Today, we are bringing you an overview of the ROE and capital structure of the SBITOP constituents, as well as the comparison of these indicators on a YoY basis.

It should be noted that the data is based on the H1 2023 results, but adjusted for the trailing twelve months (TTM) period preceding it. This was done in order to be able to compare items in the P&L and the balance sheet of the companies. A comparison was done with the same period last year, which is also adjusted on a trailing twelve-month basis. It should be noted that the insurance companies were excluded from the comparison due to the new accounting standards not allowing for like-for-like comparison on a TTM basis.

ROE of select SBITOP constituents* (TTM H1 2023 vs. TTM H1 2022, %)

Source: Companies’ data, InterCapital Research

*Excludes Equinox from TTM H1 2022 comparison as the Company does not have comparable data for 2021

As we can see in the chart above, the largest ROE is recorded by the companies in the financial sector in Slovenia. Leading the way is NLB at 15.2%, a decrease of 1.32 p.p. YoY. This decrease in ROE didn’t come as a result of an organic decline, but due to the fact that the Company recorded negative goodwill last year from the Sberbank acquisition. This was first recorded in the P&L, thus increasing the ROE last year, but later transferred to equity, leading to an increase in equity. In fact, NLB’s equity increased by 14% YoY in H1 2023 to EUR 2.65bn. As such, the ROE was inflated last year and deflated this year due to this dynamic.

Moving on, Cinkarna Celje and Krka recorded ROE of 14.3% and 13.1%, respectively. This also represents a decline of 9.97 p.p. and 3.26 p.p. YoY, respectively. For Cinkarna Celje, the Company recorded a 76.6% decrease in the net profit in H1 2023, but this is due to the fact that they operate in the titanium dioxide market, which is again tied to supply/demand on the market. Last year, the demand for the products containing this commodity was high, while this year it has declined significantly, which combined with higher inflation led to this decline. For Krka, the Company is under pressure due to its exposure to Russia, but it continues to record revenue growth. However, last year due to the appreciation in the rouble (which boosted inventories’ value in Russia), a significant FX gain was recorded. On the other hand, this year rouble depreciated, which when consolidated in euros led to a decrease in net profit of 19% YoY in H1 2023.

On the other hand, Equinox recorded the smallest ROE of only 0.12%, mainly due to the low net profit of only EUR 45k in H1 2023, with a total equity value of EUR 38.9m. Following them, we have Telekom Slovenije, with an ROE of 5.95%, representing a decline of 0.77 p.p. YoY, mainly as a result of a 5% decrease in TTM net profit YoY, while the Company’s equity increased by 7% to EUR 635.3m.

Capital structure of select SBITOP constituents (H1 2022 left, H1 2023 right, % of the total)

Source: Companies’ data, InterCapital Research

Due to the differences in their reporting and the structure of their balance sheet, NLB, Triglav, and Sava Re were excluded from the comparison. In terms of the remaining companies, Cinkarna Celje has 100% of its financing coming from equity, followed by Krka at 99.5%. Both of these companies didn’t record any significant changes in this regard. Following them there is Luka Koper, at 81.7% of equity financing, a decrease of 3.52 p.p. YoY, Equinox, with 81.4%, with an increase of 0.86 p.p., Telekom Slovenije at 60.1%, an increase of 2.27 p.p. YoY, and Petrol at 58.7%, a decrease of 0.73 p.p. YoY.

As we can see in this comparison, the Slovenian companies are well-capitalized which in the current macroeconomic environment, seems to be a prudent decision. Most of the companies haven’t recorded major changes to their levels of equity, which again given the situation, is to be expected.  

According to the latest report by DZS, the average Croatian net wages amounted to EUR 1,141 in July 2023. On a MoM basis, this is a decrease of 0.8% nominally and 1% in real terms. On the other hand, on a YoY basis, this represents a nominal increase of 13.4% and an increase in real terms of 5.7%. Taking a quick look at a comparison from 3 years ago, in real terms the wage growth actually amounted to only 3.2%, meaning that if we were to average it over the 3 years, it would mean that the average wage only grew by a little over 1% each year.

The latest statistic regarding wages in Croatia has been released by the Croatian Bureau of Statistics, DZS. According to the report, the average gross wage in Croatia amounted to EUR 1,580, representing a nominal decrease of 0.6% MoM, and a real decrease of 0.8%. Furthermore, the average Croatian net wage in July 2023 amounted to EUR 1,141, representing a decrease of 0.8% MoM in nominal, and 1% in real terms. In terms of the yearly change, the average gross wage is 15.5% higher in nominal terms, and 7.6% higher in real terms. The average net wage, on the other hand, is 13.4% higher in nominal, and 5.6% higher in real terms YoY.

Average gross and net wage in Croatia (EUR, left, 2015 – July 2023), (YoY real growth rate, %, right, 2016 – July 2023)

Source: DZS, InterCapital Research

However, the average wage by itself does not tell us much, as it could mean that there are people who are earning significantly more, and then people who are earning a lot less compared to it. In this case, looking at the median wages is more prudent, as the median represents the middle value (meaning 50% of people earn less than the median value, and 50% of people earn more). In this regard, the median net wage for July 2023 amounted to EUR 984, while the median gross wage amounted to EUR 1,325. In terms of growth, the median net wage increased by 9.7% in nominal terms, and 7.1% in nominal terms.

Median gross and net wage (EUR, left, 2016 – July 2023), (YoY real growth rate, %, right, 2017 – July 2023)

Source: DZS, InterCapital Research

In terms of the breakdown of net wages by activity sections, the highest average net wage amounted to EUR 1,549 in the Information and communication section. Following it, we have Human health and social work activities, with an average net wage of EUR 1,448, as well as Financial and insurance activities, with an average net wage of EUR 1,446. On the other hand, the lowest average net wage was paid in Administrative and support service activities, at EUR 926, followed by Other service activities at EUR 941, Construction, at EUR 944, and Accommodation and food service activities, at EUR 956.

Finally, taking a quick look at a comparison from 3 years ago, before inflation started to have a huge impact, there are some interesting observations to be made. In July 2020, the average net wage amounted to EUR 892, meaning that by July 2023, it increased by 27.9% nominally. However, in real terms, the wage growth actually amounted to only 3.2%, meaning that if we were to average it over the 3 years, it would mean that the average wage only grew by a little over 1% each year. This would seem like a really dismal result, meaning that on average, after taking out inflation (which by itself is an imperfect measure), Croatians are able to purchase only a little over 3% more goods than they were able to three years ago.

Cumulative inflation and net wage growth in the last 3 years (%, July 2020 – July 2023, July 2020=100)

Source: DZS, InterCapital Research