On Friday, most Croatian blue chips published announcements on the ZSE regarding the implications of the Covid-19 situation on their operations. Here you can find the summary of all of their comments.

For today, we are bringing you the summary of announcements of most CROBEX constituents regarding the current implications of Coronavirus on their operations. The announcements below of the companies have been ranked in an alphabetical order.

AD PLASTIK

The operations of the AD Plastik Group have been running smoothly so far. There were no interruptions in the supply of raw materials or in the delivery of products, despite delays at border crossings that did not significantly affect their business operations.

In addition, the company has no announcement of changes in customer orders, which means that this situation has not had a material impact on AD Plastik Group’s business so far. FCA Group has temporarily closed four of its factories in Italy for two to three days due to the consequences of the spread of the COVID-19 virus, which does not have a significant impact on the AD Plastik Group’s business as the Group generates 1.5% percent of total sales revenue from these plants.

The financial situation of the Group is stable and not affected by the spread of the COVID-19 virus.

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ADRIS GROUP

The impact of COVID-19 disease on the underlying factors, forecasts or financial situation of the Company will depend how it will affect the business of the Adris Group.

The companies within the Group operate in different business environments, conditions and a business model. Therefore, the potential intensity and dynamics of the impact of the new circumstances are different for each of the respective companies within the Group.

According to currently available information, COVID-19 disease is not expected to affect the operations of the insurance part of the Group. The tourist part operated in accordance with the expectations up to beginning of March 2020. Following the adoption of emergency measures or recommendations, both in the Republic of Croatia as well as in other neighboring countries, the cancellation of accommodation reservations and rallies for March, April and May 2020, mainly in the MICE segment, while there are no significant cancellations of reservation for the period from June 2020 onward.

In the healthy food segment, there is a noticeable impact in distribution of products to foreign markets, as a result of the introduction of extraordinary measures, both in the Republic of Croatia and in other neighboring countries. The effect is primarily noticeable on the Italian market, which is the most significant market of Cromaris.

With low indebtedness, the Company has a strong cash position and high investment potential. Despite current environment, the group intends to implement the announced business satrtegy in the areas of investment and dividend policy.

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ATLANTIC GRUPA

Due to the effects of the COVID-19 disease on fundamental factors, outlooks or the financial situation of Atlantic Grupa, the Group informs that the functioning of Atlantic Grupa is continuing as usual, that is, at the moment they do not have concrete, materially significant negative effects on their business operations.

Due to the spread of COVID-19 in the surroundings, Atlantic Grupa has developed a Crisis Unit which regularly follows notices and directions from all official institutions and implements preventive measures accordingly.

What is important to emphasize is that at the moment not one employee of Atlantic Grupa is infected with COVID-19. In order to decrease the spread of COVID-19 and ensure normal functioning, the company has taken many measures such as: enabling work from home for employees whose positions allow it; harmonization of IT Systems and support for the new working conditions (home office); increase of the production materials and finished goods inventory, and they are in continual communication with suppliers so the purchase of raw materials continues without interruptions; ensuring additional liquidity, etc.

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ATLANTSKA PLOVIDBA

Company ships are employed under the applicable cargo contracts and so far business of Atlantska Plovidba has not recorded underperformance that would explain a recent fall in the stock price. By following the measures applied to protect the lives and health of sailors and recommendations of the World Health Organization, ships have not evidenced any cases of COVID-19.

Evidenced in all published indices of freight in the world, freight rates have been significantly reduced recently, but this decrease continued until the beginning of February this year followed by a positive trend until today.

The drop in freight rates was partly caused with an outbreak of the virus and an increasing number of patients in China, leading to a decrease in trade, production and transportation of bulk cargo due to various measures taken by the Chinese health authorities and WHO.

However, the bulk freight market recorded rising freight rates, which is forecasted to continue an upward trend. This has resulted in significantly higher freight rates in recently concluded contracts for the carriage of cargo.

Considering the significant fall in the number of patients in China and the fact that China accounts for 35% of the global dry cargo market, we believe that there is a realistic basis for the positive trend in freight rates to continue with recovery from shock brought by coronavirus.

