Instability, plunging profits, send Spuntech tumbling

Spuntech Photo: Ron Steinblatt

The non-woven fabrics company's second quarter profit was down 90% in comparison with the corresponding quarter of 2018.

The 30% plunge in the share price of NR Spuntech Industries (TASE: SPNTC) yesterday cannot be explained simply by the 90% drop in net profit in the company's second quarter financials in comparison with the second quarter of 2018. The non-woven fabrics company posted a second quarter profit of just NIS 1 million.

Spuntech's second quarter revenue fell 7% to NIS 158 million, mainly because of a lower volume of sales. In addition, Spuntech's results were dented by a change in its sales mix, bonuses to employees for 2018, and exchange rate fluctuations. Quarterly gross profit dropped 39% to NIS 20 million. Since the company did not manage to trim its expenses, Operating profit fell 74% to less than NIS million. Spuntech's bottom line was also affected by a rise in the finance expense.

In recent years, Spuntech has suffered from instability in its business, and from frequent changes of CEO. The current CEO is Yehezkel Nissan, in his second spell in the job, after having been chairman. He was replaced as chairman by Jonathan Irroni, who is CEO of Gandyr Investments, owned by Judith Yovel-Recanati, who holds 10% of Spuntech.

Spuntech's share price also fell sharply in response to its financials for the fourth quarter of 2018, released in March, with a drop of 11%. Among other things, investors were apparently alarmed by the difficulties the company reported in the US market as a consequence of the trade war between the US and China.

Together with that fall, the share price has dropped 60% in five months, giving the company a market cap of around NIS 355 million, compared with a peak of NIS 1.2 billion in 2016.

Nissan, Gandyr and Irroni took advantage of the sharp fall in Spuntech's share price yesterday. Nisan invested some NIS 500,000 in Spuntech through Nissan Industries, through which he controls the company, at NIS 5.70, while Gandyr and Irroni each invested tens of thousands of shekels at lower prices.

Published by Globes, Israel business news - - on August 15, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Spuntech Photo: Ron Steinblatt
Spuntech Photo: Ron Steinblatt
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