Friday, 18 March 2022

Croatian Equity Market: Impact of the Russian Invasion of Ukraine

March 18thund 2020 - An overview of the Croatian equity market and how it reacted to the Russian invasion of Ukraine.

On the 24th of February 2022, a full-scale Russian invasion of Ukraine began. The world was struck and this was also evident when looking at the capital markets which reacted very suddenly and there was a lot of volatility in the markets.

The Croatian equity market can be observed by looking at the benchmark index CROBEX10 which is made up of 10 Croatian blue-chip companies with the largest free-float, liquidity, and market capitalization. CROBEX10 fell by 6,47% on the first day of the invasion falling from 1284.56 to 1201.42. The downward trend has started even before that which is not odd since financial markets are to a large extent forward-looking.  CROBEX10 reached its peak on 19th January at 1342.93 and has from there slipped down to 1152.36 on March 8th, cumulatively falling by 14,19%, and technically speaking entering into a correction phase. From March 8th to March 17th at the time of writing this article CROBEX10 has soared back up by 6,57% and it reached 1228.

 

 

Croatian-Equity-Market-CROBEX10.png

When comparing Croatian CROBEX10 with other European and American market indices we can see that some Indices experienced an even more drastic market sell-off. Most notably Polish WIG fell by 11%, Hungarian BUX fell by 10%, and Slovenian SBITOP and Austrian ATX dropped 7% on the first day of the invasion. 

 

 Croatian-Equity-Market-Market-Indices-Comparison.png

Some of these indices have managed to return near the price levels as before the war while others are still deep in the red zone. As of 17th of March, Austrian ATX is at -9%, Cezch PX and Hungarian BUX at -6% while Croatian CROBEX10 is at -4% compared to their price levels on the 23rd of February.

When looking at CROBEX10 and its 10 constituents we can see that on the first day of the invasion the biggest drop can be seen in Ad Plastik -18%, Atlantska Plovidba -12%, and Podravka -9%.

Croatian-Equity-Market-Market-CROBEX10-Constituents.png

It is interesting to see how the market reacts to an unpredictable event such as this war and it is the best indicator of the extent of exposure these companies have to Russian and Ukrainian markets. As of the 17th of March, most of these companies are near the price levels before the war. Two companies that made an official statement to ZSE and which are clearly exposed to these markets are AD Plastik and Podravka which is also seen in their price level which is currently -33% and -7% respectively, compared to the price levels before the escalation.

AD PLASTIK

Croatian-Equity-Market-ADPLASTIK.png

 

AD Plastik is a Solin-based manufacturer of automobile components. Unfortunately, AD PLASTIK is largely impacted by the Russian Ukrainian war. They have two factories in Russia which together account for around 25% of their revenue according to their statement published by ZSE. These two factories sell exclusively to the Russian market and through them, AD Plastik is exposed to the fluctuation of the Russian Rubble. The AD Plastik share price was falling from the start of the war on the 24th of February until March 7th falling by 44% and whipping out nearly 300 million HRK from their market capitalization. As of 17th March, its share price has scaled up to 105 HRK which is a 20% increase but it is still 33% lower than the share price before the start of the war.

The additional burden was the release of their 2021 financial statements on the 24th of February, which showed a drop in operating revenue by 6.8% and a drop in their EBITDA margin by 273 bps. This is most likely caused by the chip shortage and other supply chain problems in the automobile industry.

On a positive note, on March 9th, they made a public statement announcing a new contract with Stellantis Group and Motherson Group for the European market which are together worth 73,6 million Euros.

PODRAVKA

Croatian-Equity-Market-PODRAVKA.png

Podravka is Koprivnica based food and pharmaceutical company. According to their statement published on ZSE, the group’s exposure to Russian and Ukrainian markets account for less than 6.5% of their sales revenue. Belupo, their pharma division, had 37,1% of international sales in Russia according to their 2020 annual report. Considering that their pharma division had significantly higher EBITDA margins In 2021 with 20.5% compared to 10.6% in the food division, it Is likely that investors expect a decrease in EBITDA margins in the coming period.

