In Q1 2022, Cinkarna Celje recorded an increase in sales of 31.8%, an increase in EBITDA of 78.1% and net profit doubling to EUR 15.6m.
In 2021, Cinkarna Celje recorded one of the best sales results for the first quarter, which amounted to EUR 66.4 m (+31.8% YoY). This increase was driven by growth in Cinkarna’s most important business unit – titanium dioxide. Sales from the titanium dioxide business unit amounted to 80.8% of total sales. Cinkarna reported an increase of 33% in titanium dioxide sales alone, which was even further driven by higher prices of titanium dioxide pigment. Also, regarding titanium dioxide prices – a specific market situation for titanium dioxide is present – decreased supply, with stable and strong demand, which resulted in the higher bargaining power of suppliers which was thus reflected in a higher price. In this quarter, the supply side of the equation shrank even further, as the delays were reported in Asian pigment coming to Europe. This impact is favourable on margins in the current period.
Overall, the above-mentioned macroeconomic situation, and general shortage in the market in titanium dioxide supply resulted in a higher price for titanium dioxide. But we should emphasize that price correction should occur during the year, as prices are unusually high. Also, there is significant pressure on prices for key raw materials, including titanium-bearing ores, energy and transport. In the quarters to follow, further increases for those input prices can be expected, but a higher price should be reported on the input side than on the output side.
Also, a reason for the sales growth was an improvement in market condition and favourable demand from all significant geographical segments, which is linked to the general consumer optimism, resulting in a better performance of every other business unit too, compared on a YoY basis.
EU Spot prices for Titanium Dioxide in the last 5 years
Turning our attention to operating expenses, in Q1 they increased by 23.5% YoY. This increase was a result of growth in sales driven by an increase in all cost line except other operating expenses(-8.4% YoY). As a result of growth in sales, the cost of materials was up 23.5% YoY, which is slower growth than sales despite of inflation (from EUR 24.1m to EUR 31m). Due to strong growth in prices of the end product, the Company was able to offset the negative effects of input price growth. Cost of services was up 23.2% YoY, while labor costs increased 8.6% YoY, amounting to EUR 8m. As the number of employees in the period fell for 3.6% YoY (from 812 to 783) due to natural employee outflow), the average monthly cost per employee was up 12.8%. This is in line with the trend of salary inflation evidenced in the 1Q 2022.
All this has resulted in strong growth of operating profit, so EBITDA surged 78% and amounted to EUR 22.4. Such a high increase happened primarily on the back of mentioned sales growth (+31.8% YoY), supported by slower growth of expenses(+23.5% YoY) leading to 9 p.p. EBITDA margin growth and increase in operating profitability. EBITDA margin surged to 33.8% from 24.9%.
Depreciation was flat at EUR 3.3m, while net financial result was positive as the company has no debt. Tax expenses doubled to EUR 3.6m as a result of the doubling of operating profit. As a result of the above-mentioned net profit in Q1 2022 doubled to EUR 15.6m (from EUR 7.4m in Q1 2021).
Cinkarna Celje Performance Q1 2021 vs Q1 2022 [EUR m]
CAPEX wise Cinkarna Celje spent EUR 1.8m in Q1 2022. Most of the funds were spent on purchasing fixed assets, replacement equipment and environmental investments. This EUR 1.8m represents 13% of planned funds for 2022. Cinkarna will focus on investing in programs that primarily show a potential for growth, ensuring profitable volumes of production.
To remind you, in FY 2021 the company paid out EUR 16.4m in dividends (EUR 21 per share), which translates to a payout ratio of 87%. Also, Cinkarna Celje spent EUR 0.9m buying its treasury shares. As a result of their strong performance, the company’s share was up 7.3% in 2021. To learn more about Cinkarna Celje dividends read here.
Cinkarna’s share price performance in 2021 and Q1 2022
In Q1 2022, Telekom Slovenije recorded a revenue decrease of -3.6% YoY, an EBITDA increase of 1.9%, and a net profit of EUR 11.9m, an increase of 23.3% YoY.
In total, sales revenue amounted to EUR 151.2m, a decrease of 3.6% YoY. This was due to several factors: Firstly, revenues from the mobile segment of the end-user market were down due to the optimisation of subscribers whose basic subscription fee includes an increasing number of services. Secondly, lower revenue from the sale of mobile merchandise, resulting in lower costs. Thirdly, revenues from the fixed segment of the end-user market were down due to a declining number of traditional connections and lower revenues from the sale of fixed merchandise. Also, Telekom Slovenije stopped the sale of electricity to end users, as of 1 January 2022. Finally, revenues from international voice services were lower.
Moving on to the operating expenses, they totaled EUR 136.4m, a decrease of 5% YoY. This was due to the lower revenue which resulted in lower COGS (-11.7% YoY), amounting to EUR 19.9m, as well as lower cost of services (-8.6% YoY), amounting to EUR 44.6m.
