Earnings Report /
Croatia

AD Plastik Group: Improved H1 results

    Filip Gracin
    InterCapital
    26 July 2019
    Published by

    In H1 2019 the AD Plastik Group recorded a 9.8% YoY increase in sales which amounted to HRK 687.5m. Note that the Group’s results are still under the influence of Tisza Automotive acquisition which was carried out in July of 2018. However, new deals for Hella and Ford, coupled with the revenue from tools in the parent company were also drivers of revenue growth in the observed period. When breaking down operating revenue by markets, the EU & Serbian market recorded sales in the amount of HRK 574m, which represents a 19.9% YoY increase. It is worth noting that AD Plastik managed to record such a strong growth despite a 3.1% YoY decrease in the number of newly registered vehicles on the market. Meanwhile the Russian market recorded sales in the amount HRK 139.7m which represents a 10.4% YoY decrease. The decline in operating revenue was caused by the expected lower revenue from the sales of tools and a lower average ruble exchange rate compared to the euro. 

    In H1 EBITDA amounted to HRK 103.4m which represents a 3.4% YoY growth. Note that this represents a successful recovery after EBITDA initially dropped by 11.8% YoY in Q1 due to the different stages of the company’s production cycles. However, in Q2 the serial production of the new Clio 5, one of the best-selling models of the Renault Group, began. Furthermore, due to the excellent demand and acceptance of this model in the market, the company expects a significant increase in the quantities produced and the full implementation of all production activities during the autumn. 

    Below the operating line, the net financial loss was sliced by more than half amounting to HRK -9.3m (from HRK -23.3m recorded in H1 2018). According to the Management, the net financial result was more favourable primarily due to the lower negative FX differences, which were partly a result of the decline in foreign currency exposure of Russian companies and partly of the strengthening of the Russian ruble in 2019. Finally, AD Plastik’s bottom line increased by 1.2% YoY to HRK 57m. The result was affected by the rising tax expense which doubled in H1 2019 to HRK 5.7m. 

    Turing our attention to the balance sheet, despite the fact that AD Plastik reduced their indebtedness when compared to the first quarter, net debt is still 2% higher than at the beginning of the year amounting to HRK 389.8m. However, as this translates into 2.36x net debt/EBITDA we do not see this as a reason for concern. The increase in net debt largely stems from the realization of a loan to finance investments in the parent company. The Management also noted that due to the financing of some of the tools for new projects, temporary debt growth is expected in the forthcoming period. 

    AD Plastik’s H1 results show improvement, however the full positive effects of the new production cycle are still upon us. Until we derive a functioning model, we keep the share price under review.