CEE Investment Opportunities 2022 Overview – Part 2

Today we bring you an overview of the main takeaways from the second day of the CEE Investment Opportunities (ZSE and LJSE Investor Days) conference.

Atlantic Grupa

To their total portfolio of consumer goods products Atlantic has added another category ‘New Growth’. Their new brand, high-quality milk chocolate Jimmy Fantastic was launched to the markets of Croatia and Slovenia. Also, a range of oat-based products under the Boom Box brand is launched also in Croatia, Slovenia, and Serbia. They are also adding a new Point-of-Sale (POS) store Ziggy that they have launched as a trial on Zagreb Flora Art. They plan to add a couple of fixed stores in Croatia as a pilot project.
The majority of the coffee business Atlantic has in coffee is in the Turkish coffee category. Raw material input prices have increased by more than 60% in 2022 compared to 2021. The raw coffee price increase is simply a consequence of the frost that happened in Brazil last year and there is hope that it will change in the next year. Therefore, they have increased their coffee prices twice, first in November 2021 by 20% and again in 2022 for another 10%. So, in total 20% prices increase for their coffee products was evidenced. In other products they have increased prices from 5% to 8%. With Argeta they are protecting quantities and they are increasing them, so they have not increased prices strongly. In Savoury Spreads, they have a growth of 8.6% YOY in Q1 2022. They have also evidenced growth in volume with salty snacks, where in 2022 they expect higher growth than what was evidenced in Q1 2022 (+5.7% YoY). The investment that they plan is new machinery in Serbia that will allow the volume to increase. Donat, their smallest BU, in Q1 2022 experienced growth of 9.4% YoY. This was the combination of the price increase and quantity growth. When looking at the Russian market robust growth was shown. They are changing the model and approach in their work in Russia by selling only Donat and Argeta. They increased prices and they have asked customers/distributors to pay in advance. They are currently now at the minimum level of sales, so they don’t expect strong growth of BU Donat in 2022. When looking at their Q1 2022 sales by markets Croatia holds 1/3 of the total. Serbia is at 21% chased by Slovenia with 19.1%. Russia and CIS countries have 1.6% and by 2022 it is expected to be smaller.
The key challenge today is to secure packaging material due to supply change constraints. So, optimizing working capital expenses is not a priority. There is a delay in the supply of equipment in 3-4 weeks, so there are some delays in CAPEX. But they continue to invest in modernisation and for 2022 investments between HRK 280m and 330m are expected. The land near Varaždin in Croatia is already bought for the construction of a new Argeta factory which quantities are growing. They will wait one year time and t to decide then when to start the construction. As they are expecting more than 60% higher average prices of raw coffee on the global commodity market combined with the unfavourable US dollar exchange rate, they expect normalized EBITDA margin to be app. 320-340bp lower than it was in 2021.

Valamar Riviera

During the conference, Valamar Riviera reiterated its 2021 business results overview and commented on the Q1 2022 results. During Q1 2022, total revenue increased to HRK 75m, which is HRK 23m higher than in the same period of 2019. They continued their deleveraging strategy, decreasing their net debt to assets by 13 p.p. YoY. Overnight stays also increased significantly and amounted to 147,401, +55% YoY.

Moving on, the Company also touched on some trends in the industry as well as their expectations for 2022. They expect the summer season to be very good, on par or above 2019 levels, as the bookings have been growing on a consistent basis since the beginning of the year (only slowing down/stopping temporarily at the end of February and during March as a result of the Russian invasion of Ukraine, but picking up again and now on the growth path). The Company also estimates that its current selling prices are solid, and with the demand being high, they expect ADR and revenue to be good this year.

The Company also commented on the current energy prices, and they expect the increase in energy to have a strong impact, combined with the expected salary growth, but to be somewhat mitigated, as the Company’s budget is solid this year. As such, EBITDA is also expected to come very close to 2019’s levels. In terms of their assets, they expect to open the Amicor Green Resort in July. At the same time, they expect their Northern assets to perform well, especially compared to Dubrovnik as airline flights are still recovering but haven’t fully recovered. As such, they expect Dubrovnik to sit between 2019 and 2021 levels.

In terms of the labour force, Valamar has secured app. 95% of the total labour force for the whole summer season. Finally, the Company touched on its Pinea resort. In total, they invested around EUR 100m into the resort, with approximately 20% of the resort completed until now, but the project is currently on hold. They are also open to further asset-light investments and are willing to find new partners who will help them invest in acquiring these assets.


