IC Market Espresso 21 Jun 2022

Petrol Will Not Achieve 2022 Set Targets Due to Government Regulation of Petrol Prices

The management board of Petrol has estimated that compared to its business plan, in the first half of 2022 company should achieve gross profit lower by EUR 53m, EBITDA by EUR 79m and bottom line by EUR 54m, due to previous and new regulations of motor fuels in Slovenia and Croatia regarding retail prices of petroleum products.

Today, the management board of Petrol reported the effect of motor fuel price regulation on the Petrol Group’s operations. The company estimated that compared to its business plan, in the first half of the year, Petrol should report gross profit lower by EU EUR 53m, EBITDA by EUR 73m and bottom line by EUR 54m. The company set its business plan with sales amounting to EUR 5.9 bn, EBITDA of EUR 297.8m and net profit of EUR 158.3m. This effectively means the company in 2022 expects EBITDA to reach EUR 224.8m and the bottom line amounting to EUR 104.3m. This is a direct effect of both previous and new regulations on motor fuels in Slovenia and Croatia. The company said it will carry out all activities necessary to receive compensation for the loss resulting from the disproportionate measure of the petroleum products regarding retail price regulation.

In Slovenia, there are currently caps on margins at service stations outside motorways in the period from 21 June until 16 August at EUR 0.0607 per litre, with the maximum permitted margin for diesel is EUR 0.0983 per litre and for petrol amounting to EUR 0.0994 per litre. In Croatia, regarding measures adopted by the government, fo a period of 14 days, regulations capped motor fuel prices at service stations outside motorways. Effectively starting from 21 June, petrol will cost HRK 13.5 per litre, diesel HRK 13.08 per litre and blue-dyed diesel HRK 9.45 per litre. The company emphasised the regulated retail prices outside motorways are not sufficient to cover the operating costs of these units.

Petrol emphasized it has been in a „strange situation“ – with the volumes sold exceeding the planned sales due to the significantly lower prices compared to those in the neighbouring countries, whereas it was forced to sell fuel below the cost of it, effectively generating a los with each litre of fuel sold. Petrol sold more than 90% of the fuel below the cost during the regulation period. Petrol addressed a loss compensation claim to the Government of the Republic of Slovenia for the loss resulting from price regulation of petroleum products and expects the government to fully meet its obligation in the shortest possible period. To read more, click here.

Croatian Government Puts a Cap on Petrol Prices and Fixes Euro Super 95 Fuel Price to HRK 13.5 (EUR 1.79) per liter

Bi-weekly recalculation of retail prices for petrol products in Croatia due to formula used would lead to strong increases of retail prices. Therefore, the Government has decided to intervene by changing the already existing regulation and by putting the cap on retail price on all gas stations except on highway ones. The new cap fixes Euro-Super 95 fuel price to HRK 13.5 (EUR 1.79) per liter, where it approximately was in the last two weeks.

Despite the fact that oil prices on global markets (Brent) decreased in the last two weeks (-6%), premium unleaded spot fuel prices on European refined oil product markets have increased. Bi-weekly recalculation of retail prices for petrol products in Croatia due to formula used would lead to strong increases of retail prices. Therefore, the Government has decided to intervene by changing the already existing regulation and by putting the cap on retail price on all gas stations except on highway ones.

As a reminder, in Croatia from 7 June Regulation On Determination Of The Highest Retail Prices Of Petroleum Products is valid where prices are recalculated bi-weekly according to formula that adds retailer’s premium to ”Basic price of fossil fuel in the accounting period (t) in HRK / liter rounded to three decimal places”. This basic prices is calculated by weighting the mid-daily averages of Premium Unleaded 10 ppm fuel spot prices on Mediterranean ports according to provider Platt’s. In this Regulation retailer’s premium was decreased to HRK 0.65 per liter for motor and diesel fuels. When new prices would be recalculated without Government intervention new price for Euro-super 95 valid from today would amount to HRK 15.95 per liter (EUR 2.11 per liter). By putting a price cap on retail price of petrol sold, the Government is directly influencing retailer margin as they have already purchased gasoline that they will be selling on petrol stations. As Government is putting cap only on petrol stations that are not located on highways, retailers still have some room for higher margins.

The new decision will be in force for the next two weeks, and is valid from today, while Government states that new decisions will be made depending on the market situation. The Government still has room to intervene if new fuel price increases occur, either by decreasing further excise tax, either by decreeing retailer margins or simply by putting the cap on retail prices. To look further on our take on global oil and retail prices read our blog.

Upcoming Events – June 2022

Here you can find the dates for the upcoming events of the regional companies.

wdt_ID Date Ticker Announcement Country
13 24.06.2022. KOEI Ex-dividend date Croatia
14 24.06.2022. NLBR Ex-dividend date Slovenia
15 24.06.2022. CICG Dividend payment Slovenia
16 25.06.2022. TRP Half-yearly financial statements 2022 Romania
17 26.06.2022. TRP Conference call – H1 financial results Romania

Due to the nature of these events, they are subject to change (might be postponed or canceled).

