Today, we bring you a quick analysis of the indebtedness and capital structure of Croatian blue-chip companies that make up the CROBEX10 index, using the latest available 2024 results.
With the publication of all FY 2024 results for Croatian companies behind us, we examined how these results have impacted the indebtedness and capital structure of some of the country’s largest publicly traded firms. To do this, we analyzed the net debt to EBITDA ratio, the percentage of debt used to finance operations and investments, and the additional debt capacity these companies could take on before reaching 3x EBITDA. The 3x EBITDA level is commonly regarded as the upper limit of sustainable leverage, beyond which a company’s financial risk increases significantly. However, this threshold may vary across industries. It is particularly relevant when companies evaluate new investments, especially in M&As, which typically require higher debt levels. For this analysis, only loans from credit institutions were considered, as banks typically exclude lease liabilities from such calculations.
Among Croatian blue-chip companies, the majority operate with negative net debt, including Hrvatski Telekom, Končar, Končar D&ST, Adris Grupa, Ericsson NT, and Span. A negative net debt position indicates that a company’s cash holdings and short-term financial assets exceed its total financial debt, effectively making it a net cash company. Consequently, these companies have a negative net debt to EBITDA ratio. It is also important to note that HPB is excluded from this analysis, as banks do not report EBITDA and follow different accounting standards when assessing leverage and capital structure.
Net debt to EBITDA of select Croatian blue chips (2024, points)
Source: Companies’ data, InterCapital Research
Among the companies with positive net debt to EBITDA ratios, the most leveraged is Valamar Riviera, with a 2.2x ratio. As Croatia’s largest hospitality company, Valamar has been actively investing in its portfolio, both in expansion and in higher-end offerings, leading to an increase in debt. However, alongside these investments, the company has been improving operational efficiency, and in the mid-term, its net debt to EBITDA is expected to decline toward 2.0x.
Next is Atlantic Grupa, with a net debt to EBITDA ratio of 2.0x, reflecting the impact of its Strauss Adriatic acquisition, finalized last year. However, EBITDA also increased in absolute terms in 2024, driven by higher sales, both organically and through the acquisition’s contribution.
The third and final company with a positive net debt to EBITDA ratio is Podravka, at 0.1x. Over the past few years, Podravka has significantly reduced its leverage while continuing to invest and improve profitability. This leaves ample room for further investments and acquisitions, such as its recent interest in Fortenova’s agricultural business.
Potential additional debt (EURm) to reach 3x EBITDA
Source: Companies’ data, InterCapital Research
In terms of additional debt capacity, or how much more debt companies could take on before reaching 3x EBITDA threshold, Hrvatski Telekom leads by far, with a potential additional debt capacity of EUR 1.6bn. Following HT are Končar with EUR 746m, Adris Grupa with EUR 657m, Končar D&ST with EUR 519m, Podravka with EUR 329m, Ericsson NT with EUR 131m, Valamar Riviera with EUR 98m, Atlantic Grupa with EUR 93m and Span with EUR 48m of additional debt capacity. This further highlights that Croatian blue chips have significant room to take on new debt to finance both investments and operational improvements.
Capital structure of CROBEX10 constituents (2024, % of the total funding)
Source: Companies’ data, InterCapital Research
Looking at the current capital structure of CROBEX10 constituents, not a single company has more than 50% of its financing from debt. Valamar Riviera has the highest debt share at 43%, followed by Atlantic Grupa at 35%. Three companies have single-digit debt percentages – Podravka at 8%, Končar at 3%, and Končar D&ST at 3% – while HT operates with 100% equity financing.
Therefore, we could state that Croatian blue chips tend to rely on equity financing rather than debt. This could be attributed to several factors. Firstly, many companies have historical or present ties to state ownership or were privatized in a way that left them with strong equity bases. Moreover, many of them are backed by pension and state funds, which prioritize financial stability over leverage. Also, following past financial crises, many Croatian companies adopted a risk-averse financial strategy, reducing reliance on debt and implementing more conservative financial management. Furthermore, the Croatian corporate debt market is underdeveloped, with corporate bond issuances being a rarity, limiting alternative debt financing options.
To conclude, Croatian blue-chip companies maintain relatively low debt levels, with many operating in net cash positions. While some companies, such as Valamar Riviera and Atlantic Grupa, have moderate debt exposure, most remain significantly under-leveraged. With plenty of debt capacity available, many of these companies are well-positioned to finance new investments, acquisitions, and operational improvements, should they choose to do so. However, structural factors suggest that equity-heavy financing will likely remain the dominant model for Croatian blue-chip companies in the foreseeable future.