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DALEKOVOD

Company Dalekovod established a crisis headquarters to manage the situation of COVID-19 virus epidemic and actions that are challenging for the company’s operations. Headquarters in charge for the entire Dalekovod Group, will report regularly on any changes related to business continuity.

A detailed plan has also been made in the event of the occurrence of patients with COVID-19 virus in the company itself and will be distributed in accordance with the Plan available at all sites and construction sites.

The situation in key markets, Scandinavia and the domestic market, the situation is stable, works are carried out without interruption with parallel planning of potential escalation procedures.

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ĐURO ĐAKOVIĆ

So far, the Coronavirus has not significantly affected the operations of the Group companies as no orders had yet been canceled by buyers, or difficulty with deliveries by suppliers. However, given the escalation of the spread of the virus, especially considering that the foreign markets in which the Group operates (Germany, Austria, etc.) are significantly affected by spreading the virus, there are possible negative consequences for the business of the Đuro Đaković Group.

Due to the rapid nature of developments related to the spread of COVID-19 viruses, the Group is still unable to evaluate it concrete impact on the Group’s operations for the current year, as well as its long-term financial consequences, although they deem that a negative effect seems inevitable.

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HRVATSKI TELEKOM (HT)

HT notes that their business operations are ongoing in accordance with their business plans. The company will be able to give a more detailed estimate on the coronavirus impact to their results and the main KPIs at the announcement of the results for the first quarter of 2020. It is currently not possible to give a more detailed estimate with respect to the impact of the virus to the business operations of the Company. HT has a strong financial position, which enables the business continuity in case that more severe market conditions occur.

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KONČAR

So far, COVID-19 has not affected the Company’s operations. Hence, there was no effect on concluding new business, delivery of transformers to customers, nor on the supply of raw materials, materials and equipment from suppliers. If the situation deteriorates in the coming period, the Company monitors the situation on the markets and considers taking measures in accordance with the recommendations of the competent institutions. Končar is in constant contact with customers and suppliers. Given the new situation that has not been reported before, the Company is not able to anticipate further reactions of customers, suppliers, government bodies, banks and other business entities in the markets. The Company ensures that the investment public will be informed in a timely manner.

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MAISTRA

The Company (up to beginning of March 2020) operated in accordance with the expectations. Following the adoption of emergency measures or recommendations, both in the Republic of Croatia as well as in other neighboring countries, the cancellation of accommodation reservations and rallies for March, April and May 2020 occured, mainly in the MICE segment, while there are no significant cancellations of reservation for the period from June 2020 onwards.

In case of further the escalation of virus, and consequently more severe emergency measures, the Company will be negatively affected, which cannot be quantified at the moment.

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OPTIMA TELEKOM

Optima Telekom’s business operations are ongoing in accordance with their business plans. The Company will be able to give a more detailed estimate on the coronavirus impact to their results at the announcement of the audited results for 2019 and for the first quarter of 2020.

They add that it is currently not possible to give a more detailed estimate with respect to the impact of the virus to the business operations of the Company.

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PODRAVKA

Due to unpredictable nature of COVID-19 and consequently the impossibility of accurately predicting further developments in this regard, it is premature to make any estimates regarding the potential impact of COVID-19 on the Issuer’s business in the upcoming period.

At this moment, Podravka is not aware of relevant pertaining information regarding the impact of COVID-19 on the underlying factors, prospects or financial situation of the Issuer. As a company known for its corporate social responsibility, it closely monitors the further development of COVID-19 situation both on the territory of the Republic of Croatia and globally, and accordingly undertakes appropriate measures that are focused on ensuring continuity of its business.

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VALAMAR RIVIERA

Due to the uncertainty regarding the escalation of coronavirus and unpredictable government measures to slow the outbreak in Croatia and the Company’s leading source markets, it is still early to quantify the possible impact of the virus spread on Valamar’s business in the upcoming periods. Although the current annual state of bookings is better than last year, the entry of new bookings has slowed significantly due to the rise of COVID-19 cases in Italy.

