We met Atlantic Grupa’s Management during the Belgrade conference last week and now we bring you some key takes from our meeting.
Our meeting with Atlantic Grupa’s Management started off with a short discussion about of the company’s key revenue drivers. When talking about the performance of individual markets on which the company operates, the Management stated that they are satisfied with the development in the region where own brands and new principals have been posting stellar performances. The Management also replied that they will retain their focus on own brands, however this does not mean that principal brands will be set aside.
Regarding OPEX, the Management stated that the company does feel that the rising pressure on wages will be a threat to the company’s profitability. Furthermore, this threat is likely to spread across other expenses since suppliers are facing the same problem which will in turn likely result in higher prices of services. Also note that prices of raw materials are expected to increase slightly as well. Coffee is the largest concern here since Atlantic’s SBU Coffee accounts for roughly 20% of the Group’s sales.
CAPEX will amount to EUR 30m in the upcoming two years after which it will return to around EUR 20m. Note that CAPEX is mostly spent on regular maintenance and modernization of production capacities.
On the balance sheet, Atlantic Grupa plans to further deleverage their operations since the company can finance all their needs from own sources. However, note that a potential M&A deal would result in the company taking on some additional debt.
M&A wise, Atlantic Grupa is currently interested in a large acquisition, however the Management stated that, at the moment, they just haven’t found the right fit. To specify, Atlantic Grupa is looking for another FMCG company whose existing brands would fit into the company’s current portfolio of products. Furthermore, the acquired company would have to be a complementary one in order to help Atlantic Grupa’s own brands to reach better placement in the market on which it operates.
When talking about the company’s strategy of divesting non-core segments we discussed the recent sale of Fidifarm. The amount for which the sale was agreed remains undisclosed, however Atlantic will record a certain gain from the sale. Note that since Fidifarm did generate a positive operating result next year’s top line and EBITDA will be somewhat affected. Regarding future divestments the Management stated that other segments which do not post an adequate level of profitability could also be up for sale. Also note that, although one can consider Farmacia as something outside of Atlantic Grupa’s core business, the Management does not intent to divest the business since the segment posts strong results and has proven to be relatively easy to manage.
Dividend wise, the company plans on sticking to their dividend policy which states a pay-out ratio of up to 25% of the Group’s consolidated profit.