On the positive side, their 2021 financial report recorded a 2.8% increase in the group’s sales revenue and a 64 bps increase In their EBITDA margin.

To conclude, the Croatian equity market has been through a few turbulent weeks and has managed to partially recover but we are still surrounded by a high level of uncertainty, with the war in Ukraine still raging, with rising inflation, and the upcoming interest rate hikes it will be a challenge for the whole world and especially for the European continent.

Disclosure: I do not own any of these shares and this article is purely for informational purposes and should not be used as the basis for any investment decisions.

SYMBOLS

EBITDA – earnings before interest taxes depreciation and amortization

WIG - Warsaw Stock Exchange General Index (WIG) 

BUX -Budapest Stock Exchange  Index

SBITOP – Ljubljana Stock Exchange  Index

ATX - Austrian Traded Index

PX- Prague Stock Exchange  Index

S&P500 - Standard and Poor's 500  Index

EURO STOXX 50 - stock index of Eurozone stocks 

CROBEX- Zagreb Stock Exchange  Index

Sources: zse.hr , pse.cz , RGFI , marketwatch.com , wienerborse.at, ljse.si

For more, check out our business section.

Monday, 7 February 2022

Former Deputy PM Martina Dalic to Continue at Podravka's Helm

February the 7th, 2022 - Former Deputy Prime Minister Martina Dalic, also a Croatian economist, is set to remain at Podravka's helm.

As Jutarnji list/Novac writes, on Friday last week, Podravka's Supervisory Board appointed a new Management Board, which will continue to be headed by Martina Dalic for the next five-year term. Davor Doko and Ljiljana Sapina will also remain on the Management Board, while new members are Milan Tadic and Ivan Ostojic.

According to the announcement, the five-year term of the new Management Board of Podravka begins on February the 24th, 2022.

Martina Dalic, who was appointed to this position on February the 4th, 2021, will therefore remain in the position of President of the Management Board. With this recent decision, the Supervisory Board confirmed its satisfaction with the work and the results achieved under Dalic, entrusting her with running the company throughout the next, full term.

Along with Martina Dalic, members of the Management Board who are set to remain are Davor Doko and Ljiljana Sapina, who were first appointed back in February 2017, and as new members it includes Milan Tadic, Podravka's General Manager for the Adria Region, and Ivan Ostojic, who comes from Wustenrot. Ostojic is also a member of Podravka's Supervisory Board and his term in the Management Board will begin on July the 1st, 2022, Podravka's statement said.

Podravka also pointed out that the Supervisory Board thanked the current members - Marko Djerek and Hrvoje Kolaric for their contribution to Podravka through their membership in the Management Board of the company.

Marko Djerek is now a member of the Belupo Management Board, which continues to be led by Hrvoje Kolaric, according to Podravka's statement.

As the President of the Supervisory Board, Zelimir Vukina stated: "The fact that we've completed the election process and decided on the composition of the new Management Board almost a month before the current Management Board's term is set to begin is the result of the Supervisory Board's focus on continuously improving the quality of corporate governance and approaching global standards for Podravka's size and complexity.''

Congratulating the President and the appointed members of the Management Board, he said that they expect the new Management Board to achieve the goals of the strategic plan for the next five years and especially the further growth of the company, both organically and through acquisitions.

''We expect the intensification of investments in raising the overall technological level of production processes as a prerequisite for greater innovation and maintaining high product quality, the motivation and loyalty of our employees and a contribution to increasing the quality of life in the local community, all of which will be the best indicators of the success of the new Management Board,'' said Vukina.

Martina Dalic stated that the opportunity to lead Podravka together with her colleagues from the new Management Board is understood as an expression of trust placed in her over the next five years, but in the same way as it did a year ago, for her, it represents an "extremely great responsibility".

