required to explain and clarify the reasons; on Mellat Bank latest status, he stated that the ticker is ready to reopen; however it seems that this requires a proper timing. On Gol -Gohar’s latest status, he mentioned that this company faced a 30% negative adjustment on the one hand while the letter sent by the minister of industry on this company’s financial statements has caused new ambiguities which must be removed. The tickers of mines and metals are the ones being halted for some time; however, since Chadormalu Mining and Industrial Company and Gol- Gohar Iron Ore Company are regarded as the most important assets of this industry, their reopening requires the removal of ambiguities on Iron Ores.