For today we decided to look at EBITDA and net profit margins of Croatian companies, for which we used Q1 2021 figures.
It is important to note that comparing the margins across the selected companies is not necessarily the best way to do the comparison as many companies operate in different industries. Since both EBITDA and profit margin reflect to a great extent the industry in which the company operates in, we advise to compare it to the peer average or median. Nevertheless, it is still worth seeing which Croatian companies are more profitable and therefore have more “room” to potentially reduce the prices of their goods or services if needed, while still remaining a higher level of profitability.
Besides that, we note that looking at only Q1 margins might lead to misleading conclusions as some of the observed companies derive most of their earnings in other quarters.
Q1 – EBITDA margin of Selected Croatian Companies (%)
In Q1, Atlantska Plovidba noted the highest EBITDA margin of 45.6%, by far the largest improvement compared to Q1 2020, when the company reported an EBITDA margin of merely 1.5%. In Q1 2021, Atlantska Plovidba benefited from a sharp increase in average daily freight rate which stood at USD 12,908 per day (c. +72% YoY). Next come two Telecoms – HT and Optima Telekom with EBITDA margin of 39.7% and 32.8% respectively, which does not come as a surprise given the industry they operate in. However, we note that HT noted a slight improvement of EBITDA margin (+0.5 p.p. YoY), while Optima Telekom noted a decrease of 2.3 p.p.
Next comes Podravka with an EBITDA margin 17.3%. Končar’s Q1 EBITDA margin is the lowest among the observed companies, however we note that this could be attributed to the industry in which the Group operates. The company reported a very solid Q1, which was reflected also by an improvement in the EBITDA margin by as much as 3.1 p.p.
We also note that we have not included Croatian tourists in the overview, as they reported a negative EBITDA and a net loss. Despite the challenges of the pandemic, Q1 tends to be a loss generating quarter for Croatian tourists, so the performance should not be considered as indicative of the FY results.
Q1 – Profit margin of Selected Croatian Companies (%)
Turning our attention to the profit margins, Atlantska Plovdiba once again leads the list with 13%, followed by Podravka with 9.9%. Ericsson NT and AD Plastik follow with a profit margin of 9.1% and 7.9%, respectively.
Končar noted the highest improvement of its profit margin, by as much as 5.7 p.p., while on the flip side, HT noted the highest decrease in profit margin of 5.7 p.p. To be specific, HT’s bottom line decreased by 66%, due to higher D&A costs which increased by 31.5% (or HRK 150m). Such an increase came due to difference in timing between booking CAPEX and depreciation. On the flip side, Optima Telekom was the only company (of the observed ones) to report a net loss.
If you wish to compare EBITDA and net profit margins of these companies to their regional sector peers, you can do so by looking at our daily trading multiples which can be found here.
For today we decided to present you with the updated analysis (Q1 2021) of the interest coverage ratio of Croatian companies.
Interest coverage ratio is used as a measure which gives us an insight on the company’s ability to meet its interest payments. The ratio is calculated by dividing the company’s operating profit by the interest expenses. Therefore, a higher ratio indicates that the company is less burdened by debt and the other way around. A ratio lower than 1 indicates that the company’s operating profit is not sufficient to cover for the interest payments. We used Q1 2021 figures for calculating the interest coverage ratio of Croatian companies.
Interest Coverage Ratio (Q1 2021)
As illustrated on the graph, Ericsson NT operates with the highest interest coverage ratio of 133.9. It does not come with a surprise considering that Ericsson NT operates with low debt (negative net debt). Podravka and Končar come next with 57.3 and 34.8, respectively. Two food companies that follow are: Kraš and Atlantic Grupa, with 28.7 and 26.8. We also note all of these companies operate with very low debt.
On the flip side, three tourist companies were excluded from the calculation as they reported an operating loss. The only company (of the observed) to have its interest coverage ratio below 1 is Optima Telekom. To be specific, the company operates with an interest coverage ratio of as low as 0.2 showing quite a high debt burden compared to its operating profit. To read more about the company’s Q1 2021 results, click here.