Today we decided to bring you an overview of the FY 2022 EBITDA and profit margins of Slovenian companies as the majority of blue chips published their results.

Over the course of March, Slovenian companies posted their FY 2022 results. As a result, we decided to bring you an updated EBITDA and profit margin analysis. One thing that is important to point out is that comparing the margins across the selected companies is not necessarily the best way to do the comparison, considering that many companies operate in different industries. Since both EBITDA and profit margins reflect to a large extent the industry in which a certain company operates, it is more advisable to use the peer average or median.

Even so, it is worth seeing which Slovenian companies are more profitable and therefore have a better position in managing their prices and services (reducing costs, increasing prices of goods/services) thus increasing these margins – and which are not. It should also be noted that financials (Triglav, Sava Re, and NLB) were excluded from these comparisons due to the nature of operations & reporting in the sector.

FY 2022 EBITDA margin of Selected Slovenian Companies (%)

Source: LJSE, Bloomberg, InterCapital Research

Out of the four observed companies, Luka Koper recorded the highest FY 2022 EBITDA margin at 36.6%. If we were to look at 2022 vs. 2021, the margin increased by 9.8 p.p. YoY. The higher margin was a result of more robust and profitable business operations during the year. We note that Luka Koper reported a 37.2% higher top line due to higher net revenue from warehouse fees resulting from the extended retention time in warehouses due to the current situation in the global logistics market, which decreased at the end of 2022 because of the gradual normalization. Further, revenue grew due to the increase in prices of services, increased volume of throughput, and additional services in all commodity groups, but also due to higher productivity. However, Luka Koper also increased its profitability on all profitability levels.

Next up, there is Krka with an EBITDA margin of 28.6%, decreasing slightly by 1.1 p.p. YoY. Regarding Krka, in Q4 revenue further accelerated to 22.1% YoY (vs. 4.6% YoY in Q3), due to quantities growth on Krka’s markets coupled with the increase in prices of nonprescription products. However, the biggest turn of events occurred in Russia – Russia was up 44% YoY in Q4 due to strong volume growth of non-prescription drugs and a surge in their prices coupled with an increase in prescription drugs due to rouble depreciation. The incidence of common cold and flu increased because restrictions associated with COVID-19 were lifted. Finally, EBITDA was under a positive impact of rouble appreciation. Rouble appreciation impacted the inventories valued in the Russian rouble, which were later sold at much higher quantities than we have estimated so realized EBITDA grew more than expected.

Following these two, we have Cinkarna Celje and Petrol. Cinkarna recorded an EBITDA margin of 28.2%. In 2022 Cinkarna recorded an increase in sales revenue of 18% YoY. Sales grew on the back of higher spot prices of the titanium dioxide segment, which were driven by a favorable market situation for the most period throughout the year (with Q4 as an exception as the trend started to reverse). This growth in the top line translated directly to a higher EBITDA and bottom line. Lastly, there is Petrol, which reported an EBITDA margin of 1%, which is more or less in line with the specificity of the industry the company operates in. On a YoY level, Petrol reported a significant decrease in EBITDA margin of 4.8 p.p. Due to the capping of prices in the beginning and later capping of margins in 2022 Petrol was unable to achieve the announced business plan. Petrol was affected by the fuel price regulation imposed by governments on all their markets. In some of their periods’ margins were fixed and in certain periods prices were capped on its main markets of Croatia and Slovenia. Overall, Petrol announced further cost optimizations in 2023, as it views 2022 as a challenging year. For 2023 EBITDA is expected at EUR 250m and net profit at EUR 117m, putting it on the level of 2021 net result. Risks to achieving the plan entail further changes in governments’ regulation, disruption to supply chains, rising inflation, and an increase in volatility of energy markets.

FY 2022 Profit margin of Selected Slovenian Companies (%)

Source: LJSE, Bloomberg, InterCapital Research

Looking into the 2022 profit margins, we can see that profit margins are in line with EBITDA ones. Luka Koper leads the way with a net margin of 23.7%, which was achieved on the back of the aforementioned business results. Krka follows the way with 21.3%. As a result of an increase in FY net profit of 18% YoY, the Company’s net margin also increased by 1.4 p.p. Krka is followed by Cinkarna with an 18.6% net profit margin, which also increased by 1.4 p.p. YoY. This increase in profit margin is driven by strong top-line growth due to higher selling prices.  Last to follow is Petrol with a net profit margin of 0% (-2.4 p.p. YoY), which is a direct result of the fuel price regulation imposed by the governments on all of their markets.

At the share price before the announcement, this would imply a DY of 1.5%. Neither the ex-date nor the payment date has been announced yet.

