In 9M 2022, Ericsson NT reported a slight increase in sales revenue of 0.8% YoY, an EBITDA decrease of 20.2%, and a net profit of HRK 79.3m, a decrease of 30.9% YoY.
Ericsson NT’s sales revenue amounted to HRK 1.55bn in 9M 2022, representing an increase of 0.8% YoY, mainly driven by the increase in services to Ericsson. Out of the total sales, the domestic market accounted for 41.4%, or HRK 640.3m, a decrease of 12.3% YoY. Out of these, Ericsson notes continued cooperation with HT, on delivering 5G and fiber optic solutions, based on multi-year agreements. With A1 Hrvatska, they are also continuing their activities related to the expansion of the 5G network. Nevertheless, due to the negative global trends, such as rising energy prices, the operators had adjusted the investment dynamics, which directly influenced Ericsson’s sales revenue. Meanwhile, revenue from services to Ericsson amounted to HRK 740.8m, a 14.6% increase YoY. Finally, sales from other export markets amounted to HRK 164.7m, a 4.9% increase YoY.
Breaking the sales down by segments, the Networks segment increased by 11%, to HRK 745.2m, the Digital Services segment increased by 3.4%, to HRK 421.1m, while at the same time, Managed Services decreased by 16.1%, to HRK 376.9m. Gross profit amounted to HRK 138.6m, a decrease of 21.6% YoY, mainly as a result of higher costs of termination of the eHealth implementation project in Belarus, as well as the increase in salaries, prices of energy, raw materials, and materials. Gross margin also decreased to 9%, down 2.5 p.p. YoY. Selling and administrative expenses increased by 3.9% YoY, amounting to HRK 64.6m, with the share of these expenses in the sales revenue at 4.2%, a reduction of 0.1 p.p. YoY.
Sales breakdown by market (H1 2018 – H1 2022, HRKm)
As a result of the higher expenses, EBITDA decreased by 20.2% YoY and amounted to HRK 139.9m. In Q3 EBITDA amounted to HRK 37.6m, noting a YoY increase of 37.1%, with the EBITDA margin increasing by 2.5 p.p. to 7.8%. Nevertheless, the third quarter was relatively low compared to Q2 2021, so overall 9M EBITDA decreased by the mentioned 20.2% with EBITDA margins decreasing by 2.4 p.p. to 9.1%.
Moving further, financial income amounted to HRK 8.6m, while the financial expenses amounted to HRK 3.4m, leading to a net financial result of HRK 5.2m, a 61.5% increase YoY, mainly as a result of higher interest income and positive FX differences.
The positive net financial result did somewhat offset the negative impact of the higher expenses lowering the EBITDA, but EBT still recorded a notable decrease, lowered by 20.4% to HRK 107.8m. The income tax for the period amounted to HRK 28.5m. Finally, the net profit of the Company decreased by 30.9% and amounted to HRK 79.3m. On a Q3 2022 basis, the net profit decreased to HRK 10.9m, a decrease of 18% YoY. This would also mean that in 9M 2022, the net profit margin decreased by 2.4 p.p. and amounted to 5.1%, while in Q3 2022 it amounted to 2.3%, a decrease of 0.3 p.p. YoY.
Ericsson NT key financials (9M 2022 vs. 9M 2021, HRKm)
Looking over at the balance sheet, the total assets decreased by 4% YoY and amounted to HRK 1.16bn, as a result of both lower long-term & short-term assets. Cash and cash equivalents amounted to HRK 462.6m (including short-term fin. assets), a decrease of 5.7%, in line with the Company’s planned regular activities. Looking at the passive side of the balance sheet, the total equity amounted to HRK 400.6m, a decrease of 0.9% YoY, mainly as a result of lower retained earnings. Meanwhile, total liabilities increased to HRK 754.6m, a decrease of 5.6% YoY, mainly coming from lower long-term liabilities from banks and other financial institutions and short-term liabilities to the suppliers.
NLB has published a call for the GSM which will be held on 12 December 2022. In it, they proposed the payment of EUR 2.5 DPS, which at the price before the announcement, would amount to a DY of 4.6%. The ex-date is set for 16 December 2022.
