In Q1 2022, Cinkarna Celje recorded an increase in sales of 31.8%, an increase in EBITDA of 78.1% and net profit doubling to EUR 15.6m.

In 2021, Cinkarna Celje recorded one of the best sales results for the first quarter, which amounted to EUR 66.4 m (+31.8% YoY). This increase was driven by growth in Cinkarna’s most important business unit – titanium dioxide. Sales from the titanium dioxide business unit amounted to 80.8% of total sales. Cinkarna reported an increase of 33% in titanium dioxide sales alone, which was even further driven by higher prices of titanium dioxide pigment. Also, regarding titanium dioxide prices – a specific market situation for titanium dioxide is present – decreased supply, with stable and strong demand, which resulted in the higher bargaining power of suppliers which was thus reflected in a higher price. In this quarter, the supply side of the equation shrank even further, as the delays were reported in Asian pigment coming to Europe. This impact is favourable on margins in the current period.

Overall, the above-mentioned macroeconomic situation, and general shortage in the market in titanium dioxide supply resulted in a higher price for titanium dioxide. But we should emphasize that price correction should occur during the year, as prices are unusually high. Also, there is significant pressure on prices for key raw materials, including titanium-bearing ores, energy and transport. In the quarters to follow, further increases for those input prices can be expected, but a higher price should be reported on the input side than on the output side.

Also, a reason for the sales growth was an improvement in market condition and favourable demand from all significant geographical segments, which is linked to the general consumer optimism, resulting in a better performance of every other business unit too, compared on a YoY basis.

EU Spot prices for Titanium Dioxide in the last 5 years

Turning our attention to operating expenses, in Q1 they increased by 23.5% YoY.  This increase was a result of growth in sales driven by an increase in all cost line except other operating expenses(-8.4% YoY). As a result of growth in sales, the cost of materials was up 23.5% YoY, which is slower growth than sales despite of inflation (from EUR 24.1m to EUR 31m). Due to strong growth in prices of the end product, the Company was able to offset the negative effects of input price growth. Cost of services was up 23.2% YoY, while labor costs increased 8.6% YoY, amounting to EUR 8m. As the number of employees in the period fell for 3.6% YoY (from 812 to 783) due to natural employee outflow), the average monthly cost per employee was up 12.8%. This is in line with the trend of salary inflation evidenced in the 1Q 2022.

All this has resulted in strong growth of operating profit, so EBITDA surged 78% and amounted to EUR 22.4. Such a high increase happened primarily on the back of mentioned sales growth (+31.8% YoY), supported by slower growth of expenses(+23.5% YoY) leading to 9 p.p. EBITDA margin growth and increase in operating profitability. EBITDA margin surged to 33.8% from 24.9%.

Depreciation was flat at EUR 3.3m, while net financial result was positive as the company has no debt. Tax expenses doubled to EUR 3.6m as a result of the doubling of operating profit. As a result of the above-mentioned net profit in Q1 2022 doubled to EUR 15.6m (from EUR 7.4m in Q1 2021).

Cinkarna Celje Performance Q1 2021 vs Q1 2022 [EUR m]

CAPEX wise Cinkarna Celje spent EUR 1.8m in Q1 2022. Most of the funds were spent on purchasing fixed assets, replacement equipment and environmental investments. This EUR 1.8m represents 13% of planned funds for 2022. Cinkarna will focus on investing in programs that primarily show a potential for growth, ensuring profitable volumes of production.

To remind you, in FY 2021 the company paid out EUR 16.4m in dividends (EUR 21 per share), which translates to a payout ratio of 87%. Also, Cinkarna Celje spent EUR 0.9m buying its treasury shares. As a result of their strong performance, the company’s share was up 7.3% in 2021. To learn more about Cinkarna Celje dividends read here.

Cinkarna’s share price performance in 2021 and Q1 2022