CECEP COSTIN New Materials (‘CC’ or the ‘Company’)’s 2H15 EPSdecreased 66.9% yoy and was 62.6% below our forecast due to revenueand margin decline. 2H15 revenue decreased 29.0% YoY, was 42.6%below our expectation and decreased 18.4% HoH, the first time on recordwhen revenue was lower in the second half of the year compared to the firsthalf; from 2009 through 2014, revenue always increased HoH in the secondhalf of the year due to seasonal trends. Making matters worse, 2H15 grossprofit margin declined by 7.7 ppt YoY, indicating a significant deterioration ofbusiness environment.
We revise down 2016 and 2017 EPS forecasts by 23.8% and 22.9%,respectively, on lower revenue, partially offset by higher profit margin.Administrative expenses in 2H15 included one-off allowances for tradereceivables and inventories which we do not expect to repeat in 2016.Excluding such allowances, the percentage of administrative expenses torevenue was 5.8% in 2015, better than we previously expected, and so weincrease our operating margin forecasts. We expect net profit margin toincrease from 14.6% in 2015 to 18.2% in 2016.