In Q1 2023, Ericsson NT recorded a revenue decrease of 0.6% YoY, an EBITDA growth of 0.6%, and a net profit of EUR 7.8m, a 1.2% decrease YoY.
In total, the Company’s sales revenue amounted to EUR 69.4m, representing a decrease of 0.63% YoY. The Company noted that this development is positive in light of the current macroeconomic situation, as it shows the stable operations of the Company. They also noted that the delivery of services to Ericsson has continuously grown, and has offset lower sales revenue in the domestic and export market which was caused by reduced operators’ capital investment.
Breaking the sales down further, the domestic market accounted for 37.6% of the total revenue, or EUR 26.1m, and recorded a decrease of 7.3% YoY. In this segment, Ericsson NT notes that they continued cooperation with the leading operators on the modernization of telecom networks, with a particular focus on the 5G and fiber networks. They also note that the infrastructure they provided has allowed their strategic partners, HT and A1 Hrvatska, to achieve a high-performance network. In the Digital Society segment, they also pointed out the contract with the City of Split for the project “Introduction of Intelligent Transport Systems in the Functional Traffic Area of the City of Split”, more of which you can read here.
Next up, looking at the most prominent segment, i.e. services to Ericsson, which accounted for 53.8% of the total revenue (or EUR 37.3m), and recorded a 9.1% increase YoY. In this segment, they noted that their R&D Center has recorded solid results and contributed significantly to the Company’s results. At the regular half-year meeting (R&D Management Business Review), the representatives of all development units proclaimed the aforementioned Center the best-performing partner. Furthermore, Ericsson highlighted the role that their experts from other expert centers had in the modernization of the telecom networks for the Company’s customers in the EU, but also worldwide.
The last revenue segment, export markets, which accounts for 8.6% of the total revenue (or EUR 6m) decreased by 19.7% YoY. Ericsson noted that they continued cooperation with HT Mostar, Crnogorski Telekom, and IPKO on the expansion and modernization of their telecommunication networks. They especially emphasized the cooperation with Crnogorski Telekom on software upgrades and modernization of mobile networks. Activities with the operator Telekom Kosovo have also increased after the implementation of a contract that was signed at the end of 2022. This contract includes the modernization and virtualization of the entire core network, among other things. Finally, the continued cooperation with the operator Ucom in Armenia on network modernization and the introduction of new functionalities.
Ericsson NT sales revenue breakdown (Q1 2017 – Q1 2023, EURm*)
Source: Ericsson NT, InterCapital Research
*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question
Gross profit amounted to EUR 11.5m, an increase of 5% YoY as a result of the business mix and operational and cost efficiency. This would also imply a gross profit margin of 16.6%, an increase of 0.8 p.p. YoY. Moving on to EBITDA, it amounted to EUR 11m, representing a slight increase of 0.58%. This would also mean that the EBITDA margin amounted to 15.9%, an increase of 0.2 p.p. YoY. In terms of OPEX, it amounted to EUR 60.9m, which is a decrease of 1.3% YoY. This was achieved despite the fact that material expenses increased by 8.3% YoY, and amounted to EUR 31.5m, while staff costs increased by 8.1% YoY, and amounted to EUR 33.6m. This was offset by the higher value of inventory and finished products, which increased by 215% YoY to EUR 8.4m.
Meanwhile, the op. profit amounted to EUR 9.5m, an increase of 3.3% YoY, implying an EBIT margin of 13.75%, an increase of 0.5 p.p. YoY. The net financial result was a small, but positive EUR 2k, which means that the EBT amounted to EUR 9.5m, an increase of 1.2% YoY. Finally, the net profit of the company amounted to EUR 7.8m, a 1.2% decrease YoY.
Ericsson NT key financials (Q1 2017 – Q1 2023, EURm*)
Source: Ericsson NT, InterCapital Research
*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question
Ericsson NT also noted that the stable net profit levels meant that return on sales (ROS) remained unchanged YoY, and amounted to 11.3%.
Taking a quick look at the balance sheet, the total assets amounted to EUR 165.8m, decreasing by only 0.5% YoY compared to YE 2022, as a result of the lower level of cash and customer receivables. Cash and cash equivalents, which include short-term financial assets, amounted to EUR 66.2m at the end of Q1 2023, representing 39.9% of the total assets. They have recorded a decrease of 10.5% during this quarter, which Ericsson notes is in line with regular activities, including the payment of the larger part of the annual bonus.
In Q1 2023, Atlantska Plovidba recorded a sales revenue decrease of 47.5% YoY, an EBITDA decrease of 65.8%, and a net income of EUR 197.4k, a decrease of 97.8% YoY.
In Q1 2023, Atlanska Plovidba transported a total of 1.13m tons of cargo. Of this, they transported 404.8k tons of coal (35.8% of the total), 149.8k tons of grain (13.25% of the total), 336.7k tons of minor bulk (29.8% of the total), and 239.2k tons of iron ore, representing 21.2% of the total.