"It's my responsibility to achieve Podravka's success on the global market and increase value for shareholders, and it's also to improve things for the local community through the continuous improvement of the position and satisfaction of all our employees. Podravka is a Croatian multinational company whose heart is and will always be in Koprivnica. I expect the Management Board to function as a team, focused solely on the growth and development of Podravka through dedicated and determined implementation of the development and investment cycle that we started in recent months,'' said Martina Dalic, who then thanked the members of the Supervisory Board and all shareholders for their trust in her.

It's worth noting that the largest shareholders of Podravka are Croatian pension funds (mandatory and voluntary) which together hold 51.1 percent of Podravka's shares, while the state has 25.5 percent of Podravka's shares.

For more, check out our business section.

Tuesday, 7 December 2021

Croatian Podravka Brand Hopes to Conquer Wealthier European Markets

December the 7th, 2021 - The Croatian Podravka brand is aiming to strengthen its position on the more wealthy European markets, and Martina Dalic says this is an ambitious goal of hers.

As Poslovni Dnevnik/Jolanda Rak Sajn writes, an even bigger and stronger Croatian Podravka brand is an ambitious goal that has been entrusted to the new President of Podravka, Martina Dalic, since the beginning of this year. This aim has the strong support of Prime Minister Andrej Plenkovic and the pension funds, which are the main shareholders of the Koprivnica food giant.

Behind the prematurely deceased Marin Pucar, one of the most important regional companies, which is the holder of most of the development of a good part of the Croatian food and retail industry, remained on good foundations, with excellent results and a stable position across many markets.

However, even in this difficult and uncertain year affected by the coronavirus pandemic, the Croatian Podravka brand has maintained high growth rates with even greater focus on consumer preferences and conquering potential markets in Western and Central Europe while maintaining a dominant position and strengthening competitiveness in the Adria region where Podravka has been in business for more than 70 years,

In the first nine months of this year, the Podravka Group generated a net profit of 259.3 million kuna, 23.4 percent more than in the same period last year. Sales revenues amounted to 3.38 billion kuna, as well.

The Nutrition segment generated 2.6 billion kuna in revenue and Pharmaceuticals generated 749.5 million kuna, with the largest contribution from the Prescription Medicines category, which increased by 5.4 percent in total. Revenues from the sales made by Podravka d.d. in the first nine months of 2021 amounted to 1.65 billion kuna, which is 3.9 percent more than in the same period last year.

Just like last year, due to the epidemiological situation, there was an increase in demand for Podravka's products and the creation of large stocks of customers in almost all markets, and this year's growth has been even more significant.

Compared to pre-pandemic 2019, revenues grew even more, by 5.4 percent, and sales revenue growth was achieved in almost all business programmes. In the Western Europe region, it amounted to 9.5 percent, and the highest growth was generated by the Culinary, Podravka food and Baby food, sweets and snacks segments.

In Central Europe, growth stood at 4.4 percent, and in the Adria region 2.9 percent. The price of a Podravka share on September the 30th this year amounted to 664 kuna, and on the last day of 2020, it was 485 kuna, which is an increase of 36.9 percent.

In accordance with the Strategic Plan of the Podravka Group for the period 2021-2025, adopted after the arrival of Dalic, the company began investments worth 5 billion kuna in production and logistics modernisation and digitalisation, marketing and acquisitions.

The five-year plan includes both divisions of the group, Nutrition and Pharmaceuticals (Belupo), through three development pillars - about 1.7 billion kuna of investment in the modernisation and digitalisation of production and logistics processes, about 1.4 billion kuna in marketing for organic growth and around 2 billion kuna for acquisitions.

The future rapid growth and development of the Podravka Food Division will be based on product categories with greater export potential such as food additives, soups and bakeries, and a focus will be placed on Europe's richer markets. Self-sufficiency will be increased through agricultural production and cooperation will be strengthened in order to reduce import dependence and stably manage risks in the primary part of the supply chain, including through the use of EU funds.

The Croatian Podravka brand recently received 19.4 million kuna in grants from the Rural Development Programme for the modernisation of fruit and vegetable processing plants, the development of new technologies and new products of Kalnik with a total value of more than 38 million kuna, and 5.2 million kuna for the construction project involving solar power plants, worth a total of 10.33 million kuna.

