During 9M 2023, Kraš recorded revenue growth of 14% YoY, an EBITDA increase of 15%, and a net income of EUR 5.9m, a 22% increase YoY. On the other hand, in Q3 2023, Kraš recorded a revenue increase of 18% YoY, an EBITDA growth of 43%, and a net income of EUR 2.85m, a 132% increase YoY.

Firstly, Kraš’s revenue amounted to EUR 122.4m during 9M 2023, a 14% increase YoY, and EUR 43.8m during Q3 2023, an 18% increase. Of this, during 9M, the domestic market recorded EUR 69.6m of revenue, an 18% increase YoY, while the foreign markets recorded a 7.9% increase, to EUR 51m. In terms of the volume sold, Kraš sold 26,867 tonnes of products, which is 1.2%, or 326 tonnes less than last year. Of this, the domestic market recorded 0.6% higher volume sold, while the foreign markets recorded 3.2% lower volume sold.

Moving on to expenses, total operating expenses amounted to EUR 117m, a 14% increase on a 9M basis, and EUR 41m during Q3, a 16% increase YoY. Kraš noted that during the entire 2023, they had a strong focus on optimizing internal resources and rationalization of all cost segments, combined with somewhat lower prices of input products. In terms of cost categories, material expenses increased by 12% YoY to EUR 81.2m during 9M, and by 11% to EUR 27m during Q3. Employee expenses meanwhile, decreased by 5% YoY to EUR 23.9m during 9M, and 1% to EUR 8.57m in Q3. Material expenses growth is in line with the inflation rates, while employee expenses were influenced by a decrease in the number of employees (2,091 employed as of 31 September 2023, – 8% YoY). As employee expenses decreased less than this, it would imply that salary growth occurred during this period as well.

As a result, the EBITDA increased by 15% YoY, to EUR 13.5m during 9M, and by 43% YoY to EUR 5.4m during Q3. EBITDA margin did slightly improve on a 9M basis, by 0.13 p.p. to 10.99%, while it recorded a more noteworthy increase of 2.21 p.p. to 12.33% on a Q3 basis. The increase in profitability was also supported by the tourism season, as Kraš is one of the largest food producers in Croatia. Elevated inflation rates also influence the prices of Kraš’s products, which combined with an inflow of foreign tourists surely supports the Company’s profitability, which can be seen in the Q3’s EBITDA.

In terms of the net financial result, it amounted to EUR 79.4k during 9M, a 77% decrease YoY, and EUR 132.4k during Q3 2023 (Q3 2022: EUR -136.4k). Both on the side of the fin. income and fin. expenses, FX differences played the main role, leading to this decrease. Finally, the net income amounted to EUR 5.9m in 9M 2023, a 22% increase YoY, and EUR 2.85m in Q3 2023, a 132% increase YoY. As such, the net margin also improved, by 0.33 p.p. to 4.8% on a 9M basis, and by 3.2 p.p. to 6.5% on a Q3 basis.

Kraš key financials (9M 2023 vs. 9M 2022, EURm)

Source: Kraš, InterCapital Research

Kraš key financials (Q3 2023 vs. Q3 2022, EURm)

Source: Kraš, InterCapital Research

At the end of September 2023, Croatian mutual funds’ total NAV amounted to EUR 2.06bn, remaining unchanged MoM, but declining by 4.8% YTD, and 6.1% YoY.

Recently, the Croatian Financial Services Supervisory Agency, HANFA, published the latest monthly report on the developments and changes recorded in the Croatian capital markets, for August 2023. In this report, we’ll review the mutual funds’ performance and developments. According to the report, the total NAV of Croatian mutual funds amounted to EUR 2.06bn, remaining unchanged MoM, but decreasing by 4.8% YTD, and 6.1% YoY.

To see why this happened, we took a closer look at the asset structure of the mutual funds. On a monthly basis, the largest absolute increase was recorded by shareholdings, which increased by EUR 7.4m, or 2.2%. Following them there are deposits and cash, at EUR 4.1m, or 2% MoM, the money market holdings, which grew by EUR 3.6m, or 11%, and receivables, which increased by EUR 3.4m, or 24.4%. On the other hand, investment funds recorded a decrease of EUR 9.1m, or 4.4%, while bonds declined by EUR 2.7m, or 0.2%. Meanwhile, on a YoY basis, the largest increase was once again recorded by shareholdings, which grew by EUR 103.5m, or 42.5%, followed by investment funds at EUR 11.2m, or 6%. All remaining categories recorded decreases, with deposits and cash declining the most, at EUR 237.5m, or 53%, followed by money market holdings, at EUR 47.2m, or 56.8%.

Total assets of Croatian mutual funds (2015 – September 2023, EURm)

Source: HANFA, InterCapital Research

Unlike pension funds where net contributions into the funds are guaranteed due to the way that the pension system is structured, mutual funds depend on the investors’ willingness to increase their stakes in the funds, as one way of increasing the value of the asset in the funds. The second way is the inherent change in the value of the underlying assets, be it shares, bonds, investment funds, etc. The final way is a technical one, in which fund managers decide to increase/reduce certain investment amounts. The first of these ways, net contributions, is the easiest to look at. In September 2023, the net contributions to the Croatian mutual funds amounted to EUR 11.1m, with the largest increase coming from other’ fund category, with an increase of EUR 13.1m. Equity funds also increased, by EUR 3.6m, while balanced, and bond funds recorded decreases of EUR 3.4m, and EUR 1.2m, respectively. This would mean that the decrease in value on a YoY basis, and stagnation on a MoM basis came mostly from the decrease in the value of the underlying assets.

One other tidbit is interesting here, and that is the trend of the other fund’ category’s growth, which has been going on for a while now. It would seem that investments into alternative forms of assets are becoming more and more prominent, which considering the relatively small size of the domestic equity market, as well as the uncertainty regarding the bond market is something that shouldn’t come as a surprise.

Moving on to securities and deposits, in September 2023 they amounted to EUR 2bn, accounting for app. 98% of the total NAV. Of this, domestic securities and deposits accounted for EUR 808.3m, decreasing by 2.8% MoM, or EUR 23m, and 26%, or EUR 286m YoY. On the other hand, foreign securities and deposits amounted to EUR 1.2bn, increasing by 2% MoM, or EUR 22m, and 46% YoY, or EUR 377.4m. This would mean that foreign securities and deposits growth offset most of the decline in domestic securities and deposits.

Finally, taking a look at the current asset structure of the funds, the majority is still held by the bond holdings, at 61%, which is a decrease of 0.32 p.p. MoM, but an increase of 4.65 p.p. YoY. Following them there are shareholdings at 16.7%, with an increase of 0.30 p.p. MoM; and 5.88 p.p. YoY, as well as deposits and cash at 10.3% (+0.17 p.p. MoM, -9.70 p.p. YoY), and investment funds at 9.5% (-0.47 p.p. MoM, +1.24 p.p. YoY).

Current AUM of Croatian mutual funds (September 2023, % of the total)

Source: HANFA, InterCapital Research