Yesterday, Podravka held its investor day where the Group’s annual financial results for FY 2023 were presented along with a Q&A session afterward, while Podravka granted the opportunity to tour the production complex in Koprivnica. We bring you the key takeaways from the investor day.
Yesterday, Podravka held an investor day for an investment community in the Group’s headquarters in Koprivnica, where the Group’s annual financial results for FY 2023 were presented and the Q&A session afterward. Further, Podravka granted the opportunity to tour the production complex in Koprivnica.
The presentation was held by Group CEO, Martina Dalić, who briefly glanced over their FY 2023 financial results and allowed a lot of time for Q&A. We bring you a short summary of the financial picture. In terms of profitability for Podravka in 2023, the pharmaceutical segment primarily contributed in absolute amounts and relative margins across all profitability levels. The food segment achieved growth in normalized EBITDA and normalized net profit despite the negative impact of rising costs of raw materials, packaging, and energy, mitigated through procurement process optimization driven by increased supplier competition. Additionally, the Group emphasized that the food segment in 2023 was impacted by restructuring efforts aimed at improving profitability, with effects expected to be visible during 2024. Concerning business in 2023 there was no cooperation with Kaufland, which is app. EUR 15m and this will be re-established in 2024 so this will also support revenue growth. Central Europe region negatively affected sales growth in 2023 by EUR 4.3m due to the process of restructuring and optimizing the portfolio in the markets of Poland and Czechia. This was to increase profitability. This was carried out successfully so in, 2024 Poland and Czech sales will grow again on these solid foundations. The Western Europe and Overseas region grew their sales for EUR 12.8m in 2023 which is a great success. It was also due to the restructuring of the distribution channel. In Austria, Atlantic Grupa is a new distributor for Podravka as the previous relationship was unsatisfactory, and positive effects are also expected in 2024. On the USA market, Podravka is doing distribution itself also for Atlantic Grupa, Serbian Bambi, and another company which is oriented on Slavic and Turkish ethnic markets.
Finally, Podravka noted they are satisfied with their net debt position and the achieved trend of lowering net debt position due to the regular payments of credit obligations and an increase in the cash & cash equivalents position. Furthermore, Podravka’s investment cycle was touched upon with the main takeaway being that the investment cycle goes in line with Podravka’s Business Strategy (until 2025). In an investment cycle, that started in 2021, Podravka invested EUR 150m by the end of 2023. Finally, in the Q&A segment, the current M&A situation regarding the sale process of Fortenova Group’s agricultural business division was deemed most significant. The Group noted they find the agriculture business attractive due to its profitability and the possibility of synergy effects. It was said this might represent the 3rd business pillar, next to Food and Pharmaceutical. Proximity of agricultural products is another important driver as using vegetables that are grown nearby can significantly reduce waste and protect risk of disruption in value chains that we have seen during the pandemic. Podravka is also one of the biggest buyers of wheat in the Croatian market, and this acquisition would reduce its reliance on buyers, even though they would still need to continue purchasing big amounts. We note that Podravka already made the information regarding the participation in the process of due diligence of the mentioned agricultural division publicly available and you can read more about it here. Podravka pointed out during the Q&A session that other markets that would be interesting for M&A, excluding Croatia, would be Poland and Serbia, due to proximity and strong sales on these markets.
In Q1 2024, BRD Group recorded a net interest income growth of 7% YoY, a net fee and commission income increase of 8%, net banking income growth of 5%, and a net income to majority of RON 326.3m, a 4% decrease YoY.
Starting off at the top of the P&L, BRD Group recorded a net interest income of RON 716.2m, an increase of 7% YoY. Improvements in the balance sheet supported this, as cash and current accounts with the Central Bank grew by 58% YoY to RON 11.8bn, loans and advances to credit institutions grew by 4% YoY to RON 6.1bn, while loans and advances to customers increased by 9% YoY to RON 40.6bn. Given the high interest rates in Romania (currently at 7.0% for deposits at the Central Bank), all of these assets yielded higher returns, thus leading to an improvement in the net interest income.
The most important category in this, i.e. loans and advances to customers, recorded an increase in both the corporate and retail segments. The retail segment grew by 7.2% YoY, and new loans granted to individuals grew by 43% YoY, while inside this, consumer loans increased by 51% YoY. New housing loans also increased by 45% YoY. On the corporate side, net loans grew by 20% YoY, and inside it, net loans granted to SMEs increased by 27% YoY, and to large companies by 17%, while leasing activity recorded an increase of 20% YoY.
Net fee and commission income meanwhile, grew by 8% YoY to RON 186m, with BRD continually investing and improving its digital platform and services. In fact, YouBRD reached 1.5m users in Q1 2024, an increase of 28% YoY, contributing to this growth.
Together, this led to a net banking income of RON 984.7m, an increase of 5% YoY. In terms of operating expenses, they amounted to RON 529.5m, an increase of 4% YoY. Inside the OPEX, other op. expenses grew the most in absolute terms, by 16% YoY to RON 172.6m, followed by personnel expenses at 9% YoY to RON 244.7m, while the Contribution to the Guarantee Scheme and Resolution Fund decreased by 43% YoY to RON 43m. The increase in other op. expenses came due to a higher tax on turnover of RON 30m (new law starting 1 January 2024, representing 2% of the turnover in 2024/2025, and 1% of the turnover in 2026). Meanwhile, the growth in personnel expenses came due to higher wages, mainly related to inflation.
Moving on, the cost of risk amounted to RON 54m (Q1 2023: RON 9.4m), mainly as a result of higher provisions for loans, which more than doubled YoY. Mainly as a result of this higher cost of risk, the net income to majority decreased slightly, by 4% YoY to RON 324m.
BRD Group key financials (Q1 2024 vs. Q1 2023, RONm)
Source: BRD Group, InterCapital Research
Taking a quick look at the balance sheet, due to the developments in cash held at the Central Bank, higher loans to other credit institutions, and higher loans to customers, the total assets of BRD Group grew by 15% YoY and amounted to RON 83.8bn. On the other hand, total liabilities grew by 15% YoY to RON 75bn. The largest increase here was recorded by deposits to customers, which grew by 13% YoY to RON 62.9bn, followed by borrowed funds at 24% YoY to RON 7bn. Inside the deposits, retail deposits grew by 12% YoY to RON 40.8bn, while corporate deposits increased by 16% YoY to RON 21.9bn. Inside the corporate deposits, SMEs recorded an increase of 13% YoY to RON 9bn, while Large corporate deposits increased by 18% YoY to RON 12.9bn.