Belupo, on the other hand, is preparing for stronger growth across Central and Western Europe.

For more, check out our business section.

Sunday, 31 October 2021

Croatian Company Podravka Records Fantastic Sales Growth

October the 31st, 2021 - The much loved Croatian company Podravka has been recording some excellent sales growth across important markets, and despite the negative economic circumstances the coronavirus pandemic has dragged the entire world into, things are looking up for this enterprise.

As Poslovni Dnevnik writes, revenues from the Croatian company Podravka's sales for the first nine months of this year amounted to a very impressive 1,651.4 million kuna, which is 3.9 percent more than what was recorded back during the same period last year. Since last year, due to the poor epidemiological situation, there was an increase in demand for Podravka's products and the creation of increased stocks with customers across almost all markets, making this year's growth is even more significant.

If, for example, we compare the Croatian company Podravka's revenues with the pre-pandemic year of 2019, then revenue growth this year is even more significant, standing at 5.4 percent.

Sales revenue growth this year was achieved in almost all business programmes, among which the most significant growth of 5.2 percent was recorded in the Culinary business programme. The aforementioned growth in this particular segment was achieved mainly due to the growth of revenues from the sale of Universal Food Additives and Soups.

When it comes to sales revenue by region, growth was achieved across all of this company's key markets. Particular emphasis is placed on revenue growth of 9.5 percent in the Western Europe region, where growth was achieved in almost all business programmes, of which the largest growth was generated by the Culinary, Podravka food and Baby food segments.

It is worth noting that the other two most significant regions also achieved sales revenue growth, of which in Central Europe there was a growth of 4.4 percent, while the Adria region achieved sales revenue growth of 2.9 percent.

When we look at the business results of the Podravka Group for the first nine months of this year, an impressive 3,383.5 million kuna in sales revenue was generated. This realisation represents growth of 1.6 percent compared to the year before. Higher sales revenues are the result of revenue growth in two important business segments - Food and Pharmaceuticals. The Nutrition segment generated 2,634 million kuna, while Pharmaceuticals recorded 749.5 million kuna in sales revenue, with the largest contribution from the Prescription Medicines category, which increased by 5.4 percent.

The net profit of the Croatian company Podravka for the aforementioned period amounts to 259.3 million kuna and is higher by 23.4 percent when compared to the comparable period from one year before.

It's worth mentioning that the price of Podravka's shares on September the 30th this year amounted to 664 kuna, while back on December the 31st, 2020, they amounted to 485 kuna, which is a promising increase of 36.9 percent.

For more, check our our dedicated business section.

Wednesday, 29 September 2021

Zagreb Stock Exchange: Podravka Again Most Traded Stock

ZAGREB, 29 Sept, 2021 - The Zagreb Stock Exchange (ZSE) Crobex index on Wednesday decreased by 0.21% to 1,983 points, while the Crobex10 increased by 0.03% to 1,126 points.

Regular turnover was HRK 13.3 million.

Again, the most traded stock was the Podravka food company, which turned over more than HRK 4 million, closing at a record-high HRK 636 per share, up 1.3%.

Podravka has been recording an increase in turnover for three weeks, during which time its shares have mainly been bought by the Pivac meat industry, which holds 3.18% of Podravka's equity.

Forty-four stocks traded today, with 12 increasing in price and 20 decreasing, while 12 were stable.

(€1 = HRK 7.489688)

For more about business in Croatia, follow TCN's dedicated page.

Tuesday, 14 September 2021

Zagreb Stock Exchange Indices Rise; Focus on Podravka, Adris Shares

ZAGREB, 14 Sept, 2021 - The main Zagreb Stock Exchange (ZSE) indices went up on Tuesday, the Crobex by 0.15% to 1,971 points and the Crobex10 by 0.16% to 1,204 points, with regular turnover reaching HRK 8.6 million.

The most traded stock was the Podravka food company, turning over a little more than HRK 3 million. It closed at HRK 596 per share, down 0.33%.