Petrol is a downstream retailer of petroleum products with its own warehousing. Also, they are engaged in the sale of LNG, LPG, electricity, and environmental solutions for managing wastewater plants. In the last two years, there was a 4-5-fold increase in petrol prices. And in 2022 the business situation has changed significantly which has affected supply chains and caused changes in price regulation in the energy sector. A high increase in oil, electricity, and natural gas prices has resulted in Government regulation. In Slovenia for petrol and diesel maximum allowed retail and wholesale price for periods from 14 Mar till 30 Apr and from 11 May till 10 Aug was introduced. Only for extra light fuel oil maximum permitted margin was introduced lasting until 20 May. In Croatia from 7 Feb maximum permitted retail price regulation was introduced. From 7 March it changed by introducing a pricing model where the maximum permitted margin was introduced, lasting up to 90 days. In Serbia there is also a cap on price, in B&H there is a cap on margin, while in Montenegro they have regulated maximum margin and they are looking to change the model.
In Slovenia, there is a cap on products Petrol Group is importing and they cannot hedge well. They have a commitment from the Government to compensate them for the losses. They expect to be compensated for EUR 51m and Petrol published what is the result of their measure. To conclude, they believe that they will achieve annual plans. They expect a 2022 net profit of EUR 158.3m which is a sharp rebound compared to last year. They see tourists coming and they expect a good season. They believe that their plan for 2022 net income will not be jeopardized by Government intervention. New Government announced that they will not allow any war profits as their prime minister puts it and that they will have to react to it. Petrol is not making any extraordinary profits and they also have good dialogue with the Government. As Petrol is only hedging its margins and protecting itself against the volatility of prices, they believe it will be compensated by the Government for 2022. They are selling at some points below purchase prices, and they have to be compensated for it. For the rest of the year, they hope to renegotiate to a more acceptable model with the government.
Petrol Group achieved good financial results in Q1. They were achieved by electricity trading, higher sales volumes of petroleum products, and integration of Crodux Croatia into Petrol Group. EBITDA increased 21% YoY to EUR 65.6m which was achieved by effective cost management. Share of operating costs in adjusted gross profit stood at 70.9%, which is the same level as in Q1 2021. At the end of Q1 2022, net debt increased by EUR 54.7m due to higher Working Capital needs. Due to the improved profitability, net debt/EBITDA was down to 1.9x, compared to 2.1x (end of 2021).
Petrol is in the process of obtaining an ESG rating. They have also set up a Sustainability Board. Based on the ESG rating they will create an action plan and they have set clear targets in this area. They have a number of projects in this area.
Investing in E-charging stations, and at end of March 2022, they had 323 of them. Adoption rate of charging stations is slow. In Serbia 2019 was the first year that you could register electric vehicles. By the end of 2025, they plan to have 1,575 charging points for electric vehicles. They think that development goes very much in line with demand.


Span achieved good financial results in Q1, with revenue growing by 38% YoY and amounting to HRK 185.1m. What’s more, the revenue growth was recorded across all of its business segments, ranging for 20% to 70%. The largest segment by revenue, Software Asset Management & Licensing, grew by 31% YoY and amounted to HRK 101.2m. This segment is important because it refers to Span’s licensing agreement with Microsoft, and even though it can drive high revenue growth, it does not carry a high margin, usually not higher than 5%.

EBITDA before one-off items (one-off refers to the acquisition of Ekobit) amounted to HRK 23.1m and grew by 88%, while EBITDA after one-offs grew by 68% YoY. Finally, net profit increased significantly, growing by 135% and amounting to HRK 17.2m. To read our detailed report on the Q1 2022 results, click here.

Moving on, the Company also touched on some of the current trends and challenges facing them. Firstly, they touched on employee retention and fluctuation rates. When it comes to key employees, the fluctuations are close to 0%, while in terms of non-key employees, there is some fluctuation, but they are hiring new people all the time. This was also mentioned as one of the limiting factors to the Company’s growth, it’s not that they aren’t expanding, but that the expansion is limited by the number of new people they can employ.

Span also talked about the impact of the Russian invasion of Ukraine on its business. In Q1 2022, Ukraine accounted for 11% of the Company’s consolidated sales, but since the start of the invasion, the focus has been on providing safety and security for the Company’s employees. As the Company’s offices are located in Kyiv, the focus now is on providing continued safety but also reviving the business. Most of the Company’s customers in the country are located in Western Ukraine and Kyiv, with the exception of one of its largest customers which is the owner of the Azovstal factory in Mariupol. With the current situation, they are limited in meeting their commitments to Span and making new ones. Overall, Span plans on remaining in Ukraine and helping the country recover after the war, and they currently estimate that revenue growth in Ukraine, even now, will be higher than expected.

