As all the Slovenian 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 Slovenian companies are more profitable and therefore have “room” to potentially reduce the prices of their goods or services and remain at a high level of profitability.
9M results portray the effects of the COVID-19 virus which had unfavourable effects for most of the Slovenian Companies.
9M 2020 EBITDA margin of Selected Companies (%)
As of 9M, a pharmaceutical, telecom and port/logistics company lead the list with the highest EBITDA margins. To be specific, Krka and Telekom Slovenije recorded the highest EBITDA margin of 31.7% and 29.6%, respectively. For Krka, this translated to a significant increase in the margin of 8 p.p., as the health care sector is one of the sectors who was among the least impacted by the pandemic on revenue generating abilities. Observing the 9M period, Krka sales revenue amounted to EUR 1.2bn in revenue, representing a 6.4% YoY increase. Prescription pharmaceuticals were the leading product group, accounting for 91% of total regional sales, a 9% YoY sales increase. The largest individual market remained Germany where sales soared 32% YoY primarily due to good sales of advanced antihypertensives.
Meanwhile, Telekom Slovenije’s EBITDA margin increased by only 0.4 p.p. YoY as their decline in revenue of 2.1% was compensated by the decrease of operating expenses by 2.95% YoY. Of that, the largest item was cost of services which stood at EUR 157.1m (-7% YoY). Such a decrease could be attributed to the to the reduced volume of international traffic and roaming as and lower costs of multimedia content.
The highest drop YoY in EBITDA margin was witnessed by Luka Koper (-7.4 p.p.) due to decrease in revenue (-10.9% YoY). The fall in revenue of EUR 19m can mostly be attributed to a decreased amount of maritime throughput by 2.9m tons equaling to a decline of 16.3% YoY and is mainly attributed to the Covid-19 outbreak. The combined effect of shrunk revenues as well as an increase of labour costs in the amount of EUR 2.7m resulted in the significant drop of EBITDA.
Change in EBITDA & Profit margin (9M 2020 vs 9M 2019) (p.p.)
Turning our attention to profit margins, Krka once again leads the list with 18%, while its margin increased by 2.4 p.p. YoY. Telekom Slovenije and Cinkarna Celje follow with a profit margin of 13% and 10%, respectively.
Only one company, Telekom Slovenije, recorded a negative profit margin (net loss) of -0.1%. Of the companies which recorded a net profit, Luka Koper observed the highest drop in profit margin of -5.8 p.p. YoY.