Today, we bring you a quick overview of the current situation in the market, as well as how this affected a select group of regional, European, and global indices during 2023 thus far.

Despite the general macroeconomic situation being one that includes inflationary pressures, high interest rates, and various conflicts continuing (Ukraine War) or starting (Israel – Hamas Conflict), 2023 has overall been quite a good year for equity. There is a contrast here as compared to 2021 (the start of the inflationary pressures) and 2022 (the start of the war in Ukraine, and for the majority of the world, the start of interest rate hikes), as the reaction of the markets seems a lot more grounded and in a sense, numb than it was back then. This is the investor sentiment that has been present for the majority of 2023. Despite the central banks around the world not only stating that further interest rate hikes could happen, but that even the current elevated levels will have to persist until inflation gets under control (targeting 2% inflation growth YoY), the reaction was once again, numb.

There is almost a sense of optimism and hope that the situation has to get better and that the current environment isn’t as dire as it seems. In a way, this is true. Examples range from the war in Ukraine not causing an energy crisis in Europe (at least not to the extent that was expected at first) to economies around the world chugging along, instead of spiraling into recessions. Of course, exceptions to this trend exist. Putting this into context, it is not hard to see why despite the situation, the equity market has at least recovered what it lost in 2022. So having all of this in mind, how did regional, wider European, and US indices perform?

Select regional indices performance (2023 YTD, %)

Source: Bloomberg, InterCapital Research

Starting off with the region first, we took a look at indices from Croatia, Slovenia, Romania, Serbia, and Bulgaria. Overall, most of them, excluding Serbia’s BELEX15 recorded double-digit growth, with CROBEX10 leading the way at 29.5%, followed by BET at 26.8%, and SOFIX, at 24.2%. Even SBITOP, recorded solid growth, increasing by 16.4% YTD. This was despite the recent pressure due to the natural disasters (affecting both companies directly, but also insurance and the banking sector indirectly), as well as the new regulation, an example being the tax on total banking assets.

Turning our attention back to Croatia for a second, it is important to note that despite the relatively low liquidity that has been plaguing the Zagreb Stock Exchange for years now, there are some stars that allowed the index to pull through. These include Podravka, with a staggering 78% return YTD, followed by HPB at 71%, Končar at 61%, and Span, at 38%. Taken together, this led to the aforementioned 30% return for CROBEX10, which makes it the 2nd fastest-growing index this year, at least among the select indices here, only behind the Nasdaq Composite.

For Slovenia, growth was supported by NLB (+34% YTD), Telekom Slovenije (+29% YTD), Luka Koper (+23% YTD), Petrol (+18% YTD), and (Krka (+16% YTD), while in Romania, the banking and energy sector in particular, recorded solid growth.

Select European and Global indices performance (2023 YTD, %)

Source: Bloomberg, InterCapital Research

Moving on to the wider European and global indices, the best performance was recorded by the Nasdaq Composite, which increased by 37% YTD, followed by WIG20 at 27%, S&P500 at almost 20%, and DAX, at 18%. Even the much wider European index, STOXX 600, recorded a 9.6% return YTD. The only index which remained roughly the same YTD was the UK’s FTSE 100, which “grew” by only 0.6%. Overall, here we can see a similar trend as in the region. Nasdaq was the fastest to recover, which is to be expected as it is a technology-laden index, which also recorded more profound shocks leading to larger decreases last year. Even other indices such as DAX, recorded solid returns despite the even more challenging situation that Germany is facing. This would primarily pertain to the drop in exports the country has recorded, as well as higher energy prices due to the (at least until recently), Germany’s dependence on Russia for its energy imports.

Today, we are bringing you a detailed overview of the 2023 business performance estimate, 2024 business plan of Cinkarna Celje, as well as the company’s development strategy for 2024 – 2028.

The Company noted that in 2023, the year was marked by a decrease in the selling prices of pigment. They managed to minimize the impact on their business by taking swift and effective action. However, their influence is limited in global trade, mainly in the expansion of pigment capacity in China. The factors where the company’s influence is limited continue to be present in global trade, notably the expansion of pigment capacities in China and their placement in the EU.

Cinkarna estimates that the pigment industry is moving towards the bottom of the cycle, which is likely to be reached in 2024. On the purchase side, the company is facing above-average price levels for titanium-bearing raw materials. Lower demand for pigment from various industrial segments, pressure from customers to adjust selling prices and high input prices for key energy-intensive raw materials have led to a greater reduction in margin on both operating and bottom-line levels.

Based on the above description of the situation in the carrier industry, the company enters 2024 with caution. Taking into account the current market conditions, the outlook for the titanium dioxide industry and projections of macroeconomic conditions in the global economy, Cinkarna has set a roadmap for 2024 that the company believes is realistic.

The margin will be at a similar level as in 2023, but with uncertain macroeconomic conditions and lower demand for pigment, Cinkarna anticipates that it will not be possible to fully utilize production capacity in 2024. Irrespective of market conditions, their focus remains on maximising production capacity utilization and improving our sales structure. In titanium dioxide pigment, Cinkarna will reallocate a flexible part of our sales volumes to the most profitable markets on an ongoing basis. Achieving a lower average selling price level for pigment and a higher level of volume sales are taken into account. The pigment market is considered to be quite volatile.

Finally, Cinkarna expects for energy market prices gradually moderate in 2024. Cinkarna expects titanium-bearing raw material procurement prices to stabilize at slightly lower levels. The bargaining power of suppliers remains high, mainly due to low competition or a low number of suppliers in the titanium-bearing raw materials markets.

In 2024, the company plans investment volumes that exceed the average of previous years. Investments will be made on a program-by-program basis, according to need, capacity and prospects. Inventories will be lower than in the previous year. The volume of receivables will be higher due to higher sales. In 2024, Cinkarna will gradually start to use external funding for key investment projects. Overall, the company expects for 2024 to be at a similar operating level to that in 2023.

Cinkarna Celje 2023 estimate and 2024 plan key performance indicators

Source: Cinkarna Celje, InterCapital Research

Besides all the aforementioned, Cinkarna also published its 2024 – 2028 development strategy. In the strategy, it is emphasized that the main focus will remain on European markets. Mainly, the company’s presence will be strengthened in a key strategic business area – Titanium Dioxide. Further optimization of the staffing structure is foreseen through the redeployment and recruitment of new young and technically qualified staff. Investment in development, training and further improvement of the working environment for employees will also continue.

The new five-year strategic period 2024-2028, which takes into account the 2028 cycle peak, has the following strategic objectives:

• average sales revenues of € 228.9 million,

• average EBITDA of € 36.9 million,

• average net profit of € 16.8 million.

The dividend policy will be stable. 50% of net profit will be paid as dividends.