Because of the slightly higher decrease in OPEX compared to the decrease in revenue, the Company’s EBITDA amounted to EUR 56.7m, an increase of 1.9% YoY. This would also mean that the EBITDA margin equaled 37.5%, an increase of 2 p.p. YoY. The net financial result amounted to EUR -1.7m, an improvement of 23.6% YoY (Q1 2021: EUR 2.26m). Deferred tax expense amounted to EUR -1.2m, an increase in the expense of 40.2% YoY.
When all of this is combined, Telekom Slovenije generated a net profit of EUR 11.9m, an increase of 23.3% YoY.
Looking at the balance sheet, Telekom Slovenije’s total assets amounted to EUR 1.24bn, a decrease of -0.8% YoY, driven by both an increase in non-current as well as current assets. On the other hand, total liabilities amounted to EUR 628.7m, a decrease of -3.3% YoY. The decrease was driven by a decline in non-current liabilities, which declined primarily because the loans and borrowings decreased (-2.5% YoY) and amounted to EUR 301.4m, as well as a decrease in current liabilities, which declined by -5% YoY and amounted to EUR 213.9m. The decrease in current liabilities was driven by a decrease in trade payables, which decreased by -25.1% YoY and amounted to EUR 98.1m. Meanwhile, the net financial debt remained almost the same.
Telekom Slovenije key financials (Q1 2021 vs. Q1 2022, EURm)
The Impact of Russian-Ukraine Crisis
The Company also commented on the impact of the Russian-Ukraine crisis on its business. Telekom Slovenije is not directly linked to the Russian or Ukrainian markets. Because of this, there is not a significant direct impact on the Company’s cash flows and financial sources. At the same time, the Company adapted its activities and retail market portfolio due to the current inflationary pressures. To be more concrete, there has been a focus on specific user segments in order to ensure the stability of the subscriber portfolio. The Company also stopped forwarding transit traffic with operators from Russia and Belarus, while a bilateral agreement was concluded on the reduction of call termination prices in Ukraine and the Company’s network. Finally, supply chain disruptions and higher energy prices also have an impact on the Company’s performance.
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In Q1 2022, BRD Group’s net interest income increased by 9.8% YoY, net fee and commissions income increased by 3.4%, resulting in a net banking income increase of 7.5% YoY. Net profit to majority increased by 18.1% and amounted to RON 260m.
BRD Group’s net interest income increased by 9.8% YoY and amounted to RON 556.2m. This was due to the strong business momentum on the back of a dynamic lending activity across the board. Net fee and commission income grew by 3.4% and amounted to RON 180m, on the back of higher volumes of customers’ transactions. Combined, this increased the net banking income by 7.5% YoY, and it amounted to RON 809.5m.
Moving on to operating expenses, they increased by 6.4% and amounted to RON 459.8m. This was mainly driven by the cumulated contributions to Deposit Guarantee and Resolution funds, which were 40% higher compared to Q1 2021 (RON 69.2m vs. RON 49.4m). If we were to exclude this, OPEX increase would amount to 2.1% YoY. The main drivers of the remainder of the increase were the staff expenses, which grew by 2.6% YoY and amounted to RON 193m, as well as the non-staff expenses, which grew mainly due to the impact of the inflation on real estate expenses and subcontracting costs of IT services.
Meanwhile, the quality of the loan portfolio also improved, with an NPL ratio of 2.7%, a decrease of 0.4 p.p. YoY. Provision coverage also increased by 3.2 p.p. and amounted to 76.5%. Furthermore, the net cost of risk was reduced by 41.2% and amounted to RON 32m YoY, as a result of a recovery in performance, which was partially offset by the current geopolitical environment.
Because of all of these reasons, BRD Group recorded a net profit to the majority of RON 260m, an increase of 18.1% YoY. This would also mean that ROE (return on equity) amounted to 11.9%, an increase of 2.8 p.p. YoY.
BRD Group key financials (Q1 2021 vs. Q1 2022, RONm)
Looking over to the Group’s balance sheet, the total assets increased by 12.3% YoY and amounted to RON 69.1bn. The increase was driven by growth across all types of assets, which the main drivers being net loans and advances to customers, which grew by 8.9% and amounted to RON 33.5bn, followed by an increase in Other financial assets, which increased by 6.4% and amounted to RON 20bn, and finally, the cash and current accounts with the Central Bank, which grew by 27.6% and amounted to RON 8.5bn.
On the other hand, total liabilities increased by 18.5% and amounted to RON 63.6bn. The growth was experienced across all categories, with the Amounts owed to credit institutions increasing 18x, from RON 360m to RON 6.6bn. This increase was driven by the access to a Lombard facility in March, due to the tightened RON liquidity. Next up, we have an increase in Amounts owed to customers, which grew by 3.8% YoY and amounted to RON 53.5bn, and Other liabilities, which grew by 98.7% YoY and amounted to RON 3.5bn.