CEE Investment Opportunities 2023 Overview Part II

Yesterday, we brought you an overview of the main takeaways from the CEE Investment Opportunities conference (ZSE & LJSE Investor Days along with a few Romanian companies). Today we present you with all of the rest of the companies participating in the event that we spoke to.


For the year 2025, Krka is preparing a changed annual report, and therefore, from January 2024, reporting will be introduced that will help them get detailed information from an ESG perspective so that the reporting can be comprehensive. In Q1 2023 reporting for Krka Group Regional Product Sales by Market was introduced which is very recommendable from the point of view of investors and analysts and this segmentation is here to stay. When looking at the region South-East Europe in Q1, of the bigger markets sales in Croatia were up 19% YoY. It was due to the growth of pharma and non-prescription products but also due to animal health products. Animal health products increased sales by 30% YoY and all markets, and they amounted to EUR 28.4m. Especially in South-East Europe animal health grew 6% YoY and in the future company sees this segment continually showing growth. When looking at the biggest market in South-East Europe, Romania, it was down 2%. We can say that quarterly sales show seasonality as pharma companies in some quarters deduct clawbacks paid to health insurance providers so variations in results can be evidenced. The current Krka Group 2023 business plan envisages full-year sales to grow 2% YoY, while in Q1 2023 sales grew 6% YoY. If there will be a revision of the plan the company plans to publish it on 16 November together with the release of the January – September 2023 Interim Report.

Krka is currently in the process of working on a new strategy. It is expected that the management will approve this strategy in September, Supervisory Board in October, and that it will be published in November. When the strategy will be published in November, Krka will hold investors’ day on this premises in Novo Mesto in physical form. As the company holds positive net debt and has a robust balance sheet, this strategy will include general plans on what to do with excess cash. It is not planned to return it to shareholders through extraordinary dividends, but rather to invest it in business through acquisitions and to return additional value to shareholders through capital gains. Krka’s payout ratio is minimally 50% and the dividend yield is around 6% which is above their peer group.

On 18 May 2023, Krka published a notice of an AGM meeting which is asking for approval to prolong the share-buyback programme up to the amount of 10% of total shares and that will be valid for 3 years from adoption. The company is in this way also returning value to shareholders, while the aim of the treasury fund would be to decrease share capital. In the upcoming period, this could be done by canceling treasury shares under the simplified procedure in accordance with the Companies Act. This is expected to be resolved by 2026. This shows that the management believes that the share price is still undervalued so returning values to shareholders is profitable. In 2022 the company purchased shares in the value of app. EUR 10m and a similar pace of acquisition of treasury shares in expected in 2023, approximately 1/4th of this amount per quarter.

New Krško API plant – Sinteza 2 – investment is valued at EUR 170m. It will be realized in the next 2-3 years in case all the production permits will be obtained, which should be known in this quarter. If this project will be realized, the domestic production of API will increase to a double-digit share in total API production but partners from China and India, where outsourcing of API according to Krka processes is done will remain to be the major source of API production.


The F&B segment has seen a deterioration in margins, but it has fallen lower than expected due to the optimization of costs. It is mainly because expense management is now allocated to product portfolio so now each BU director oversees its whole P&L. This reorganization is in place from 1 Jan 2023, but the effect will be felt throughout 2023. Supply savings have increased as with key raw materials alternative suppliers have been introduced and e-auctioning was introduced. Optimization is and will be evidenced due to streamlining of transport packaging. 280 different SKUs were used in the past and now there will only be 50 types. Now mostly packaging made of recycled paper with a low carbon footprint will be used. It is visually unappealing, but it is practical for transport packaging. When it comes to product packaging, the situation is different. It takes much longer to introduce new materials, as product packaging needs to be tested for a period of up to two years and the procedure is complex. Through its new strategy, Podravka is committed to having 100% compostable, recyclable, and environmentally acceptable packaging by 2030. Efforts will be made to achieve this guideline even before that.

