In 9M 2020, Končar recorded an increase in sales of 12.7%, an increase in EBITDA of 43.7% and an increase in net profit of 185%.
In the first 9m of 2020, Končar Group generated revenue from sale of products and services in the amount of HRK 2.051bn, representing an increase by of 12.7% YoY (or HRK +231.4m)
When looking at the sales breakdown, on the Croatian market, revenue generated from sale of products and services to HEP Group companies amounted to HRK 273. (38.7% of total revenue generated in the Croatian market), representing an increase by 2.9% YoY.
On the foreign markets, the largest segment (66% of total sales), sales amounted to HRK 1.345bn, representing an increase of 19% (or HRK 215.2m). When it comes to export by individual countries, the most significant export volume relates to the Swedish market, amounting to HRK 183.9m or 13.7% of total export. Goods and services exported to Germany amounted to HRK 160.7m (11.9% of total export); to Austria HRK 106.3m (7.9% of total export); and to Finland HRK 54.4m (4.0% of total export). Segment wise, it seems that the transformers (Končar D&ST) were the leading driver of the increased sales. You can read about Končar D&ST’s 9M results here.
The management noted on a FY basis that they expect to see an increase in sales of 5% YoY, which is slightly higher than the expected 4% increase stated in the H1 2020 report.
In the first 9m, Končar contracted new transactions valued at HRK 2.225bn. From the total amount of transactions contracted, HRK 664.3m (or 29.9%) refers to the Croatian market, while HRK 1.56bn (or 70.1%) refers to export contracts. This represent an increase of 7% (HRK 145m). The value of backlog as of end September amounted to HRK 3.531bn, representing an increase of 5.3% YoY.
Moving on to operating expenses, they amounted to HRK 2.06bn, which is an increase of 10.3%. Of that, material costs amounted to HRK 1.477bn (+14.6%). Such an increase is mainly the result of the structure of sales and increased price of raw materials and supplies. Staff costs amounted to HRK 438.8m (+4.9%) which came on the back of an increase in the number of employees (54 more employees at the Group level).
EBITDA & Net Profit (9M 2019 vs 9M 2020) (HRK m)
As a result of all of the above-mentioned, EBITDA amounted to HRK 120.2m, representing an increase of 43.7% YoY. Such a result shows an improvement of the EBITDA margin by 1.3 p.p. YoY to 5.7%. Meanwhile, operating profit is up by 3x and stands at HRK 47.17m.
Going further down the P&L, the bottom line was further boosted by an increase in net financial result which amounted to HRK 10.2m (compared to HRK 3.6m in 9M 2019). Such an increase could mostly be attributed FX gains.
In the first 9m, the share in profit from undertakings linked by vritue of participating interests amounted to HRK 7.4m representing a decrease of 45.7%. The company does not give much insight to the reasons behind the decrease, however it is safe to assume that the decrease could be attributed to the poor performance of KPT (JV with Siemens), which has traditionally added a solid boost to the bottom line.
Končar Group reported an increase in net profit of 185%, amounting to HRK 49.19m. Such a result led to an improved profit margin by 1.4 p.p. YoY which as of 9M stands at 2.3%. Of the reported net profit, HRK 25.18m relates to net profit to majority (increase of 6x YoY). Although the above mentioend results seem to be quite positive, one needs to remain aware that in 9M 2019 the Group showed quite a poor performance due to a lower topline performance, which now served as a lower base. As a reminder, in 9M 2019 a decrease in operating revenues was caused by prolongation and blockade of several significant deals, which include the construction of a hydroelectric power plant in Bosnia and Herzegovina and a delay in the contract realization of equipment to an Iranian buyer (due to sanctions implemented to Iran).
Finally, looking at CAPEX one can see that the company more than halved their investments in the first nine months of 2020 (-53%), while they amounted to HRK 59.55m.
In 9M of 2020, net banking income decreased by 12.8% YoY, while net profit decreased by 29.8%.
Zagrebačka Banka (ZABA) published their 9M report according to which net interest income amounted to HRK 2.32bn (-11.1% YoY). Such a decrease of HRK 290m was mostly influenced by downward pressure on the NIM which has been an ongoing trend on the market. Besides that, the Covid-19 pandemic has left its toll on credit activity, so net loans and advances to customers decreased by HRK 2.2bn to HRK 81.174bn.
When looking at net fee and commission income, it witnessed a decrease of 9% to HRK 962.1m. One could argue that the lockdown has had an impact on the bank’s fees and commissions, however it is difficult to assume to which extent, as the bank did not provide any information on it.
The bank also realized a sharp decrease of 34.9% in income from trading and other income to HRK 252m (decrease of HRK 135m). Such a decrease could be attributed to the deterioration of the financial markets trading as a result of the pandemic. However, the bank does not give much insight into their trading portfolio so it is difficult to estimate the direct cause of such a drop, especially given that financial markets have seen a significant recovery since the March lows. As a result of the above mentioned, net banking income decreased by 12.8% to HRK 3.531bn.