The ordinary share of the Adris tourism and insurance group turned over HRK 2.7 million, closing at HRK 470 (+2.17%), while its preferred share turned over HRK 1.09 million, closing at HRK 417 (+0.48%).

Thirty-six stocks traded today, with 14 gaining in price, 11 losing, and 11 staying the same.

(€1 = HRK 7.483597)

For more about business in Croatia, follow TCN's dedicated page.

Monday, 13 September 2021

87 Million Kuna Renovation of Podravka Office Building on Cards

September the 13th, 2021 - An 87 million kuna renovation for the Podravka office building is set to take place, with a company from the continental Croatian town of Krizevci being ''the chosen ones'' for the job.

As Novac/Vedran Marjanovic writes, Podravka's Supervisory Board approved the Management Board's decision to invest a massive 87.7 million kuna in the renovation of the company's office building, and to conclude a contract with the construction company Radnik (Worker) from Krizevci for the job, the much loved Koprivnica-based company announced yesterday.

The renovation of the Podravka office building includes IT and energy reconstruction, as well as its modernisation. The current Podravka office building was built back in 1979 and hasn't been renovated for practically 42 years.

With this, the reconstruction project, which has been being planned for many years now, has entered the implementation phase, and includes a seven-storey office building, a restaurant, a car park and the surrounding area, Podravka announced, adding that the works will begin on October the 1st this year and will be completed in July 2022.

During this time, according to the announcement of the Koprivnica company, employees whose workplace is in the Podravka office building will be relocated to other locations in the company.

Podravka pointed out that the renovation of the company's office building will be financed from its own sources, without any borrowing involved. They added that the renovation of the Podravka office building is being done in its existing dimensions and that the investment framework is appropriate for a challenging business year with careful cost management.

When it comes to the selection of Radnik d.d. from Krizevci as the contractor, Podravka revealed that three rounds of collecting bids from contractors were conducted and that the selection was based on the project of renovation of the office building prepared by the company Forma-Biro, also from Koprivnica.

The amount of the investment in the renovation of the Podravka office building refers to construction works, the mechanical installations, works on the facade and those on the electrical installations, according to the Koprivnica company, noting that the renovation project incorporates elements of material artistic value of the building.

The reconstruction of the office building, Podravka noted, will improve the company's energy efficiency, corporate and information security and ensure that the new requirements of the prescribed standards are met in the time after the coronavirus pandemic.

For more, follow our business section.

Sunday, 25 July 2021

Croatian Company Podravka Achieves 197 Million Kuna Net Profit

July the 24th, 2021 - The Croatian company Podravka has managed to achieve 197 million kuna in net profit, despite all of the issues caused by the ongoing pandemic.

As Poslovni Dnevnik writes, the net profit of the Croatian company Podravka in the first half of this year reached an impressive 197.6 million kuna, which is 22.3 percent more than in the same period last year, the company announced on Thursday.

At today's meeting, the Supervisory Board of Podravka confirmed the unaudited results of the Podravka Group's operations for the first half of the year, expressing "satisfaction and support for all efforts made to continue the company's continued profitability growth in these still difficult business conditions caused by the coronavirus pandemic,'' in a statement.

In the first half of the year, the Nutrition segment generated a net profit of 136.3 million kuna, which is 13.9 percent more than the year before, while the Pharmaceuticals segment generated a net profit of 61.3 million kuna, or 46.3 percent more, which doesn't come as a shock considering the global public health crisis we're still embedded in.

The Croatian company Podravka's sales revenue in the first half of the year amounted to 2.2 billion kuna and was one percent lower when compared to the comparable period of 2020.

The expected decline in sales revenue compared to 2020 is actually the result of unusually large orders and the creation of additional stocks with customers in March last year caused by the introduction of lockdown in most countries where the Podravka Group operates, the statement said.

It is also stated that when, for example, the total sales revenues from the first half of this year are compared with the comparable period of pre-pandemic 2019, then revenues are actually 4 percent higher, which shows positive trends for the company's business operations.

Within the Nutrition segment, the largest increase in sales revenue in the first half of the year was achieved in the Culinary business programme in the amount of 2.5 percent.