A new system of calculation of wages based on coefficients will be introduced, so there will be tariff classes and clearly defined criteria for individual positions. The tariff classes will be in gross wages according to the levels of complexity. This is done in accordance with the advice of consultants. This will help in optimizing salary costs, but it is also important for them to keep profiled employees from switching jobs. So further improvement of material rights is expected this year. The sale of non-operating assets continues. Tomato production is moving to Kalnik, so the factory in Umag, which is situated in the coastal area on 25 thousand square meters of land, will become a non-operating asset. Istria will remain the raw material base area, while production is moved away. The building permit has already been obtained for Kalnik to expand production, so tomatoes will be processed there from May 2024.

Atlantic Grupa

Atlantic publishes profitability by segment half-annually but it can be concluded that the trends from year-end have continued in the first quarter. The decrease in profitability is primarily stemming from an increase in raw materials and packaging. In 2022, the highest decrease in EBITDA margin was experienced in the Snacks segment, which at the end of 2022 had an EBITDA margin of 6%, 11 p.p. down YoY. But this segment had the highest growth in Q1 of 34% YoY as new production lines for Smoki and chocolate are in place. Also, Jimmy Fantastic from the new growth segment (Other segments) was merged into the Snacks segment. The Beverages segment also experienced strong top-line growth of 23.8% YoY in Q1 2023 primarily due to growth of prices, while brands Cockta and Cedevita showed strong growth in HoReCa and retail channels. In the first quarter, the vitamin waters were launched which are expected to show strong growth in Q3 when profitability is expected to increase compared to 2022 levels when the EBITDA margin has amounted to 16% vs. 21% in 2021. Pharma segment sales grew 6% in Q1 2023 as in 2022 Atlantic bought 2 pharmacies. Atlantic currently owns 100 pharmacies and specialty stores on top of which it sells through a webshop. Since Pharma is a retail business it has the lowest profitability among Atlantic businesses, but it proves as the anchor in turbulent times as it was the only segment in 2022 whose EBITDA margin grew to 12% ( by 1 p.p.).

When looking at staff expenses in Q1 2023 they grew 10.6%, which is due to the increase in basic salaries and higher variable payments because of higher sales. Also, in May Atlantic announced the acquisition of Serbian biggest competitor which is pending regulatory approval. The deal is valued at EUR 40.5m on a cash-free and debt-free basis, assuming delivery of normalized net working capital at transaction closing. Strauss is known for its strong coffee brands in the Serbian market – Doncafe and C kafa. Along with the brands, Atlantic Grupa would be taking over Strauss Adriatic’s modern production facility in Šimanovci industrial zone, near Belgrade, and its 220 employees. The Coffee segment has in 2022 seen a decrease in EBITDA profitability of 10 p.p., but after the normalization of coffee prices and a decrease in inflation rates on Atlantic core markets, it is expected that this profitability will improve by the end of 2023.


With Span, we kept it short and sweet. As the company held pretty detailed Q1 results, we just glanced through development in each business segment. You can read it in more detail here. Further, we want to emphasize something else. As you probably know, Span employed more than 200 people during the end of 2022, representing the biggest investment cycle for Span. Consequently, this was an important topic at the CEE event. Span noted that regarding this topic, everything is going as planned. Group’s guess is that the results should be seen already in the Q2 results. This we find encouraging above everything else, as this is a form of CAPEX for an IT company like Span. Finally, Span noted that they still see its relationship with Microsoft much more as a strength than any form of risk. Indeed it was short and sweet and we are glad that the stock exchange notices Span. Looking at the current data, Span will be also the most traded company on ZSE for the first half of the year, not only in the first quarter.

Cinkarna Celje

Cinkarna Celje communicated that the company expects the current situation on the market to remain until the end of the year. Due to the lower disposable income, the end-users for final products, which contain Cinkarna’s input, the end-customers are lowering their expenditures for permanent products. The other momentum influencing Cinkarna’s business environment is that some European buyers are weighing the risk of the supply from China compared to the EU. However, on a positive note, two plants in the EU that produced TiO2 are closing. CInkarna’s direct competitor – Venator, is being delisted (had a market capitalization of c. EUR 60m). Finally, regarding Cinkarna, we are still waiting for the GSM to see the dividend approval development.