In terms of profitability, the operations in Ukraine do not have a significant impact on the P&L, as the EBITDA is close to 0 or negative, while the net profit is negative. This is due to the fact that the Company was in the process of expansion of its client network, mostly through its Microsoft licensing agreement, which as we said, carries lower margins.

Span currently has strong results and plans on expanding, especially in the Western markets, attracting new customers through its partnership with Microsoft while at the same time, expanding the network it’s offering its own services.


The company stressed out both qualitative and quantitative results. NLB noted a very strong Q1 of 2022, showing improvement in virtually all major lines. Favorable trend in deposit growth was maintained, while NLB is still the 1st choice when it comes to population putting in their saving. Net interest income increased by c.11% YoY and net fee and commission income also witnessed a strong increase of c.13% YoY. But, the biggest positive surprise in Q1 was the negative goodwill coming from the Sberbank (its Slovenian subsidiary), via the acquisition amounting to EUR 172.8m – boosting significantly the bottom line (+231.5% YoY). Turning the attention to the balance sheet, the company’s assets reported a 15.3% YoY growth. Also, to remind, in Q1 NLB again reported a negative cost of risk standing at -17bps. NLB said the main reason behind the negative cost of risk is a highly diversified and well-collateralized portfolio. All declared dividends are expected to be paid out.

Furthermore, Company emphasized the KB integration – it occurred within the planned time frame and NLB noted of achieving know-how during the process. Despite the fact that integration involved 400 people, NLB was also able to report its organic growth. The company expects even better operations in times to come, further boosted by a high synergy.

2022 updated guidance was partially communicated, but NLB noted it will be published to the public in a few weeks. NLB plans for their costs to remain flat with high control over them. For the cost of risk, a level of roughly positive 30bps is to be expected, while high single-digit growth in loans is expected. For ROE, it is expected to stabilize at above 10% level in future years.

Also, the company put some targets for some of the KPIs for 2025. Primarily, NLB will focus on growth organically (even though, if a solid M&A opportunity occurs, inorganic growth will be possible too!), while the focus will also be on stable and growing dividends for shareholders. By 2025, NLB expected its profit to exceed EUR 300m and its goal is to distribute EUR 500m in dividends in the period from 2022 to 2025. Dividends paid out will not affect the company’s capital adequacy in any way.

Sava Re

Q1 2022 result is quite good according to the Management of the Group as it is coming to a more normalized level of claims incurred when compared to the pandemic period when claims were much lower. When looking at segments there was a decrease in participation of reinvestment result in total income due to a part of the portfolio being evaluated through P&L. In Reinsurance, GWPs were up 5% YoY, but there was a decline in underwriting results because of lower net premiums earned and higher net claims incurred. There was unfavourable development of old UWYs and major fire losses in Asia, while the impact of major claims was mitigated by good reinsurance protection. The combined ratio of 91.5% in this segment is still very favourable. The biggest segment of the group structure, non-life Slovenia also had weaker results due to the same reason, due to part of the portfolio being evaluated through P&L as it had higher expenses for the fair value changes. Its net combined ratio very favourable at 88.7%
Non-life international segment in Croatia had 1.5% YoY growth as they are cleaning the portfolio. Serbia grew 19% Montenegro 12% and Kosovo had robust growth. Strong organic growth was realized as this is the retail portfolio. All markets performed better due to technical profitability. Investment result was roughly the same and improvement in net expense ratio was evidenced by 1p.p.
Life-Slovenia GWP was up 3% YoY. The negative expenses impact of the evaluation of the portfolio through P&L was realized here. Net expense ratio remained flat YoY. There were fewer payouts due to maturities, surrenders, and deaths coupled with better sales, so PBT was up 19% to EUR 5.3m. 72% of this segment is units linked business. Life-international is the smallest segment in terms of insurance but will be a good part of the profit in the future. New annual premiums written grew up 64% YoY.

Pension and asset management businesses are situated in Slovenia and Macedonia, more related to annuities. Growth of GWP by 10% was evidenced. PBT was down due to the devaluation effect of the bond portfolio through P&L and adding reserves through guarantee funds. When it comes to one-offs in Q1 2022, Sava Re sold land in Kosovo sold for EUR 1m profit, which was recorded in net results.
Strategy until 2027 will be announced by the end of the year. Focus on core IT solutions in the reinsurance segment to cover continuing technological and process upgrades in cyber security, with an emphasis on end-user training. Sava Re has increased market share in the life segment outside Slovenia, while in the rest of the segments they kept their positions in the market.
Direct exposure of investment portfolio to Russia & Ukraine is neglectable. Adopted sustainability investment policy and they are starting to look at the carbon footprint of their portfolio and ways how they will reduce it.

Category : Flash News

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