At this moment, it is not possible to precisely predict the final adverse effect of the booking slowdown on business as there is a possibility of reimbursing them through “last-minute” bookings along with a simplified booking cancellation policy. The current room cancellations are mainly related to the period from March to May 2020 and only to a lesser extent to the high season, which accounts for over 85% of annual operating revenues. Since the manifestation of the COVID-19, Valamar has been closely observing the ongoing situation and has employed its resources on implementing preventive measures to protect the health of both guests and personnel. At the same time, the Company has prepared and initiated comprehensive crisis management operational actions, escalation plans for safeguarding liquidity and business continuity, and established transparent communication with all stakeholders including guests, partners, employees, creditors, shareholders, competent state and local authorities. Due to the possible further change of events beyond the Company’s influence, further changes in relevant circumstances can be expected. Valamar promises to publish all relevant information on the impact of COVID-19 in accordance with the relevant regulations.

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ZAGREBAČKA BANKA (ZABA)

Zagrebačka banka has adopted a business continuity plan to ensure that there is no disruption to their business activities. The plan is periodically reviewed to reflect any new developments.

The plan includes:

• ensuring customer service through all business channels;
• reduction of (physical) meetings at the bank and replacement by telephone or video conferences;
• daily intranet communication and education, accessible to all employees, including all relevant ones COVID-19 risk information and any advice consistent with recommendations made public health authorities.

In addition, based on all currently available information, Zagrebačka banka, as a credit institution which predominantly operates in the Croatian market, is so far unable to determine the relevant effects of COVID-19.

If you’re working at a fixed income desk, chances are last few weeks have been particularly tough. Strained liquidity made all of the bids disappear and modest quantities were traded. This is the moment when institutional support came for the domestic financial markets in the form of structural REPO and outright securities purchases. Find more about it in this brief article.

After intervening three times last week by selling a total of 1.214b EUR @ 7.5451, Croatian central bank recognized the unique and unfavorable circumstances that have caused the integrity of Croatian securities market to deteriorate. Exchange rate volatility was in larger part caused by the rapid spread of Covid-19 and mitigating measures introduced by Croatian main trading partners, prompting a swift and resolute response from the central bank. The same adverse conditions forced some of the market participants to reduce their exposure to Croatian government paper, driving them to sell government bonds. This selling pressure happened soon after Croatian government held its largest bond issuance ever at the end of February, meaning that balance sheets of institutional investors had too little room to meet all of the supply that was coming from some segments of Croatian financial market. In other words, after curbing excessive exchange rate volatility the CNB Council decided to place liquidity through structural repurchase operations with a five-year term and 0.25% interest rate (commencing today), coupled with outright purchases of Croatian government debt securities. 

These actions were welcomed by financial markets and on Friday afternoon the central bank bought some 212.88m HRK of government bonds. The willingness of central bank to step in and start buying fixed income securities was definitely a step in the right direction, although normal functioning of the market is still fragile and market participants will probably need to be convinced that this was not a “one time thing”, but instead a policy tool that might be used again if needed.  

It’s also worth bearing in mind that last night US FED delivered a 100bps interest rate cut (pushing FED fund rates to pre-Yellen range of 0.00%-0.25%), paired with 700b USD QE package (200b USD in MBS + 500b USD in US Treasuries). Apart from the FED, six major central banks decided to put swap lines set up during the last financial crisis in use and started offering USD weekly with an 84-day maturity and at a cost of OIS+25bps to ease the strain on dollar funding. In this context, Croatian central bank is in line with what other central banks are doing, although the pace is more gradual compared to its peers since some of the instruments (such as outright purchase of securities) have seen their inaugural use on Friday afternoon. 

With this package we’re clearly not out of the woods, but at least the institutions are conveying a message that adverse financial conditions would not go unmitigated. This message would likely resonate through the domestic financial system and reduce the seller’s anxiety. It’s also worth mentioning that on Tuesday the government plans to unwind a set of thirteen legal measures designed to curb the impact pandemics has on the domestic economy.