IC Market Espresso 28 Jun 2023

Q1 2023 EBITDA & Profit Margins of Croatian Blue Chips

As the Croatian blue chip companies are about to soon published their Q2 2023 results, we bring you brief analysis of their EBITDA and profit margins for the first quarter of 2023.

Before we start, we would like to note that comparing these margins across different industries is not necessarily the best way to give a comparable overview. The reason why is that the EBITDA and profit margins vary significantly across sectors, and as such, the best way to compare any of these companies through these margins would be to compare it to the companies in the same industry in the form of a peer group or a median value for the select industry. Despite this, it is still worth looking at these margins, especially as turbulent a year 2022 was, companies across industries have experienced significant cost growth, varying degrees and as such all recorded developments in their margins.

Besides that, we note that looking at only Q1 margins might lead to misleading conclusions as some of the observed companies derive most of their earnings in the upcoming quarters.

Q1 2023 vs. Q1 2022 EBITDA margins of Croatian blue chips (%)

Source: Companies’ data, InterCapital Research

Overall, Q1 2023 was influenced by the persistence of high inflation and ongoing macroeconomic uncertainty. In this environment of high costs, companies across the board have increased their prices to compensate, but the growth in OPEX was a lot stronger than the price increase so the majority of companies’ operating profit and net profit margins decreased.

As can be seen in the graph above, the highest margin recorded was by Atlantska Plovidba, at 41.5%, followed by HT at 40.5%. HT remained resilient to inflationary pressures. HT is followed by Ericsson NT at 15.9% and Podravka at 15.5%. On the flip side, there are a few blue chips that achieved EBITDA margin <10%. Atlantic Grupa noted a 9.7% EBITDA margin during the first quarter, closely followed by Končar and Ad Plastik with both achieving a 9.1% margin. However, if we compare the margins to Q1 2022, we can see that the majority of companies recorded at least a slight decline in their margins. The largest decline was recorded by Atlantska Plovidba, whose EBITDA margin decreased by 22.2 p.p. Also, we note that it makes more sense for companies like Končar to look at normalized margins due to significant non-recurring effects. Končar reported a slightly lower normalized EBITDA margin due to higher material costs but also noted an exceptional backlog growth compared to the end of 2022. AD Plastik was materially under the impact of the geopolitical situation regarding Russia and Ukraine. Further, AD Plastik’s margins were also affected due to the semiconductor shortages in the automotive industry, combined with the disruption of the company’s operations in Russia.

We also note that we have not included Croatian tourists in the overview, as they reported a negative EBITDA and a net loss. Q1 tends to be a loss-generating quarter for Croatian tourists, so the performance should not be considered as indicative of the FY results, as they make most of their profit during Q3.

Q1 2023. Vs. Q1 2022 profit margins of Crotian blue chips (%)

Source: Companies’ data, InterCapital Research

Moving on to the net profit margins, HT recorded the highest profit margin at 11.6%, which is an increase of 1.1 p.p. YoY. Next up, we have Ericsson NT with a profit margin of 11.3%, noting a slight decrease of 0.1 p.p. YoY. Podravka is to follow with a profit margin of 9.1%, an increase of 1.3 p.p.

Overall, during Q1 the companies were under a lot of pressure and additional cost increases could threaten the companies even further. Especially as inflation is eating away at the disposable income of customers as well, reducing the companies’ ability to pass costs further down the line.

ACEA Report Shows Car Market’s Slow But Steady Recovery

In May, passenger car registration in the EU increased by 18.5% YoY, totaling 938,950 units. Meanwhile, looking at the first 5 months of 2023, EU registration of new cars increased by 18% YoY overall. In Croatia in the mentioned period, passenger car registration reported a much more pronounced increase of 46.9% YoY.

New passenger car registration by month [2018-2023]

Source: ACEA, InterCapital Research

In May 2023, passenger car registration in the EU increased by 18.5% YoY, totaling 938,950 units. The most significant increase reported in the EU in May was reported in Germany, where the reported increase amounted to 39.8k units, representing a 19.2% YoY increase. Germany is followed by Italy, where a 28k unit increase can be noted (+23.1% YoY). Italy is closely followed by France, which is also considered a major and significant region, noting an increase of 18.7k units (+14.8% YoY). Finally, the last major region within the EU, Spain, also noted a strong growth of 7k units, amounting to 92k units (+8.3% YoY).

When observing the first 5 months of 2023, the situation is pretty similar – EU registration of new cars increased by 18% YoY, reaching 4.4m units registered in total. Overall, EU new car registration saw a strong increase on a YoY basis. However, the previous year was influenced by the semiconductor shortage, which started at the beginning of 2022. Consequently, most EU markets showed strong growth compared to 2022. When observing the whole period, each of the major markets within the EU noted a positive development. Germany reported solid growth (+10.2% YoY), while Spain, Italy and France all noted even more pronounced growth of 26.9%, 26.1% and 16.3%, respectively. Further, a lot of smaller regions also noted a strong double-digit growth.

Looking at the region, when observing the whole period since the beginning of the year, Croatia reported an increase of 46.5% YoY, amounting to 26.3k units registered. Slovenia reported a somewhat worse situation – when observing the first 5 months, the development was less pronounced with 5.5% growth.

Fuel type cars market share [April 2023]

Source: ACEA, InterCapital Research

During May, the most significant change occurred with battery electric cars, where a significant growth in market share by 4.2 p.p. YoY was noted, now amounting to 13.8%. Furthermore, hybrids are now the second-most popular choice for new car buyers. Finally, petrol cars continue to dominate with the largest share of 36.5% (negative market share YoY development).

Upcoming Events – June 2023

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

wdt_ID Date Ticker Announcement Country
23 28.6.2023 TLSG Telekom Slovenije ex-date Slovenia
24 30.6.2023 TTS Transport Trade Services 2022 ESG Report Romania

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

*Ex-dates present here also include companies that haven’t yet held the GSM meeting, and thus the approvals haven’t been made yet.