Yesterday, LJSE held a webinar with 6 listed Slovenian blue chips. During the event, the companies commented on their FY 2021 results and the geopolitical impact on the companies’ business operations.
The following companies participated in the webinar: Sava Re, Krka, Petrol, Triglav, NLB, and Cinkarna Celje. Out of these companies, we listed the most important highlights below.
Sava Re commented on their exposure to Russia-Ukraine saying that 0.24% of their investment portfolio is through indirect exposure related to Russian roubles. In the underwriting business segment through reinsurance contracts, 0.5% of the revenue of the Group is exposed to this region. All in all, direct exposure is not material while indirect exposure via volatility of financial markets is a threat whose impact is yet to be determined. The Group also reiterated its estimates for 2022 stating that operating revenues are estimated at a level above EUR 700m (EUR 733m in 2021), while net profit is expected at EUR 60m (vs. EUR 76m in 2021). The business plan for 2022 assumes that there will be no new lockdowns in 2022 or no restrictions of movement. Group is also open to further acquisitions in the region which are not included in 2022 as their occurrence is not possible to estimate. Sava Re expects its Combined ratio to be below 94%, while in 2021 it stood at favourable 88.3%.
Krka reiterated its overview of an assessment of the geopolitical situation and its impact on their core markets already presented in its 2021 unaudited business report together with the assessment of the Ukraine and Russia situation. Krka announced that it has a strong capital structure and no debt so it will not be materially threatened by the ongoing situation. Sales on these two markets in Q1 2022 are expected at a few percent higher than in Q1 2021 due to the fact that management acted fast on both markets, so supply and stock of goods were sufficient and they were present on both markets, adapting quickly to the new situation. Production of Russia plan functions normally where 75% of all Russia market consumption is produced, while local production is functioning completely uninterrupted. Their company has app. 14bn roubles of receivables, which are all secured and according to the credit insurance companies, it will be available in Russia in the future. Long position in the Russian rouble currently amounts to EUR 75-80m, which in our calculation implies a net FX loss of app. EUR 15m YTD at EURRUB exchange rate of 106.5. This is a long position while taking into account that 50% of their position is hedged. After 1 April hedging of the Russian rouble would not be possible anymore so the company’s long position would amount to EUR 150m-160m. Furthermore, no withdrawal from the Russian market or confiscation of assets from the Russian state is not envisaged. So Krka is not planning to limit its business activities in Russia as they are not allowed, due to the fact that they are but bound by conventions and declarations, to deliver medicines to the markets in a situation like this. None of the pharmaceutical producers present on the Russian market have withdrawn from the market.
Petrol presented its 2021 results and stated that direct impact from the geopolitical situation is evidenced on capping of margins for petroleum products sold by the respective governments on their markets of Slovenia, Croatia, Serbia, B&H, Serbia, and Montenegro. The impact of capped prices is different from week to week and they cannot be assessed upfront as they do not know how the prices will move. Management can determine it week by week when they see how the price has moved in that week. If prices go up Petrol will have a negative effect, and if the price goes down Petrol will have a positive effect. They are looking at the weekly impact of capped prices on their result and in case they will not be able to achieve the announced business plan they will communicate it to the investor universe. The Petrol Group does not have its own companies or representative offices in Ukraine, Russia, or Belarus and their exposure to this region is negligible except for the purchase of natural gas that is executed through their company of Geoplin d.o.o Ljubljana. In 2021 and the first two months of 2021 Russia as a source of supply has accounted for less than 7% as regards Petrol Ljubljana middle distillates (diesel and extra light heating oil).
During the event, Petrol communicated their plan to do a share split. This decision was already announced last week (18 March 2022) when a call for the General Meeting agenda was announced. The main reason stated for the split is the fact that Petrol is the company with the highest share price on LJSE’s Prime Market. The goal of the share split is to increase the share’s liquidity as well as to attract new investors. The proposed split ratio would be 1:20, meaning that 1 share would be split into 20 shares.
After the split, the number of Petrol shares would increase to 41,726,020 from the current 2,086,301. The share capital in the amount of EUR 52,240,977.04 would remain the same. The Management Board will execute the share split in accordance with the GM resolution after the resolution on the amendment to the Articles of Association becomes effective, implementing a corporate action and procedures stipulated in the Central Book-Entry Securities Register at KDD and Ljubljana Stock Exchange.
Triglav presented its 2021 results combined with its business plan and 2022 estimates. Triglav expects EBT to reach levels EUR 120 – 130m, which, if realized, would represent a decrease compared to FY 2021 EBT of EUR 132.6m. The Company expects gross written premiums to reach levels beyond EUR 1.4b., meaning Triglav expects a continuation of the company’s stable and organic growth in the market. Further, Triglav revised its Strategy to 2025 to reflect growth and development in a client-centric approach. The Group’s operations are planned to remain profitable and safe. Group plans to achieve total revenues of at least EUR 1.6bn by 2025 (2021 total revenues amounted to EUR 1.46 bn). Triglav also stated their insurance and reinsurance have low exposure to war in Ukraine. Group’s reinsurance also has a low exposure to sanctions against Russia and Belarus. Their investment portfolio risk has a direct exposure very limited with only 0.3% of Triglav’s total assets in Russian bonds.
NLB commented on their FY 2021 results along with the 2022 and 2023 business plans. NLB plans to achieve annual growth in the company’s regular income of c. 5% in the upcoming 2022 and 2023. The company also expects its operating costs to remain flat in 2022, and even to fall in 2023 by c. 5.%. As stated, they find costs in 2021 to have a very high base due to integration costs. To remind you, NLB acquired Sberbank in Sloveniareporting a price-to-book ratio (P/B) equal to 0.03. You can read about it here. Furthermore, NLB expects its cost of risk to increase from -41 bps in 2021 to positive 20-30 bps and report further growth in the cost of risk in 2023. Dividend-wise, NLB should remain a solid dividend payer.
Cinkarna Celje commented on its 2021 results along with its business plan for 2022. Cinkarna reported sales of EUR 192.4m in 2021 and plans to increase its sales by c.6%. Also, Cinkarna plans to achieve EBITDA under the current levels due to higher energy input prices. EBITDA in 2021 amounted to EUR 51.8m, while planned EBITDA in 2022 amounts to EUR 39,2 m, which, if realized, would represent a decline in EBITDA of c. 24%. This decrease in EBITDA should translate to the company’s bottom line. Cinkarna expects its net profit to fall from EUR 33.2m in FY 2021 to EUR 20.1m in FY 2022. Referring to employees, Cinkarna does not expect any drastic change. The company expects the number of employees to decrease from 793 to 791, mostly due to natural employee outflow. Dividend-wise Cinkarna expects to stay in the same range as previous years, while in the previous years Cinkarna reported a dividend payout ratio of c. 75%.