As the CROBEX10 companies have published their 9M 2022 results, we decided to bring you a brief analysis of their EBITDA and profit margins in 9M 2022.

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 in as turbulent a year as 2022, as companies across industries have experienced significant cost growth, varying degrees, and as such all recorded developments in their margins.

9M results also include the Croatian tourist season. As the tourist companies make the majority of their profitability in this period, their margins will be somewhat “inflated”, as compared to using the FY data or quarter-on-quarter data only.

9M 2022 vs. 9M 2021 EBITDA margins of CROBEX10 constituents (%)

Source: Companies’ data, InterCapital Research

As can be seen in the graph above, the highest margin recorded was by Atlantska Plovidba, at 59.3%, followed by Valamar Riviera at 54.1%, Hrvatski Telekom, at 43.7%, and Arena Hospitality Group, at 35.8%. On the flip side, the only companies with below 10% EBITDA margins are AD Plastik, with 0.3%, and Ericsson NT, at 9.1%. However, if we compare the margins to 9M 2022, we can see that 6 out of 10 companies recorded a decline in their margins. The largest decline was recorded by AD Plastik, whose EBITDA margin decreased by 11.7 p.p., followed by Arena Hospitality Group by 5.7 p.p., and Atlantic Grupa by 4.4 p.p. decrease. On the flip side, Valamar Riviera recorded an increase of 8.8 p.p. YoY, while Atlantska Plovidba recorded an EBITDA increase of 3.2 p.p.

Several things need to be noted here: first of all, the tourism companies (Valamar, Arena Hospitality, and to an extent, Adris through Maistra and HUP) had a low base in 2021, or rather both their revenue and EBITDA were lower than in the normal years of operations due to the COVID-19 pandemic. As this was the case, the EBITDA margin was “inflated” last year, while this year, the strong recovery in tourism nights and revenue was also followed by strong growth in operating expenses. On the flip side, AD Plastik recorded a decline an 11.7 p.p. decline in its EBITDA margin, due to the strong decline in profitability due to the semiconductor shortages in the automotive industry, combined with the disruption of the company’s operations in Russia after the Russian invasion of Ukraine.

In fact, overall, even with the inflation being significant in 2022, the companies observed did, for the most part, only manage to retain their profitability levels, meaning that the operating expenses growth was even more significant. In this sense, they carried the majority of the OPEX growth on their margins, and haven’t passed the complete cost to customers.

9M 2022. Vs. 9M 2021 profit margins of CROBEX10 constituents (%)

Source: Companies’ data, InterCapital Research

Moving on to the net profit margins, Atlantska Plovidba recorded the highest profit margin, at 32.3%, which is an increase of 4.1 p.p. YoY. Considering that 2022 has been a really good year for the shipping industry (if you would like to read more about the shipping industry as a whole, click here), these improvements are expected. Next up, we have Valamar Riviera, with a profit margin of 20.3%, a decrease of 3.3 p.p. YoY, Arena Hospitality Group, with a profit margin of 18.1%, an increase of 1.2 p.p., and Adris, with a profit margin of 14.3%, a decrease of 0.1 p.p. YoY. On the flip side, AD Plastik recorded a negative profit margin of 9.7%, a decrease of 12.5 p.p. YoY.

Overall, only 4 out of 10 companies recorded an increase in their margins, meaning that the profitability of the companies has been under a lot of pressure, and further cost increases could threaten the companies even further, especially as inflation is eating away at disposable income of customers as well, reducing the companies’ ability to pass costs further down the line.

Petrol announced the extension of the Geoplin’s loan agreement, while also announcing that no capital increase is needed. Finally, they announced that they have called upon Russian Gazprom for the breach of contract due to the limited gas supply.

At yesterday’s GSM meeting of Geoplin, Petrol, the majority shareholder of Geoplin at 74.34%, announced several resolutions. First of all, they announced that they will extend the loan agreement to Geoplin, in order to ensure liquidity for Geoplin to enable it to continue operating smoothly. At the same time, the management has estimated that a capital increase for the company is not needed in the current market situation.

At the GSM, the shareholders were also briefed on the financial effects of the limited gas supply under the Russian agreement with Gazprom which can no longer be efficiently managed in a way that would avoid any damage to Geoplin. To this end, shareholders gave their consent to the GM for executing legal transactions and acts to protect the interests of the company. The latter called upon Gazprom to resolve the breach of agreement and provide full compensation for damages resulting from such a breach.

Gas prices* (2015 – 2022 YTD, EUR/MWh)

Source: Bloomberg, InterCapital Research

*Based on the Dutch TTF 1-month forward contract

Considering that several months ago news was circulating that Geoplin might need a capital increase due to the situation regarding the prices of gas, we find this news quite positive. As the prices of gas have recently somewhat stabilized, these are quite positive news for Geoplin, and by extension, for Petrol. As such, we find this news positive for Petrol’s share price.

Petrol share price* (2015 – 2022 YTD, EUR)

 Source: Bloomberg, InterCapital Research

*Adjusted for the 1:20 share split

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

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