In terms of the operational ships, they have a total of 11 ships, 5 of which are in the Panamax category, 4 of which are in the Supramax category, and 2 are in the Handy Category. Furthermore, Atlantska Plovidba notes that it has 2 ships under construction, in the Kamsarmax category. In terms of the age of the ships, the average age amounted to 11.78 years at the end of Q1 2023. Also, of the employed ships, 7 are employed on a short-term lease, while 4 are employed on a long-term lease. In terms of the average daily rate, we can see that it amounted to USD 13,542/day, which is a decline that has been recorded by the shipping industry over most of 2022, and even now in 2023, as the demand for shipping has declined drastically recently, due to the macroeconomic developments.
Looking at the fleet utilization, Atlantska Plovidba recorded a value of 98.9%, meaning that most of the ships were employed for the majority of the time. Finally, the NAV of the fleet on 31 March 2023 amounted to USD 211.5m, or on a per share basis, USD 99.12.
Moving on to financials, the developments described above led to a 47.5% reduction in sales revenue, which amounted to EUR 10.6m. Meanwhile, op. expenses amounted to EUR 10.1m, a 1.1% decrease YoY. Of this, material expenses amounted to EUR 3.37m, a decrease of 12.2% YoY, while staff expenses amounted to EUR 2.2m, a 1.3% increase YoY.
Taken together, this led to an EBITDA of EUR 4.41m, a 65.8% decrease YoY, which as we noted, is in line with the industry trends we have been seeing for the last year now. This would also imply an EBITDA margin of 22%, a decrease of 42 p.p. YoY. Meanwhile, the net financial result amounted to EUR -1.58m a 26% decline YoY, mainly driven by low financial revenue, while FX losses increased YoY.
Finally, the net income of the Company amounted to EUR 197.4k, a 97.8% decrease YoY, implying a net profit margin of 1%, a decrease of 43 p.p. YoY. It has to be noted however, that Atlantska Plovidba operates in a highly seasonal/dynamic industry, in which a lot of the growth drivers are the global macroeconomic situation, as well as the supply/demand for the shipping. 2021 was a record year for the shipping industry, and this decline could be seen as more of a correction and will depend on new developments.
Atlantska Plovidba key financials (Q1 2023 vs. Q1 2022, EUR ‘000)
Source: Atlantska Plovidba, InterCapital Research
The latest flash estimate of the Croatian CPI shows an increase of 8.8% YoY and 0.9% MoM in April 2023. The full release is planned for 16 May 2023.
Yesterday, the Croatian Bureau of Statistics, DZS, released the flash estimate for the Croatian CPI, for April 2023. According to the release, the Croatian CPI increased by 8.8% YoY, while MoM, it grew by 0.9%.
Starting off with the yearly change first, according to the main components of the index, Food, beverages and tobacco grew by 14% YoY, Non-food industrial products without energy by 8.6%, Services by 7.8%, and finally, Energy by 1.1%.
On a monthly basis, the largest increase was recorded by Non-food industrial goods without energy, with 1.5% growth, followed by Services at 1%, and Food, beverages and tobacco, at 0.9%. On the other hand, Energy recorded a decline of 0.4% MoM.
Croatian CPI (February 2013 – April 2023, YoY, %)
Source: DZS, InterCapital Research
Even though the decline on a YoY basis is encouraging, it doesn’t tell the complete story, for two reasons. Firstly, the base from which the CPI in April 2023 is compared is quite high already, as inflation in April 2022 increased by as much as 2.6% compared to February 2022 (9.4% YoY). If this didn’t happen, then the inflation rate right now would be higher. Also, the monthly CPI can tell us the real story, as it can show us if the inflation is slowing down or not. The 0.9% increase MoM shows us that the inflation rate is not only slowing down but is actually accelerating (the previous month amounted to 0.8% MoM).
Looking at the breakdown by sectors, we can see that the initial growth, especially on the yearly average, was driven by higher energy and food & beverages costs. However, right now, the story is a bit different. Energy actually recorded a decrease in prices, which given the current favorable environment in the energy market (especially compared to several months ago) is expected. However, other segments did record growth, and this even includes categories outside the energy and food & beverage segment, meaning that other sectors besides energy are driving the inflation rate higher. Very tight and strong labor market with a low unemployment rate that showed to be relatively sticky is present in all sectors. Prolonged high inflation in all sectors has resulted in increase of wages which has spilled-over to increase in prices of goods and services across the economy. Currently, the only way central banks, and in our case, ECB can combat this is with higher interest rates. However, with inflation spreading widely across many segments, the increase in interest rates will not be able to affect inflation in the same way across these segments, leading to high inflation rates, even with interest rate hikes. The argument that could be made against this point is the fact that the interest rates haven’t been implemented long enough and need more time to have the desired effect. This is a fair argument, but the problem with it is the fact that as time goes by, it will be harder and harder to gauge what influence these hikes have. Multiple interest rate hikes effects over a prolonged period is extremely hard to pinpoint when it comes to their direct impact on inflation rates.