The Croatian company Podravka points out that the business programme(s) Baby Food, Sweets and Snacks also recorded an increase in sales revenue in the amount of 1.7 percent, while the growth in sales revenue was also recorded in the Podravka food segment, in the amount of 2.4 percent.

In the Pharmaceuticals segment, the largest growth was recorded in the Prescription Drugs category, whose sales revenues increased by 4.3 percent when compared to the first half of 2020.

When observing sales revenues by region, within the Food segment from Podravka, point out the growth of sales revenues in the markets of Western Europe and overseas in the amount of 8.2 percent when compared to the comparable period last year.

In these markets, sales growth was achieved in almost all business programmes, of which the largest absolute growth was generated by the business programmes Culinary, Baby food, sweets and snacks and Podravka food.

The Pharmaceuticals segment achieved the largest relative growth in sales revenue of 13.9 percent within the Central Europe region, due to higher sales in the Prescription Drugs category, the statement said.

For more, follow our business section.

Wednesday, 9 June 2021

Podravka Group to Invest HRK 5 Bn Over Next Five Years

ZAGREB, 9 June, 2021 - Over the next five years, the Podravka Group plans to invest about HRK 5 billion in the modernisation and digitalisation of production and logistics, marketing and acquisitions, the group said on Wednesday after the Supervisory Board green-lighted its business strategy until 2025.

"The implementation of the adopted strategy includes investment of about HRK 1.7 billion in the modernisation and digitalisation of production and logistics processes, about HRK 1.4 billion in marketing to achieve organic growth, and about HRK 2 billion for acquisitions," Podravka said in a statement.

The group's Food division will focus on product and packaging development and innovation to increase the availability of products and adjust them to the needs and habits of different consumer groups.

The business strategy also sets the criteria for the consideration and selection of acquisitions. With possible acquisitions in the Food division, Podravka aims to strengthen its presence and position on markets to pursue further accelerated growth.

The Pharmaceuticals division (Belupo) will focus on strengthening growth on international markets, notably in central and eastern Europe, expanding its portfolio with products  in additional anatomical, therapeutic and chemical groups, and boosting growth on the domestic market by introducing new products.

(€1 = HRK 7.5)

For more about business in Croatia, follow TCN's dedicated page.

Wednesday, 9 June 2021

Podravka Factory to Undergo Modernisation for Manufacturing of New Products

June the 9th, 2021 - The Podravka factory (Kalnik) in continental Croatia is set to get an enormous cash injection to modernise its facilities and equipment to make way for the production of yet more products from this much loved Croatian company.

As Poslovni Dnevnik/Sergej Novosel Vuckovic writes, the Kalnik Podravka factory located in the continental city of Varazdin is being modernised, after which new food products from this globally recognised company will be created.

The company received a huge 19.37 million euro grant from European Union (EU) funds from the Ministry of Agriculture, because the "Investment in the modernisation of fruit and vegetable processing plants, new technologies and new products from the Kalnik factory" project owned by Podravka passed the tender of the rural development programme for the implementation of measure 4.2. 1.

The works, which come with a hefty price tag of 40.6 million kuna include the purchase of new equipment and the reconstruction of the Podravka warehouse, as well as its subsequent conversion into a fully equipped, modern production space.

The new equipment on the cards are a line for the receiving, processing and aseptic filling of fruit, the purchase of additional vacuum boilers, all to increase production capacity, and the packaging equipment this Podravka factory uses will be changed and modernised.

This investment will also introduce a set of brand new products: jams, marmalades, new types of ajvar, vegetable and fruit spreads, fruit fillings and more. This particular Podravka factory in Kalnik is the location in which sterilised and pasteurised vegetables, mustard, horseradish and marinades are otherwise produced.

These investments in the company's Varazdin factory aim, among other things, to achieve a wider and more diverse range of products, which will increase the price competitiveness of Podravka's much loved items on both the Croatian market and indeed on foreign markets.

For more, make sure to follow our dedicated business section.

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