Yesterday, the Croatian Bureau of Statistics released its flash estimate for the Croatian CPI, for the month of August 2023. According to the estimate, the CPI grew by 7.8% YoY, and 0.6% MoM in August.
The latest flash estimate released by the Croatian Bureau of Statistics shows that the inflationary pressures in Croatia are far from over, with growth recorded both on a YoY, but also on a MoM basis. Accordingly, the CPI grew by 7.8% YoY, and 0.6% MoM.
Croatian CPI (February 2013 – August 2023, %)
Source: Croatian Bureau of Statistics, InterCapital Research
Breaking this growth into components of the index, Food, beverages and tobacco grew by 10.1% YoY, Services grew by 7.8%, Non-food industrial goods without energy by 7.4%, and Energy grew by 4.3%. Meanwhile, on a monthly basis, the Energy component grew by 2.7%, Services by 0.7%, and Food, beverages and tobacco by 0.2%. On the other hand, Non-food industrial goods without energy grew by 0.5%. It should be noted that this is only the flash estimate, and the final more detailed version will be released on 15 September 2023.
Overall, the inflation continues to put pressure on disposable income in Croatia, and given the fact that energy prices, which were the main driver of inflationary pressure in 2022 and for a lot of 2023, seemed to have somewhat subsided. It has to be noted that energy demand during the hot summer months is usually higher, so this also played an effect. Besides this, growth in Services is expected, as the main component of services is the tourism and hospitality industry. Over the last period we have seen various news and articles reporting about price growth of accommodation which is exceeding double-digit levels compared to the previous year. Last year, services have also recorded double-digit growth compared to 2021 so the overall growth in the Services is surely driven by this. Furthermore, the growth in Food, beverages and tobacco has been the main growth driver of inflation has been the main growth driver of inflation as the energy prices have stabilized. And this component is surely having the largest impact on the disposable incomes in Croatia. Lastly, as Croatia is now part of the Eurozone and as such is under the effect of interest rates set by the ECB, a stabilization in inflation would come from a reduction in borrowing. However, thus far this has not proven to be the case, at least not to the extent that was expected. This of course is tied to the main driver of borrowing in Croatia which is real estate purchases, seen also as a form of investment and saving. As such, the increase in the interest rates which was supposed to have a reductive impact on inflation thus far hasn’t been able to tame inflation, especially in more stickier core inflation components such as Food and Services.
Using the harmonized index of consumer prices (HICP) which allows comparisons to other EU members, Croatia stood at 8.5% YoY in terms of inflation, while the Euro area average stood at 5.3% YoY. Compared to countries in the region (ones available), Slovenia’s inflation stood at 6.1%, Italy’s stood at 5.5%, and Austria’s at 7.6%. Compared to larger European countries, Germany’s inflation stood at 6.4% YoY, France’s stood at 5.7%, and Spain’s stood at 2.4%. In fact, out of all the available countries, Croatia has the 2nd largest HICP growth only behind Slovakia, which stood at 9.6% YoY. As such, it would seem that the inflationary battle is far from over in Croatia.
HICP comparison with available EU countries (August 2023, YoY, %)
Source: Eurostat, InterCapital Research
According to the latest release by the Slovenian Statistical Office, the CPI in August 2023 grew by 6.2% YoY, and 0.1% MoM.
With the end of August, many EU countries have released their CPI estimates for the month, including Croatia and Slovenia. In this article, we’ll review the changes in Slovenia. According to the press release by the Slovenian Statistical Office, the CPI grew by 6.2% YoY, and 0.1% MoM. Breaking this down further, services on average grew by 8% YoY, followed by goods at 5.2%. In the goods category, semi-durable goods recorded growth of 6.2%, non-durable goods of 5.9%, and durable goods of 1.8%.