NLB has published a document regarding the convocation of the GSM, which will happen on 12 December 2022. Among other things, the Management and Supervisory Boards of the Company proposed the decision of the allocation of the distributable profit for 2021. This would be done in the following format: Out of the distributable profit on the day of the GSM of EUR 408.3m, EUR 50m will be paid out as dividends, while EUR 358.3m will be transferred into retained earnings. This would mean that a dividend of EUR 2.5 per share will be paid out, which at the price before the announcement, would imply a DY of 4.6%.
The ex-date for the dividend is set for 16 December 2022, while the payment date is set for 20 December 2022. As a reminder, NLB already paid out a dividend for this year, in the amount of EUR 2.5 DPS. You can read more about this news here. This would mean that combined with the first dividend payment, NLB will pay out a total of EUR 5 DPS during 2022 as dividends. This would also mean that if you held the NLB stock since the beginning of the year, your dividend yield after the 2nd dividend payment will amount to 8.4%.
Below we provide you with a historical overview of NLB’s dividends per share and dividend yields.
NLB Dividend Per Share (EUR) and Dividend Yield (%, 2019 – 2022)
Source: NLB, InterCapital Research
In 9M 2022, Končar D&ST reported sales revenue growth of 29% YoY, EBITDA growth of 19%, and a net profit of HRK 83.1m, an increase of 18% YoY.
Yesterday, Končar D&ST, a Končar subsidiary published its 9M 2022 results. According to it, in the 9M 2022, sales revenue increased by 29% and amounted to HRK 1.37bn. Of this, the vast majority (90%), or HRK 1.23bn, is sold abroad, while the domestic market accounts for 10%, or HRK 139.9m. This would mean that the sales abroad increased by 36% YoY, while domestic sales decreased by 9% YoY. The main driver of this sales growth was the sales in the transformer segment.
Moving on to costs, OPEX amounted to HRK 1.27bn in 9M 2022, which is an increase of 31% YoY. The main driver of this was the increase in material expenses, which increased by 38% YoY to HRK 1.15bn. Staff expenses increased by 16% YoY to HRK 150.2m. This is the trend we have seen across many companies and sectors and is to be expected, given the increase in prices of commodities, energy, and of course, the overall inflation rate. In regards to staff costs, in 9M 2022, Končar D&ST employs 805 employees, which is an increase of 9.1% compared to the same period last year. As such, higher staff costs were both a combination of higher salaries offered, but also of the higher number of employees.
Given this situation, the EBITDA increased by 19% YoY to HRK 125.7m. This would imply an EBITDA margin of 9.2%, which is a decrease of 0.8 p.p. YoY. The financial income for the period amounted to HRK 12.8m (+94% YoY), while the financial expenses amounted to HRK 14.5m (+95% YoY), mainly driven by the FX differences in this period. As such, the net financial result amounted to a negative HRK 1.66m, which is an increase of 103% YoY. This would mean that the EBT amounted to HRK 101.7m, an increase of 23% YoY. Given the higher EBT, the tax also increased to HRK 18.6m, representing an increase of 55% YoY. Because of this, the effective tax rate amounted to 18% (+3 p.p. YoY). Finally, the net income amounted to HRK 83.1m, an increase of 18% YoY, which would imply a net profit margin of 7.9%, an increase of 1.2 p.p. YoY.
Končar D&ST key financials (9M 2022 vs. 9M 2021, HRKm)
Company data, InterCapital Research
Končar D&ST also commented on the main risks to the business. First of all, the possibility of the pandemic return means that Končar D&ST is in continual contact with its suppliers and buyers. Prices of commodities and materials, as well as energy, increased significantly, and given the uncertain nature of their movements, are also posing a risk. Supply chain disruptions are also presenting a threat. Finally, the direct impact of the Russian invasion of Ukraine on the business operations of Končar D&ST is not significant, although there is an indirect impact through the supply chain disruptions and the growth in prices of commodities, materials, and energy.