Today, we bring you an overview of the indebtedness and the capital structure of Croatian blue chips which constitute the CROBEX10 index, using the updated Q1 2022 results.
As all the Q1 2022 financial results of the CROBEX10 constituents have been published, we decided to bring you an update on the level of indebtedness of these companies. We did this by comparing the net debt to EBTIDA as well as looking at the percentage of debt financing that these companies use. Finally, we took a look at how much additional debt these companies could take to reach 3x EBTIDA, an „upper“ limit of how much debt the companies could take without risking having issues paying back those debts. This is normally used to make new investments and especially acquisitions.
Among the CROBEX10 constituents, Adris, Ericsson NT, Hrvatski Telekom, and Končar operate with negative net debt, meaning that their cash positions (i.e. short-term financial assets + cash and cash equivalents) exceed their financial debt. As such, their net debt to EBITDA ratio would also be negative, and as such, we excluded them from the net debt to EBITDA overview. It should also be noted that the EBITDA is based on the trailing twelve months’ results, as taking only Q1 EBITDA data would show a wrong picture.
Net Debt/EBITDA
Out of the remaining 6 companies, the largest indebtedness is held by Arena Hospitality Group and Valamar Riviera, with 9.98x and 3.58x, respectively. Considering that both of these companies are tourist companies, and as such, they operate in an asset-heavy industry, where debt is always used to finance at least a part of investments and improvements in their portfolio (hotels, camps, apartments, etc.), the higher level of indebtedness is not surprising. Next up, we have AD Plastik, with a net debt/EBITDA of 3.23x, which considering the impact that the semiconductor shortage in the last year, supply chain disruptions, as well as the current Russian invasion of Ukraine had on the business operations of the Company, meant that its EBITDA decreased significantly in Q1 2022 (-53% YoY), meaning that just by that decrease the net debt to EBITDA ratio increased.
Finally, we have Atlantska Plovidba, Atlantic Grupa, and Podravka, with net debt to EBITDA ratios of 0.91x, 0.60x, and 0.38x, respectively. Atlantska Plovidba also recorded solid Q1 2022 results which contributed to the increase in EBITDA, lowering this ratio. Meanwhile, Atlantic Grupa and Podravka have both been decreasing their net debt to EBITDA ratios for the last couple of years, in order to be ready for any potential acquisitions, something that both companies have as goal.
We also took a look at how much more debt these companies could take to reach 3x EBITDA. We would like to note that the companies that are already over this number (AD Plastik, Arena Hospitality Group, and Valamar Riviera) have been excluded from this comparison.
Potential additional debt (HRK) to reach 3x EBITDA
In this comparison, HT leads the way with over HRK 12.8bn of additional debt they could take to reach 3x EBITDA. Considering they have a negative net debt of HRK -3.21bn (or rather, their short-term financial assets + cash and cash equivalents), they have a lot of room to take on more debt. Next up we have Adris, with HRK 3.95bn, which also has a negative debt of HRK -752.5m, Atlantic Grupa with HRK 1.77bn, Podravka with 1.54bn, Končar with 1.51bn, Atlantska Plovidba with 1.29bn, and Ericsson NT, with 1.18bn. This means that in case they need to, these companies could take a large amount of debt to finance their operations, make new investments, or make new acquisitions.
Finally, we took a look at the capital structure of these companies. All of them except Arena Hospitality Group have a majority of their funding (>50%) from equity sources. Ranking them highest to lowest, Hrvatski Telekom is 100% equity funded (maintaining no debt), followed by Podravka with 89.7%, Končar with 86.5%, Ericsson NT with 85.9%, Adris with 84.9%. On the flip side, Arena Hospitality Group has 49.1% of its funding from equity, followed by Valamar Riviera with 50.6%. Taking into account the aforementioned reasons for this amount of debt funding, this is in line with other companies in this industry.
The capital structure of CROBEX10 companies