In terms of the impact on the annual inflation, 1.8 p.p. came from the 10.4% higher prices of food and non-alcoholic beverages, 0.9 p.p. from 8.7% higher prices in recreation and culture. Furthermore, higher prices of products in health, increasing by 11%, and restaurants and hotels, growing by 8.7%, each due to the structure of the CPI contributed 0.6 p.p. to its growth, or in total 1.2 p.p. YoY. On the other hand, electricity was 13.1% lower, which reduced annual inflation by 0.7 p.p. YoY. Finally, petroleum products decreased the annual inflation by 0.6 p.p., as the prices of liquid fuels decreased by 19.1%, of diesel by 7.4%, and of petrol by 3.8% YoY.
Moving on to the monthly change, higher prices of motor fuels (diesel increasing by 5.1%, petrol by 4.5%) added 0.2 p.p. to the monthly inflation. Higher prices of packages of domestic holidays (+2.5%), meat (+2.4%), water supply and miscellaneous services related to the dwelling (+1.4%), and furnishings, household equipment and routine household maintenance (+0.7%), each contributed to 0.1 p.p. growth in monthly inflation, or 0.4 p.p. in total. On the flipside, lower prices of clothing and footwear, which decreased by 3.7% MoM decreased the overall inflation by 0.2 p.p., while lower prices of fruit (-3.5%), and health (-1.5%), each contributed to a 0.1 p.p. decrease in overall MoM inflation. All other price decreases in August contributed to a 0.1 p.p. reduction in the CPI.
Slovenian CPI (January 2011 – August 2023, YoY, %)
Source: Slovenian Statistical Office, InterCapital Research
Taking a quick look at the harmonized index of consumer prices, its growth amounted to 6.1% YoY in August, while on the monthly level, it grew by 0.2%. On average, service prices increased by 8.3%, and goods by 4.9%. In the goods category, semi-durable goods prices increased by 5.9%, non-durable goods prices by 5.8%, and durable goods prices by 0.4%. As compared to the Euro area, where inflation stood at 5.3% YoY in August, Slovenian inflation is slightly elevated.
In H1 2023, Romgaz recorded a revenue decrease of 34.7% YoY, an EBITDA increase of 44.8%, and a net profit of RON 1.69bn, a decrease of 2.3% YoY.
In total, the revenue amounted to RON 4.89bn, a decrease of 34.7% YoY. This came as a result of a decrease in the revenue from natural gas sales of 36% YoY, amounting to RON 4.28bn. Breaking this down further, deliveries decreased by 5.5% YoY, and this was under the effect of the obligation imposed by GEO No.27/2022, under which Romgaz had to sell most of the production at a regulated price of 150 RON/MWh. Furthermore, 86.2% of H1 2023 deliveries, i.e. 21.22 TWh were made at regulated prices, compared to 4.23% (1.10 TWh) in H1 2022. Next up, revenue from electricity sales decreased by 59.8% YoY and amounted to RON 200m, as in 2023, Romgaz had to sell almost all electricity produced at 450 RON/MWh. Finally, revenue from storage services increased by 59.8% YoY to RON 287.3m, mainly due to increased capacities booked by clients for natural gas storage.
Moving on, total expenses decreased by 61.8% YoY and amounted to RON 2.1bn. This was due to lower windfall tax for natural gas, which decreased by RON 2.96bn, as well as lower royalty expenses, which decreased by RON 627.1m. Together, this led to an EBITDA increase of 44.8% YoY, amounting to RON 3.16bn. This would also mean that the EBITDA margin amounted to 64.52%, an increase of 35.4 p.p. YoY. Finally, the net profit amounted to RON 1.69bn, a decrease of 2.3% YoY, which came mostly due to the Solidarity Fund Contribution of RON 970.9m, which was introduced at the end of 2022. Due to the profit remaining roughly unchanged, but revenue decreasing significantly, the net profit margin improved by 11.39 p.p. YoY, and amounted to 34.42%.
Romgaz Key financials (H1 2023 vs. H1 2022, RONm)
Source: Romgaz, InterCapital Research
In terms of investments, the Company planned investments of RON 1.97bn, of which RON 936.7m were allocated for the Neptun Deep project. The amount planned excluding the Neptun Deep project in H1 amounted to RON 464.4m, of which RON 268.4m was achieved, representing 57.8% of investments planned for H1 2023, 25.9% of the 2023 investment program, but an increase of 123.9% compared to H1 2022.