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UPDATE 2-J.Martins cautiously upbeat as Q2 net profit rises

Published 07/27/2009, 07:25 AM
Updated 07/27/2009, 07:56 AM
TTEF
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* Net profit rises 23 percent, just above expectations

* Company keeps "prudent but positive expectations" on H2

* Revenues rise 6.5 percent, in line

* Shares rise over 2 percent, analysts highlight margin rise (Adds margin, analyst comments; updates share price)

By Andrei Khalip

LISBON, July 27 (Reuters) - Portuguese retailer Jeronimo Martins was cautiously upbeat about its second-half performance after posting a better-than-expected second-quarter net profit, helped by its new stores and late Easter sales.

The country's second-largest retailer said on Monday that it was maintaining "prudent but positive expectations" about its performance in the remainder of the year, which it said were justified by its first-half operating performance.

Net profit in the quarter rose 23 percent to 40.5 million euros ($57.50 million) compared with the average forecast of 38 million euros in a Reuters poll of eight analysts while first-half net profit rose 12.5 percent to 73 million euros.

J.Martins said its sales were boosted by the acquisition of 77 Plus discount stores in Portugal and 205 stores in Poland in the last year and by Easter falling in April this year and not in March as it did in 2008.

The company also said it expected further positive contribution from a more dense and mature store network.

Revenue rose 6.5 percent to nearly 1.78 billion euros while earnings before interest, taxes, depreciation and amortization (EBITDA) increased 10.7 percent to 119 million euros.

Analysts had forecast revenue of 1.78 billion euros and EBITDA of 115 million euros.

MARGIN RISE

Millennium Investment Banking analyst Joao Flores said that although revenues in the quarter rose slightly less than he had expected, the operating line was stronger, "reflecting a rise in margins particularly in Portugal".

"JM also benefited from smaller depreciation and financial costs, with the net profit coming above expectations. We expect a positive reaction to these results," Flores said in a research note.

BPI analysts also highlighted "a robust performance of the retail margin in Portugal".

Sales at J.Martins' Polish unit Biedronka, the largest discount chain in the eastern European country, jumped more 33 percent when expressed in the local currency, but in euros they rose only about 4 percent due to the zloty's steep depreciation of over 20 percent.

Biedronka accounts for about half of the company's revenues.

Net total retail sales in Portugal increased by 12.8 in the second quarter, while like-for-like sales from same stores rose 3.1 percent.

EBITDA margin in Portugal in the first half of 2008 rose to 5.9 percent from 5.1 percent a year ago, while total consolidated margin edged up to 6.5 percent from 6.3 percent.

J.Martins shares rose 2.48 percent to 4.827 euros around midday, outperforming the broader market in Lisbon, up less than one percent. ($1=.7043 Euro) (Editing by Hans Peters and Karen Foster)

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