IC Market Espresso 29 Mar 2023

DuPont Serial Analysis of Croatian Companies – FY 2022 [Continuation]

Today, we present you with further DuPont decomposition of selected Croatian Blue Chips by looking into asset turnover and comparing it with their peers.

Since the beginning of the week, we looked at two components of the 5-step DuPont decomposition of ROE: operating margin and financial leverage. You can read about it here. Today, we present further DuPont decomposition of selected Croatian Blue Chips. Today we will look at asset turnover.

Asset turnover compares a company’s assets to its sales. This ratio helps us to determine how efficiently a company uses its assets to generate revenue. This ratio is crucial as every company has to utilize its assets. The higher the ratio is, the more efficiently company uses its assets to generate revenues. This means the company uses its equity and debt to produce higher revenues, compared to the company having a lower asset turnover ratio.

Asset turnover – Croatian Blue Chips [FY 2022]

Source: ZSE, Bloomberg, InterCapital Research

As can be seen from the graph above, just as economic theory would indicate, the asset turnover of Croatian blue chips closely follows their industry mean. Asset turnover is closely tied to the nature of a company’s assets. It should not be surprising that Atlantic Group, Podravka and Končar have the highest asset turnover, due to the nature of their sales and business. Also, conversely looking, on the other end, we have Valamar Riviera whose fixed assets amount to 86% of the company’s total assets. Asset-heavy hospitality companies hold a high amount of fixed assets so this also should not come as a surprise that Valamar’s assets amount to EUR 852.1m. Nevertheless, Valamar’s higher assets turnover from its peers indicates Valamar operates its assets more efficiently than its peers.

Končar reports interesting decomposed numbers, which DuPont decomposition lets us see clearly. In the graph above, we can clearly see that Končar has an assets turnover significantly higher than its peers, indicating a more efficient use of its assets. Consequently, Končar achieves a higher operating margin compared to its peers (read here), yet again, looking at the return on equity of Končar we can notice it was lower by 4.4. p.p. lower than its peers. The answer lies in another mentioned DuPont variable – financial leverage, which was elaborated on yesterday. How can Končar have a lower ROE than its peers if the company uses its assets more efficiently? The answer lies in lower financial leverage, which does not let the company amplify its results as much as its competitors do.

Triglav Proposes EUR 2.5 DPS

At the current share price, the dividend yield is 6.3%. The ex-date is still to be announced.

The Management Board and the Supervisory Board of Triglav will propose to this year’s GSM that part of the accumulated profit be distributed for dividend payment.

Both the Management Board and the Supervisory Board assess that the bases for the dividend payment are appropriate and thus, in accordance with the Company’s dividend policy, propose a gross dividend of EUR 2.5 per share. The total amount of dividends of EUR 56.8m will exceed 50% of the Company’s consolidated net profit of the previous year. We note that the company has been a consistent dividend payer prior to the pandemic, paying out EUR 2.5 per share for 5 consecutive years (as visible on the graph below).

At the current share price, the dividend yield is 6.3%.

The dividend is subject to approval at the GSM, which should take place on 6 June 2023, while the ex-date is still to be announced.

Dividend per Share (EUR) and Dividend Yield (%) (2014 – 2023)

Source: LJSE, InterCapital Research

Upcoming Events – March 2023

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

wdt_ID Date Ticker Announcement Country
22 30.3.2023 ATGR Atlantic Grupa 2022 Annual Report Croatia
23 30.3.2023 SFG Sphera Franchise Group Ex-dividend date Romania
24 31.3.2023 TLSG Telekom Slovenije 2022 Annual Report Slovenia

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