OMV Petrom

In an uncertain business and regulatory environment, OMV recorded a decline on both the top and bottom lines in Q1 2023. The main story for the Company, however, was the solidarity contribution and its impact on the business operations. From the 2022 financials, OMV Petrom has to pay a solidarity contribution of RON 1.5bn (EUR 300m), and in Q1 2023, this amounts to EUR 75m (app. RON 375m). This presents a challenge for the Company overall, as the potential upside, during albeit a peculiar year, is capped. On the other hand, in previous years when oil&gas prices were a lot lower, OMV did not receive support that would even be close to the level of the impact of this tax. Despite this, the Company noted that they’re continuing their business operations as usual, with a focus on regional oil and gas. The investments into the Neptun project are underway, and by 2027 the Company should invest app. EUR 1.7bn into all investments. They also expect that the energy commodity prices will stabilize, albeit saying at what level is extremely hard due to the current macroeconomic and geopolitical environment.

ONE United Properties

A premier residential and commercial real estate company in Romania (mainly Bucharest), One United Properties is set for a coming period of strong growth. Positioned in medium, medium-high, high end and premium market segments on the residential side, the Company has a plethora of projects being developed, which should support said growth. Due to its positioning, the Company has captured a market niche (in Romania in particular), which allows them to develop projects with gross margins ranging from 30-40%. Furthermore, they have many more land plots ready for development, and given the size and amount of land available in Bucharest, there is even more potential for growth. On the commercial side, the Company is serving many companies with custom-made offices, with leases signed for at least 5 years, providing a source of recurring income. Given both of these, the Company has captured a small market share when compared to the overall market size (several percentage points), but with this, they’re able to capture double-digit revenue numbers. The current growth prospects for Romania as a whole, but Bucharest especially are positive. The macroeconomic developments and high inflation haven’t affected the demand in the higher-end segments, and given the lack of supply of new and quality developments, it is reasonable to assume that the development of One is to continue. The Company’s stock has also been included in several MSCI indices, giving it even more exposure. Finally, and something that can be said for all of Romania, the Hidroelectrica IPO which is expected to take place this year, will mark a strong push of Romania from Frontier to Emerging market status. Combined with the recently launched 7BET ETF in Croatia, this will give Romanian companies a lot more exposure. As such, One United stands out not only as a Company that can continue its development pipeline on the one hand but also as one that can attract further investment opportunities from abroad.

Luka Koper

For Luka Koper, Q1 2023 was a quarter of stabilization, which when compared to 2022 numbers is expected as 2022 was one of the best years on record. They managed to increase the sales revenue by 13%, but given the fact that expenses also grew, EBITDA and net income remained roughly the same YoY. In terms of maritime throughput, it decreased slightly, by 3%. The main driver of this decrease was the decline in general cargo, which decreased by 38% YoY. On the other hand, car throughput recorded a significant increase of 32% YoY. As the Company noted, this is in line with several trends we are seeing right now. First of all, the increase in electric cars had a positive impact on the cars’ throughput, which due to the push for more green energy usage, is a positive development. Reduction in different ore types, on the other hand, is also a trend in line with this. The slowdown in revenue also came from the reduction in warehousing fees, something that already started in Q4, but this is more of a normalization, as congestion and delays caused longer warehousing needs, leading to this increase previously. Luka Koper also noted that they recorded an increase of 18% in OPEX, and growth was recorded across all expense lines. Overall, the current situation, albeit not ideal due to high costs, is stable for the Company, with continued investments into different infrastructure and other port-related projects going on continually. Finally, the Divača railway, something that could significantly boost the Company’s transportation and thus throughput capabilities, is slated for 2025/2026, and thus far, the project is ongoing with no delays announced.

Purcari Wineries

Purcari Wineries made a comprehensive introduction on our CEE investor days. The company was founded almost 200 years ago in 1927. Fast forward, Purcari was awarded the world’s most-awarded winery in 2021, the fastest-growing large winery in CEE with more than 1,450 hectares of price vineyards. A rule of thumb would be that 4-5 years are needed for a crop to mature enough for a premium wine. Purcari currently has a portfolio of 6 brands. Besides wine, Purcari also produces a cognac due to its strong synergy with wine production. Looking a few years back, the company achieved a strong EBITDA margin of around 30% with a net profit margin of c. 20% on average. Currently, the company sees organic growth as the main field of focus with potential EU subsidies. Finally, the company sees no real risk regarding Ukraine.

Category : Blog

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