Moving on to operating expenses, they decreased by 3% (or HRK 51m) and currently stand at HRK 1.673bn. To be specific, administrative expenses decreased by 2.8% to HRK 1.36m, while amortization is down by 3.7% and amounts to HRK 312.8m. Such a result puts the CIR at still a relatively low 47.37%.
It is worth adding that the value adjustments and provisions for losses amount to HRK 546m, which was driven by higher credit risk following the COVID-19 pandemic. We note that this represents quite a high QoQ increase of HRK 197m. Meanwhile on a YoY basis the bank observed what can be considered a relatively low increase of HRK 66m. As a reminder, in 9M of 2019 ZABA recorded also high value adjustments and provisions for losses of HRK 480m. However, the mentioned provisions were related mostly to lawsuits to (former) debtors on loans in Swiss francs.
As a consequence of the pandemic, the Group has provided special support measures, including standstill liabilities, repayment delays (moratoriums) and new liquidity credit lines to legal entities and citizens. In accordance with the instructions of the CNB and the ECB, the availability of these support measures to clients does not in itself constitute an automatic criterion for classification into “forborne” category or to conclude that all clients who took advantage of the available measures occurred significant increase in credit risk. This in a way indicates that we might see potentially higher NPLs when the mentioned moratoriums expire.
In 9M of 2020, ZABA recorded a net profit of HRK 1.1bn, representing a decrease of 29.8%.
Turning our attention to the balance sheet, total assets increase by 1.2% and as of end September amount to HRK 147.4bn. Of that, as above mentioned, net loans and advances to customers amounted to HRK 81.174bn. Meanwhile, on the liabilities side, deposits from customer amounted HRK 116.8bn. This represent an increase of HRK 3.5bn or +3.1% YoY. The increase in inflow of deposits has been a trend in the banking sector for some time now and this has only been further boosted by the pandemic as consumer spending has decreased while clients might have also decided to liquidate (or reduce) their positions in other financial assets and decided to hold cash (sight deposits).
Kras published their 9M results last week, recording a 3.7% YoY decrease in sales, meanwhile EBITDA rose 32.1% while net profit amounted to HRK 26.3m (+42.3% YoY).
In the first 9m of 2020 Kraš recorded a decrease in sales of 3.7% which amounted to HRK 670.5m. Of that, HRK 364.4m (or 54%) was generated in the domestic market, while HRK 306.1m (or 46%) relates to the export markets. Operating revenue on the other hand observed an increase of 0.6% to HRK 704.8m, because of a sharp increase in other operative revenue to HRK 34.3m. Such an increase was mainly a consequence of a collection of receivables from Saudi Arabia.
EBITDA is up 32.1% YoY, amounting to HRK 76.7m. The primary reason for the increase are lower staff costs which are down 19% YoY.
Below the operating line, Kras’ net financial result turned negative to HRK -2.4m from last year’s positive result of HRK 0.35m. The decrease can be attributed to negative FX movement. Finally, the bottom line amounted to HRK 26.3m (+42.3%).
Kras 9M Key Financials
In the first 9m of 2020, M+ Group recorded an increase in sales of 108%, an increase in EBITDA of 215% and an increase in net profit of 103%.
On Friday M+ Group, the largest providers of business process outsourcing services (BPO) in the region, published their 9M 2020 results. According to the report, the Group operating revenue doubled (+112%) to HRK 515.2m, which can mostly be attributed to the acquisition of the company CMC in the amount of HRK 214m. The management of the company added that the lockdown has also augmented the need for business processes and technology sector which was evidenced on the top line. Therefore, income from contact center services at the Group level continued to grow in the Q3 as well.
On the operating expenses side, one can notice an increase of 113% (or HRK 256m) to HRK 483.7m. Such an increase primarily came on the back of higher employee costs (HRK +160.6m) as the number of employees went from 2,700+ in 9M 2019 to current 7,500+. The mentioned increase could predominantly be attributed to the above-mentioned acquisition of CMC.
As a result of all of the above, EBITDA increased by HRK 58.82m (or +215% YoY) to HRK 86.22m. Of that roughly HRK 40m came on the back of the CMC acquisition, while HRK 19m can be related to an increase in business efficiency. Therefore, if we were to exclude the effect of the acquisition, EBITDA would have grown roughly 69% YoY. The reported EBITDA also meant an improvement in EBITDA margin by 5.5 p.p. to 16.7%. Meanwhile, operating profit is up by 96% to HRK 31.5m.
Going further down the P&L, the Group recorded somewhat of a lower net financial loss which amounted to HRK -1.3m (compared to HRK -1.5m in 9M 2019).
In 9m of 2020, M+ Group reported a increase in net profit of 103% to HRK 25.65m Such a result led to somewhat of a lower profit margin of 5% (-0.2 p.p. YoY).