NLB Approves EUR 2.5 DPS

Dividend yield is 3.8%. Ex-date is 24 June.

The NLB General Meeting decided on additional allocation of distributable profit for 2021, as the Bank of Slovenia’s decision restricting the payment of dividends expired at the end of September. They confirmed the proposal made by the NLB Management and Supervisory Board, which is that EUR 50m of distributable profit or EUR 2.5 per share be paid to the NLB Shareholders on 28 June 2022.

We note that the Company has published its 2022 outlook in 2021 FY results where it expects to pay out EUR 100m as a dividend that is subject to legal remedies against the adopted Swiss francs law and its potential impact on the capital position.

The Bank is aware of the importance of dividend payments as the chosen method of returning capital to owners, so it intends to continue to communicate planned dividend payments in a clear, reasoned, and timely manner. The proposed change in the frequency of pay-outs does not in any way alter the Bank’s intention to pay out EUR 100m 2022, at the same time allowing corporate actions to be adjusted to market conditions at a given time.

We note that the ex-date is 24 June.

NLB Dividend Per Share (EUR) and Dividend Yield (%) (2019 – 2022)

Overview of the Croatian Insurance Market – May 2022

In May 2022, the total GWPs in the Croatian insurance market grew by 6.2% YoY. GWPs in Non-life increased by 10.6% YoY, while GWPs in Life insurance decreased by -7% YoY.

The Croatian Insurance Association (HUO) has published a monthly report of the developments recorded in the Croatian insurance market during May 2022. According to the report, the total GWPs of the Croatian insurance market increased by 6.2% YoY and amounted to HRK 5.76bn. It should be noted that this also includes insurers from Croatia as well as insurers operating in Croatia but which are based in other EU countries. Currently, this only refers to Sava Osiguranje. The increase in total GWPs was driven by the growth in Non-life insurance, while at the same time, Life insurance decreased.

Total Croatian TTM GWPs and Croatia osiguranje GWPs in May 2022 (HRKbn)

Breaking the GWPs down according to these segments, Life insurance decreased by -6.98% (HRK -95.5m) and amounted to HRK 1.27bn. Looking at the largest companies in this segment, VIG holds the largest share, at 22% of the total, representing a decrease of 1.22 p.p. YoY (or HRK -37.5m). Next up, we have Allianz, which has a market share of 19.34%, which is an increase of 2.72 p.p. YoY (or HRK 18.6m), by far the highest increase in this category. The third largest, and the largest overall Croatian insurance company, Croatia osiguranje, maintains a market share of 14.04% in the segment, which on a YoY basis, represents a decrease of -4.96 p.p. YoY (or HRK -80.7m). Finally, the only other insurance company with over 10%, Agram Life osiguranje at 10.94%, grew by 0.49 p.p. YoY.

On the other hand, the Non-life insurance segment (which represents the largest segment in terms of collected GWPs, accounting for 77.9% of the total GWPs collected), grew by 10.6% YoY and amounted to HRK 4.49bn in May 2022. Taking a look at the companies in this segment, Croatia osiguranje still maintains the largest market share, at 31.1% or HRK 1.38bn, which is an increase of 1.16 p.p. YoY (or HRK 180.6m in absolute terms). Next up, we have Euroherc, which has a market share of 13.76%, a decrease of -1.28 p.p. YoY. However, considering the company still grew (but slower than the market), it increased its Non-life GWPs by HRK 7.8m. Next up, we have Adriatic osiguranje at 12%, which increased its market share by 0.07 p.p. (or HRK 54.2m in absolute terms).

If we were to look at the remainder of the companies’ developments in absolute terms, Allianz (10.04% market share) increased its GWPs by HRK 46.7m, while VIG (which has 7.2% of the market share) increased it by HRK 44.3m.

Taking a look at the changes in segments of the Non-life insurance, in absolute terms, Other asset insurance increased the most, growing by HRK 122.2m (or 23.2%), and had a share of 11.36% of the total Non-life GWPs. Next up, we have Insurance against civil liability in respect to the use of motor vehicles, which grew by HRK 83.5m (or +6.9%), and had the largest share of the total, at 22.78%. Following them, we have Vehicle insurance (casco policy), which grew by HRK 67.5m (or 11.5%), and had a share of 11.4% of the total. On the other hand, Insurance against other liabilities decreased the most, by HRK -20.3m (or -6.8% YoY).

Meanwhile, if we were to look at the Life insurance by segments, Life or rent insurance in which the insurance contractor takes on the investment risk increased by HRK 118.7m, representing an increase of 81.2% YoY, while on the flipside, Life assurance decreased by HRK -214.9m (or -18.6%).

Finally, looking at the Croatia osiguranje, in the last 12 months it holds 24.23% of all GWPs collected, which is a decrease of -0.96 p.p. YoY. Overall, the Company’s GWPs amounted to HRK 2.95bn, an increase of HRK 113.4m YoY, which would mean that even though the company continued its GWP growth, overall, it grew slower than the entire insurance market.

Croatia osiguranje TTM market share (November 2010 – May 2022, %)