As all Croatian blue chips published their 9M 2020 results, we decided to look at what effect did the pandemic have on the profitability margins of each observed company.
It is important to note that comparing the margins across the selected companies is not necessarily the best way to do the comparison as many companies operate in different industries. Since both EBITDA and profit margin reflect to a great extent the industry in which the company operates in, we advise to compare it to the peer average or median. Nevertheless, it is still worth seeing which Croatian companies are more profitable and therefore have more “room” to potentially reduce the prices of their goods or services if needed, while still remaining a higher level of profitability.
9M results include the aftermath of Croatia’s tourist season which both directly and indirectly influences many Croatian blue chips.
9M 2020 EBITDA margin of Selected Companies (%)
As of 9M, two Telecoms and a Hospitality company lead the list with the highest EBITDA margins. To be specific HT and Maistra recorded the highest EBITDA margin of 41.4% and 33.3%, respectively. For HT this notes a slight increase in the margin of 0.6 p.p., as this is one of the sectors who was among the least impacted by the pandemic on profitability level. Telecom sector was, in majority, influenced on the revenue side. HT as the leader felt strong impact on lost visitor revenue and handset revenue as consumer consumption decreased and tourist arrivals in 9M 2020 dropped by 62%. On the other hand the company showed in Q3 48% YoY surge in ICT revenue, which is a segment growing due to pandemic. Therefore, HT’s revenue decreased 3.9% YoY in 9M 2020. Meanwhile, Maistra’s EBITDA margin dropped by as much as 11.1 p.p. YoY as operating revenue dropped by 54.5% YoY. However, the company managed to retain still a relatively high margin as operating expenses decreased by 44% on the back of cost rationalization measures and state support. Optima Telekom comes next, with a EBITDA margin of 31.7%, showing an improvement by 4.3 p.p. YoY.
The highest drop YoY in EBITDA margin was witnessed by Valamar Riviera (-16.5 p.p.) due to strong decrease in revenue (-68% YoY) caused by coronavirus pandemic. Closed properties from March to the end of May and early termination of the summer season (as governments’ issued travel warnings to its citizens in Austria, Slovenia and Italy that came into force in mid-August) resulted in drop in number of accommodation units sold of 65% YoY. Company’s ADR decreased by 12.8% , as camps, who have lower ADRs, witnessed an increase in their share in revenues to 45% in 9M 2020.
Change in EBITDA & Profit margin (9M 2020 vs 9M 2019) (p.p.)
Turning our attention to the profit margins, HT once again leads the list with 8.6%, while its margin decreased by 1.8 p.p. YoY. Atlantic Grupa and Podravka follow with a profit margin of 7.9% and 6.5%, respectively.
On the filp side, three of the observed companies recorded a negative profit margin (net loss). Besides above mentioned tourist companies Optima Telekom also recorded a net loss in 9M. Of the companies, which recorded a net profit, AD Plastik observed the highest drop in profit margin of 3 p.p. YoY.
If you wish to compare EBITDA and net profit margins of these companies to their regional sector peers, you can do so by looking at our daily trading multiples which can be found here,
9M 2020 Profit margin of Selected Companies (%)
