We met the Metalac Group’s Management during the Belgrade conference last week and now we bring you some key takes from our meeting.

Our meeting with the Metalac Group began with a discussion about the company’s 9M 2019 performance by markets. In the cookware segment The Management stated that EU markets have shown growth, while sales in Russia and Kosovo have been lagging. In Russia the key reason was the previous depreciation of the ruble which lowered Metalac’s competitiveness in the local market. To tackle the issue of the ruble, the Management is currently considering using hedging in the future. Meanwhile in Kosovo, tariffs imposed on Serbian products were the reason behind the drop in sales. On the flip side, all other segments posted double digit growth in sales.  

When talking about their plans, the Management stated that the company plans on further developing their food retail segment by spreading across other cities in Serbia. Also, their car part manufacturing segment is currently in the process of negotiating new deals with Bosch for their factory in Nova Pazova.

The Management also stated that the company invested into the construction of an apartment building in Gornji Milanovac whose apartments are currently in the process of sale. The sales of those apartments should be a nice boost to the company’s sales and profitability in 2020.

For FY 2019 results are expected to be slightly below last year’s due to the change in the company’s cost structure. The change in cost structure is partially due to the construction costs of the apartment building and the rising costs of waste management. According to the Management, the company that previously provided them with waste management services went out of business and now their successor is charging double.

On the balance sheet, the company holds very little debt with their net debt/EBITDA amounting to less than 1x. Note that the Management state that they hold a conservative view on debt and will not be taking on any considerable debt in the future.

CAPEX is expected to amount to EUR 11m over the next three years. The majority of the amount will be spent on automatization in order to lessen the company’s dependence on human labour. In turn, this will result in a decrease in the number of employees. Considering the pressure on wages which the company is experiencing, this should improve the company’s profitability.

When talking about future plans the Management stated that they would like to enter the Polish market, where they are currently in the process of negations with a local distributor.

Dividend wise, the company has recently adopted a dividend policy which states a payout of minimum RSD 85 per share.