The subject of Croatia’s agricultural business, that are now part of Fortenova Group, is on sale and has been increasingly present in conversations recently. Today, Podravka notified that the Company was invited to finalize negotiations on this deal. Completion of the sales process will follow additional negotiations and coordination of the sales contract and obtaining all necessary approvals from regulatory authorities in Croatia and the region. At this point, the transaction price has not yet been announced.

Croatia’s agricultural jewels that are now part of Fortenova Group are on sale as they are not generating enough of additional value for the current structure. Today, Podravka notified the public on the stock exchange that the Company was invited to finalize negotiations on the purchase of agricultural companies of the Fortenova group as a preferred partner. Accordingly, Podravka and the Fortenova group signed an exclusivity agreement, which confirms Podravka’s position as the preferred partner. Consequently, Podravka will pay a EUR 15m deposit for this takeover.

Completion of the sales process will follow additional negotiations and coordination of the sales contract and obtaining all necessary approvals from regulatory authorities in Croatia and the region. The acquisition will be financed through bank loans and it is expected that the European Bank for Reconstruction and Development (EBRD) will be a partner in the transaction. Podravka noted that the Company intends to invest in the modernization of productivity of agricultural businesses. Finally, you can read in more detail on this topic and the key financials of the companies that are the subject of the transaction – here.

Podravka vs. CROBEX10 performance [July 2019 – July 2024]

Source: Bloomberg, InterCapital Research

Yesterday, Krka held its GSM, after which the preliminary H1 2024 results, among other things, were published. According to this report, in H1 2024, Krka’s revenue grew by 7% YoY, its EBITDA declined by 2%, while the net income amounted to EUR 221.6m, increasing by 30% YoY.

Starting off with revenue, Krka managed to record growth across all regions, and almost all markets. In total, it grew by 7% YoY to EUR 985.4m. Breaking this growth by regions, in the largest region, i.e. Region East Europe at 33.9% of the total, Krka recorded revenue of EUR 332.4m, an increase of 11% YoY. In terms of individual markets in the region, sales in Russia amounted to EUR 195.2m, an increase of 9% YoY, while sales in Ukraine amounted to EUR 45.9m, growing by 19% YoY. In Uzbekistan, EUR 28.5m of product sales were recorded, an increase of 22% YoY. Krka noted it recorded revenue growth in all other markets of Eastern Europe and Central Asia, except for Moldova and Turkmenistan.

Moving on, the second largest sales region was Region Central Europe, at 23.2% of the total, or EUR 227.6m, growing by 7% YoY. In Poland, Krka’s 2^nd largest individual market after Russia, Krka recorded EUR 108.8m of revenue, an increase of 17% YoY. Hungary also recorded a 4% increase, to EUR 30.9m, while in Czechia, a 9% revenue drop to EUR 31.5m was recorded. In terms of other markets in the region, growth was recorded across most of them.

Next up, Region West Europe generated EUR 183.9m of revenue, representing 18.8% of the total, and growing by 1% YoY. In Germany, Krka’s largest market in the region and 4^th largest individual market, revenue amounted to EUR 45.6m, a decrease of 7% YoY. On the other hand, in the UK, sales doubled, in the Netherlands they were up 35%, while in Scandinavia they were up 22%.

In Region South-East Europe, Krka recorded EUR 137.4m of revenue, up 8% YoY, with growth across all regional markets. In Romania, product sales amounted to EUR 38.4m, up 8% YoY. Next up, in Region Slovenia, Krka recorded sales of EUR 59.9m, up 6% YoY. This would also mean that Krka holds app. 7.4% of the Slovenia market in terms of sales value, and remains the leading supplier of pharmaceuticals in the region. Lastly, Region Overseas Markets, recorded revenue growth as well, of 5% YoY, on the back of increased sales in the Far East and Africa.

Breaking the sales down by product types, Human health products recorded a 7% revenue growth to EUR 897.1m. In this category, prescription pharmaceuticals recorded 9% growth YoY to EUR 823.4m, and non-prescription products recorded a 10% drop to EUR 73.8m. Meanwhile, animal health products recorded a 4% increase YoY to EUR 60.4m, while health resort and tourist services recorded a 2% increase, to EUR 23.3m.

While no detailed P&L or balance sheet information is available, we can see that the Group’s EBITDA amounted to EUR 283.7m, declining by 2% YoY, while its EBIT increased by 1% YoY to EUR 237.7m. This would mean that cost growth was recorded, above revenue growth, but also that a significant part of that cost came on the depreciation line. In terms of the margin, the EBITDA margin amounted to 28.8%, down 2.57 p.p. YoY, while the EBIT margin amounted to 24.1%, down 1.54 p.p. YoY.

Moving on to net income, it amounted to EUR 221.6m, growing by 30% YoY, and implying a net income margin of 22.5%, up 4.01 p.p. YoY. Even though no data on the financial income/expenses is provided, it could be summarized that the majority of the increase in the net income came from higher financial income. Interests on financial investments have increased significantly YoY and Krka at the end of 1Q had net cash of EUR 515m. Positive effects in 2Q also came from favorable FX developments. The value of the Russian ruble-denominated in the euro over the 2Q has increased by 9%. So revaluation of the long position of assets that Krka Group has due to its company and factory in Russia will positively influence 2Q results by app. EUR 17m. This is a very volatile category as FY result can change by the YE as the Russian ruble can also devaluate due to negative developments in the political situation with Russia. In our business plan we have envisaged a slight decrease in FX results but positive development will further add to Krka’s result.

Krka key financials (Preliminary H1 2024 vs. H1 2023, EURm)

Source: Krka, InterCapital Research

In terms of investments, Krka allocated EUR 54.9m in H1 2024, of which EUR 40.9m was made to the controlling company (Krka d.d.). Furthermore, Krka obtained 11 marketing authorizations for new products, of which 10 were prescription pharmaceuticals, and one was an animal health product. Furthermore, nearly 600 marketing authorization procedures were finalized in different markets. Finally, Krka provided 2024 business objectives in this report. Product and service sales are projected to reach EUR 1.85bn, with the net profit planned at just over EUR 310m. The total number of employees is expected to increase by 3%, while Krka plans on allocating EUR 150m for investments, primarily in expanding production and development facilities, infrastructure, and technological upgrades.

At the share price before the announcement, this would imply a DY of 5.9%. The ex-date is set for 23 July 2024.

Yesterday, Krka published its General Assembly resolutions. According to the release, they approved the dividend payment in the amount of EUR 230.9m, from the 2023 distributable profit of EUR 381.9m, implying a payout ratio of 60%. Meanwhile, the remainder is split in 2, will be split equally (EUR 75.4m) among other profit reserves, and the amount will be carried forward to the next year. This would mean that the gross dividend amounts to EUR 7.5 DPS. Krka notes that this is a 13.6% increase in the dividend amount YoY.

The ex-date is set for 23 July 2024 (the record date is 24 July), while the payment date is set for 25 July 2024. Below we provide you with the historical dividends per share and dividend yields of the Company.

Krka dividend per share (EUR) and dividend yield (%) (2009 – 2024)

Source: Krka, InterCapital Research

Here you can find the dates for the upcoming events of the regional companies.

Due to the nature of these events, they are subject to change (might be postponed or canceled).