In 9M of 2020, the company recorded an increase in sales of 15.2%, a decrease in EBITDA of 12.7% and a decrease in net profit of 16.8%.
In the first 9M of 2020 Ericsson Nikola Tesla sales revenue amounted to HRK 1.44bn, representing an increase of 15.2% YoY (or HRK 190.2m). Of the total sales, domestic market accounts for 46%, services to Ericsson account for 43.9%, while other export markets account for 10.1%.
To be specific, in the domestic market, sales doubled to HRK 664.6m compared to HRK 306.2m in 9M 2019. The company notes that their strategic partner HT and Ericsson Nikola Tesla Servisi signed an extension of the Management Services Agreement for the construction and maintenance of fixed and mobile telecommunications infrastructure, supervision of the telecommunications network, and field maintenance of the active access and passive network. The Agreement is in force until the end of 2023, and its value is over HRK 1.6bn. The most significant project within the Agreement is an intensive deployment of fiber to the home (FTTH).
In Ericsson market, the company’s second largest market, sales stood at HRK 633.1m, representing a decrease of 16.7% YoY. Such a decrease could be attributed to the change of business model regarding managed services of HT’s network in 2020. For comparable units, excluding manages services, sales revenue increased by 2.3%.
Ericsson Nikola Tesla’s R&D Center continued with the ongoing business activities and projects. Despite the fact that most R&D employees work from home, all work and deliveries are going according to plan.
Turning our attention to operating expenses, they amounted to HRK 1.38bn, representing an increase of HRK 200.9m or 17% YoY. Of that, selling and administrative expenses increased by 17.4% (to HRK 62.1m), due to an increased engagement on presales activities related to 4G/5G radio access and core networks and an increase of costs related to managed services for HT.
As a result of the above mentioned, EBITDA decreased by 12.7% to HRK 118.6m, which puts the EBITDA margin at 8.1% (-2.6 p.p. YoY). Meanwhile, operating profit decreased by 14.6% to HRK 76.24m. Such a result puts the EBIT margin at 5.2% (-1.8 p.p. YoY).
The company’s bottom line was further lowered by a net financial result of HRK -1.1m compared to HRK 4.3m in 9M 2019, which could be mainly attributed to FX losses in 9M 2020.
In the first 9M of 2020, the Ericsson NT recorded a net profit of HRK 67.15m, representing a decrease of 16.8%. Therefore, profit margin stood at 4.6%, representing a decrease of 1.8 p.p.
Looking at the balance sheet, as of end of Q3 2020, the Company has a solid balance sheet with total assets of MHRK 1.12bn, which is an increase of 17.7% compared to the end of 2019. Such an increase came primarily as a result of increase in total cash and cash equivalents due to significant collection of current customer receivables, and decrease of inventory due to a high level of realization of certain network modernization projects.
The company recently proposed a dividend of HRK 49 per share, with the ex-date being 11 December 2020. To read more about it click here.
According to the management, we should expect to see a relatively regular Q3.
Yesterday, NLB Group’s Management Board held a pre-publication call in which the company discussed their 9M results in broad terms. According to the management, we should expect to see a relatively regular Q3.
Slovenia is currently undergoing quite strict Covid-19 measures, compared to NLB’s other markets. To be specific, for the first time since WW2, a restriction on movement at night was introduced, meaning that Slovenians are not allowed to leave their homes from 9 pm until 6 am (with some exceptions). As a result of the imposed restrictions, many shops are closed, while the operation of hairdressing and beauty salons, wellness centres, swimming pools, cinemas, theatres and gyms is prohibited. In addition, starting this week, passing from one province to another is prohibited (unless given an acceptable reason). However, the management added that there is much more positive sentiment in the company compared to the first lockdown.
Looking at the P&L, interest income is expected to be rather stable, while on a QoQ basis we should see an improvement of net interest income. Such a result could be attributed mostly to still a solid loan production in the retail segment, while the management adds that even higher growth rates on the retail would have been observed if the imposed restrictions on consumer lending were not in place. Meanwhile, we can expect to see mixed results from the corporate side.
Moving on to fee and commission income, we can expect also relatively stable results with solid development in Q3, however with an expected YoY decrease. The mentioned decrease could mostly be attributed to a lower performance in Q1 and Q2 due to lockdown. The current measures should also have an impact on the fee and commission income, whose extent will depend significantly on the duration of the current measures. The management stated that it is plausible to expect fee and commission income to be affected, however they add that the result would be contained and would not be even closely as dramatic as in Q1 and Q2.
On the cost side, the management notes that cost discipline remains strong and that we should expect flattish cost dynamic. This could be seen as quite positive given the company’s investments into digitalization. The company has accelerated its digital agenda and they state that you can already conduct many transactions without having to go physically to the bank; such as opening an account, cash loans, overdrafts etc. The bank added that they have seen a positive trend in a shift of more and more clients to digital.
Moving on to NPLs, the management added that NPLs should be maintained and that the company is monitoring loans on a single client level. The maintained NPLs should not come as a surprise given the fact that moratoriums in certain markets are still in place. NLB adds that the bank’s loan portfolio is not significantly exposed to the riskiest industries such as tourism or the automotive industry, while the markets they operate in are also not very dependent on the mentioned industries (with the exception of Montenegro). The bank also added that the Slovenian companies in general came into the crisis quite under-levered, which in the current situation could be seen as positive and could also be a solid foundation for robust loan growth after the crisis. Besides that, cross border lending is taking place, but not on the levels expected prior to the pandemic. However, given the current situation the bank is quite satisfied with cross border lending and adds that the competition is not as fierce in this space as it was in the past. The bank still remains very selective in its practice.
Moving on to cost of risk, the management recently gave a guidance of roughly 150 bps for FY 2020. Up until the current restrictions in Slovenia, the bank was quite positive that they would beat the mentioned estimate, however given the current situation they are being careful in giving any other guidance. However, the management adds that there is still more space for a downward trend in COR as some markets are performing considerably better like Serbia and Slovenia (up until the current measures). Therefore, we might possibly lower than expected COR which would lead to an improvement of the bottom line. The also noted that roughly half of risk costs in Q3 could be attributed to pool provisions due to change in macro outlook.
Yesterday DAX ended the trading day with a decrease of 4.17%, CAC40 dropped by 3.37%, while FTSE 100 decreased by 2.55%.
Yesterday, virtually all major European equity indices plummeted as Covid-19 cases continue to rise across Europe. As a result of the constantly increasing number of cases Germany, Switzerland and France introduced new restrictions which brought worry to investors. To be specific, Germany imposed a one-month partial lockdown as starting next Monday large events will be cancelled, restaurants and bars will close, overnight stays in hotels for tourist purposes is banned etc.
France on the other hand will impose new restrictions on Friday which will be in place at least until 1 December. The restrictions include banning Travel between regions, Bars, restaurants and nonessential businesses will be closed, people can only leave home to go to work, to go to school, for a medical appointment, to give assistance to loved ones, for essential shopping or for one hour of physical exercise.
As a result of the above mentioned, DAX ended the day with a decrease of 4.17%, CAC40 dropped by 3.37%. Meanwhile, FTSE 100 decreased by 2.55%. However, it is worth adding that some major indices in Europe were in green in premarket as investors are focusing on the publication of earnings reports.