As all Croatian blue chips published their H1 2020 results, we decided to look at what effect did the lockdown 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.
Besides that, looking at only H1 margins might lead to misleading conclusions as some of the observed companies derive most of their earnings in other quarters. For this reason we excluded tourist companies (Valamar Riviera, Arena Hospitality Group and Maistra) which all recorded a negative EBITDA in H1.
H1 2020 EBITDA margin of Selected Companies (%)
In H1, two Telecoms – HT and Optima Telekom recorded the highest EBITDA margin of 40.5% and 32.3% respectively, which does not come as a surprise given the industry they operate in. Next come Podravka with 14.2% and AD Plastik with 13.8%.2 food companies follow – Atlantic Grupa and Kraš, with EBITDA margins of 13% and 9.2%, respectively.
When comparing to the same period in the previous year, one can see that most companies did not observe a decrease in EBITDA margins, indicating that the companies managed to control their cost structure in line with the revenue decreases. As visible from the graph below, Ericsson NT’s EBITDA margin observed the highest decrease YoY as it almost halved from 13.9% to 7.2%.
Change in EBITDA & Profit margin (H1 2020 vs H1 2019) (p.p.)
Turning our attention to the profit margins, HT once again leads the list with 8.6%, while its margin decreased by 2.9 p.p. YoY. Podravka and Atlantic Grupa follow with a profit margin of 7.4% and 5.9%, respectively.
On the filp side, 4 of the observed companies recorded a negative profit margin (net loss). Besides above mentioned tourist companies Optima Telekom also recorded a net loss in H1. Of the companies, which recorded a net profit, Ericsson NT observed the highest drop in profit margin of 5 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
H1 2020 Profit margin of Selected Companies (%)
