Indebtedness of Croatian Companies – FY 2020 Update

For today, we decided to bring you an updated overview of the indebtedness and capital structure of Croatian companies using FY 2020 results. 

As all Croatian blue chips published their preliminary FY 2020 results, we decided to observe how indebted are the companies are by comparing net debt to EBITDA and % of debt financing. We also added how much additional debt these companies could take in order to reach 3x EBITDA. 

Note that Adris Grupa and ZABA were excluded from the overview as Adris operates as a holding, while ZABA is a bank.

Net Debt/ EBITDA

Among observed companies Končar, HT and Ericsson Nikola Tesla operate at a negative net debt, meaning their cash position (short term financial assets + cash and cash equivalents) exceed their financial debt. Besides that, Arena Hospitality Group reported a negative EBITDA (HRK -49.1m), so it is not included in the list above. At the same time, Arena’s net debt stands at HRK 977.7m.

Unsurprisingly, two tourist companies lead the list with the highest indebtedness (of the observed companies). Valamar Riviera operates currently with a net debt/EBITDA of as much as 27.6x. In 2020, Valamar reported a plunge in sales of 70 % YoY as a result of significantly lower tourist activity during this summer season, due to pandemic and international lock-down. As a consequence, the company’s EBITDA in the first 2020, amounted to HRK 102m, representing a decrease of 87%.

Maistra comes next, with a net debt/EBITDA of 11.2x, as the company’s EBITDA decreased by 74% in 2020.

On the flip side, three food companies have the lowest indebtedness of the observed companies. To be specific, Atlantic Group operates with a net debt/EBITDA of 1.0x followed by Kraš with 1.1x and Podravka with 1.3x.

We also observed how much additional debt companies could take to reach 3x EBITDA which is in the region considered as a breaking point and red flag in terms of indebtedness.

This analysis provides information on the companies’ potentials for takeovers, but also the potential for an internal growth through additional borrowing. It’s important to point out that companies with net debt above 3x EBITDA are not necessarily too indebted as not all them are equal and their industries differ (and the other way around – certain industries are not prone to hold any leverage). Note that for this we excluded tourist companies from the calculation.

Potential Additional Debt (HRK m) to Reach 3x EBITDA 

Turning our attention to the capital structure, of the observed companies, 9 of 12 are mostly equity funded. Of those, HT leads the list with 97.4% equity, followed with Končar 92%. On the flip side, Optima Telekom and Dalekovod are almost entirely debt funded with a capital structure of 93% and 87%, respectively.

Capital Structure of Croatian Companies 

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