Yesterday, the Supervisory and Management Board meetings of Končar were held. After the meeting, the SB and MB proposed the distribution of the 2022 net profit. During the year, the company achieved EUR 15m (HRK 113m) of net profit, and decided to allocate it in the following manner: EUR 750k is to be allocated to legal reserves, EUR 9.16m will be transferred to retained earnings, and finally, EUR 5.09m will be paid out in the form of dividends. This would amount to a payout ratio of 34%, and on a per-share basis, would imply EUR 2 DPS.

The dividend yield would amount to 1.5% at the share price before the announcement. Of course, the dividend proposal is subject to approval by the General Meeting of Shareholders, which will be held on 13 June 2023. Neither the ex-date nor the payment date of the dividend proposal has been announced yet.

At the same time, it should be noted that Končar’s subsidiary, Končar D&ST also announced a dividend proposal recently, more of which you can read here.

Below we provide you with the historical dividends per share and dividend yields of the Končar Group.

Končar dividend per share (EUR*) and dividend yields (%) (2015 – 2023)

Source: Končar, InterCapital Research

*dividends paid out in HRK were converted to euros using CNB’s exchange rate for the period when the dividends were paid out

At the end of March 2023, the total AUM of Slovenian mutual funds amounted to EUR 4.21bn, representing an increase of 0.6% YoY, and 1.9% MoM.

Recently, the Slovenian Securities Market Agency published its latest monthly report on the developments recorded by the Slovenian mutual funds, for March 2023. According to the report, the total assets under management (AUM) amounted to EUR 4.21bn, representing an increase of 1.9% MoM, and 0.6% YoY.

Looking at the AUM by asset types, and starting with the monthly changes, the largest absolute increase was recorded by share holdings, which increased by EUR 49.2m, or 1.7%. Following them, we have bonds, which increased by EUR 38.2m, or 5.9%. Investment funds also recorded a slight increase, of EUR 5.5m, or 2% MoM, while on the other hand, cash holdings recorded a decrease of EUR 12.2m, or 6.7% MoM.

On the yearly basis, the largest absolute increase was recorded by the money market holdings, which grew by EUR 41m, or 120.9%, followed by shares, which increased by EUR 34m, or 1.2%, and finally, bonds, which grew by EUR 21m, or 3.1%. On the other hand, cash holdings decreased by EUR 29m, or 14.5%, while deposits and loans decreased by EUR 23m or 70.7%.

Moving on to the current AUM structure, shares still hold the vast majority, at 70.4% of the total, representing a decrease of 0.1 p.p. MoM, but an increase of 0.4 p.p. YoY. Following them we have bonds, at 16.4% of the total, representing an increase of 0.6 p.p. MoM, and 0.4 p.p. YoY. The only other noteworthy asset classes are investment funds, which hold 6.7% of the total, remaining unchanged MoM, and decreasing by 0.3 p.p. YoY, as well as money market, deposits & cash holdings, which account for 6.1% of the total, representing a decrease of 0.4 p.p. MoM, and 0.3 p.p. YoY.

Total assets of Slovenian mutual funds (June 2007 – March 2023, EURbn)

Source: ATVP, InterCapital Research

Taking a closer look at the largest category, equity holdings, in terms of their origin, domestic equity holdings amounted to EUR 61.4m, decreasing by 10.5% YoY, but increasing by 0.1% MoM. On the other hand, foreign equity holdings amounted to EUR 2.9bn, an increase of 1.7% MoM, and 1.4% YoY.

Equity holdings of Slovenian UCITS funds (October 2007 – March 2023, EURm)

Source: ATVP, InterCapital Research

The change in value in these assets can come from several directions, including the inherent increase/decrease in the value of underlying assets due to market conditions, the decision of the fund managers to increase/decrease their positions in certain assets, and finally, the net contributions into or redemptions from the funds. In March 2023, the net contributions amounted to EUR 27.6m, representing an increase of over 4.4x YoY (albeit March 2022 recorded EUR 5m of net contributions into the funds, affected by the start of the war in Ukraine). Because of this, the increase is not so noteworthy, but more of a return to normal. In terms of the numbers in the last twelve months, the net contributions during this period amounted to EUR 222.7m, a decrease of 43% YoY.

Net contributions into the Slovenian mutual funds (January 2016 – March 2023, EURm)

Source: ATVP, InterCapital Research

The overall lower net contributions into the funds over the last twelve months can show us that even though the Slovenian people are still investing in the funds, the rate of investment is a lot lower than a year ago. Of course, the twelve months preceding March 2022 also included 2021, which by itself was one of the best years of record for not only the Slovenian equity market but also the international equity markets. As the majority of the funds’ investments are indeed into equity, the net contributions during this period were higher. Now, with high inflation rates and thus continued pressure on disposable income, lower net contributions could be expected. Despite this, the number of subscribers to the funds is still growing, and at the end of March 2023, the funds recorded a total of 514.6k subscribers, representing an increase of 3.4% YoY.

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).