In H1 2023, Hidroelectrica recorded revenue growth of 42% YoY, EBITDA growth of 38%, and a net profit of RON 3.95bn, an increase of 46% YoY.
Hidroelectrica, the Company that made the largest IPO in recent years, has published its H1 2023 results. In terms of the results, the revenue amounted to RON 6.98bn, an increase of 42% YoY. Breaking this down further, the largest revenue category is wholesale revenues, which amounted to RON 4.12bn, representing 60% of the total, an increase of 34% YoY. This came as a result of a higher amount of electricity produced and sold, which amounted to 10,625 GWh, an increase of 45% YoY, while on the other hand, the wholesale price decreased by 6% YoY and amounted to RON 506/MWh. It should be noted that besides increasing production, the growth also came as a result of a drought in H1 2022.
Next up, we have supply revenues related to active energy, which amounted to RON 1.69bn, accounting for 24% of the total revenues, and growing by 124% YoY, mainly as a result of the increase in the portfolio of clients. Meanwhile, transfer costs related to the supply of electricity amounted to RON 694m, accounting for 10% of the total revenue, and growing by 174% YoY. The increase in this was proportional to the increase in the client portfolio to which the increase in the regulated tariffs was added. The remaining 3 revenue categories, i.e. Balancing revenues, System Services revenues, and other revenues from customer contracts, recorded decreases of 67%, 14%, and an increase of 213% YoY, respectively.
Hidroelectrica revenue breakdown (H1 2023 vs. H1 2022, RONm)
Source: Hidroelectrica, InterCapital Research
Moving on to expenses, in total they amounted to RON 2.49bn, an increase of 37% YoY. This came as a result of higher transport and distribution of electricity costs (RON 503m, +199% YoY), higher turbinated water costs (RON 378m, +56% YoY), higher employee benefit expenses (RON 364m, +32% YoY), as well as higher electricity purchase expenses (RON 215m, +221% YoY). Breaking this down further, transport and distribution of electricity costs grew due to the evolution of the quantities delivered on the portfolio of supply and regulated tariffs, turbinated water costs grew due to the increase in the amount of processed water used to produce the energy, as well as the higher tariff per thousand cubic meter in 2023 (RON 1.40 per thousand cubic meter vs. RON 1.23 per thousand cubic meter in 2022). Employee benefit expenses grew due to the salary increases, but also due to the increase in the number of employees. Finally, electricity purchase expenses grew because of the need to ensure a level of hedging that allows the supply portfolio to be developed in accordance with the Group Strategy.
Hidroelectrica expenses breakdown (H1 2023 vs H1 2022, RONm)
Source: Hidroelectrica, InterCapital Research
Combined, this led to an EBITDA of RON 4.96bn, an increase of 38% YoY. This would also imply an EBITDA margin of 70.9%, a decrease of 2 p.p. YoY. The net financial result amounted to RON 158.3m, an increase of 123% YoY, mainly as a result of higher finance income (RON 181.7m, +111% YoY) growing faster than finance costs (RON 23.4m, +54% YoY). Finally, this led to a net income of RON 3.95bn, an increase of 46% YoY. This would also mean that the net income margin amounted to 56.6%, an increase of 1.8 p.p. YoY.
Hidroelectrica key financials (H1 2023 vs. H1 2022, RONm)
Source: Hidroelectrica, InterCapital Research
In terms of investments, Hidroelectrica recorded total investments of RON 87m in H1 2023, an increase of 70% YoY. Breaking this down further, firstly we have the development project CAPEX which amounted to RON 36m, an increase of 52% YoY, driven by the continuation of construction works on the major ongoing investment objectives as well as the start of some new investment objectives. Secondly, refurbishment CAPEX increased by 204% YoY to RON 28m, as a result of some previously launched projects reaching maturity. Finally, we have the maintenance CAPEX, which grew by 40% YoY to RON 21m.
Yesterday, the Croatian Statistical Office published the Croatian CPI development. According to the release, in July 2023 the Croatian CPI increased by 7.3% YoY, and 0.2% MoM.
The latest Croatian CPI numbers show us that even though the CPI has been on a downward trend on a YoY basis, on an MoM basis, it still continues growing. The main reason for this is the base effect: the inflation was already high in the same period last year, meaning that growth compared to that base is lower. This doesn’t necessarily mean that the price growth isn’t slowing down, only that the significant factor for the reduction in the price growth (on a YoY basis) is due to the said base effect.
Croatian CPI (February 2013 – July 2023, %)
Source: DZS, InterCapital Research
Overall, the CPI increased by 7.3% YoY, while it grew by 0.2% on a MoM basis. Breaking this growth on the annual level, the biggest contribution came from the following categories: Restaurants and hotels, which increased by 14.6% (contributing by 0.73 p.p. to total CPI YoY growth), Food and non-alcoholic beverages, which increased by 12.6% (+3.34 p.p.), Clothing and footwear at 11.3% (+0.69 p.p.), Miscellaneous goods and services, with 10% (+0.62 p.p.), Furnishings, household equipment and routine household maintenance, with 9.3% (+0.54 p.p.), Recreation and culture, with 7.5%, Health, with 7.1% and Alcoholic beverages and tobacco as well as Housing, water, electricity, gas and other fuels with 6.4% increase.
CPI change by categories (July 2023, YoY, %)
Source: DZS, InterCapital Research
Meanwhile, on a monthly basis, the highest increase on average was recorded in the divisions Restaurants and hotels at 4% due to the season. Further, the trend in the decline of Energy prices (on a YoY basis) has been evident for a while now, as these prices have stabilized after their highest point recorded during the winter of 2022/2023. The increase across other categories is why inflation is considered “sticky” at this point, and the main reason why ECB still continues to increase interest rates.
Finally, we are going to take a short look at Eurostat’s inflation data that tracks a Harmonised Index of consumer prices (known as HICP), which allows for consumer prices to be compared across countries. Looking at the inflation rate for Croatia, we can notice an 8.1% inflation, according to HICP. To put things in context, inflation in Euro Area currently amounts to 5.3%. Finally, we would like to emphasize that Slovenia has an inflation rate much closer compared to Euro Area, amounting to 5.7%.