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Maaden's net income came in at US$11.6mn compared to a reported profit of US$5.4mn in Q1 2010 according to a report by the Saudi bank, NCB Capital (NCBC).
Although gross profit was in-line with Maaden's number, the net income was significantly higher due to a lower Zakat base.
Net income shows a significant growth YoY
Q1 2011 came in at US$11.6mn compared to a reported profit of US$5.4mn in Q1 2010 and NCBC estimate of a profit of US$0.07mn. Net income increased significantly on an annual basis (111.9 per cent growth).
Gross profit in line with estimates
Gross profit for Q1 2011 came in at US$4mn broadly in-line with Maaden's estimate for Q1 2011 at US$32.8mn. Q1 2011 was a 58.7 per cent increase YoY (US$21.4mn in Q1 2010). The company thinks this growth was primarily driven by rising gold prices over the period.
A significant difference in Zakat
Maaden stated that a decline in Zakat provision in Q1 2011 driven by increased spending on projects (which reduces Zakat base) was an important factor driving net income growth.
The company estimated Zakat for the quarter to be around US$13.8mn, and although the company did not mention an exact figure in its announcement, back of the envelope calculations suggest that Zakat expense was below US$2.6mn for the quarter.
This significant variance explains why gross profit came in line with Maaden's estimate while net income was significantly above its expectations.
According to the report, Maaden remains neutral with a PT US$6.4/share. The company awaits the full financial details before updating its model.