Earnings Report /
Croatia

AD Plastik Group: Serial production effects kick in

    InterCapital
    31 October 2019
    Published byInterCapital

    In 9M 2019 the AD Plastik Group recorded a 14.3% YoY increase in sales which amounted to HRK 1.1bn. 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, revenue from tools in the parent company and the realization of Renault Twingo and Clio 5 projects 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 859.2m, which represents a 24.8% YoY increase. It is worth noting that AD Plastik managed to record such a strong growth despite a 1.6% YoY decrease in the number of newly registered vehicles in the market. Meanwhile the Russian market recorded sales in the amount HRK 236.1m which represents a 5.9% YoY decrease. Note that the decrease in sales on the Russian market has been sliced in half when compared to H1. Furthermore, in the previous year a more significant realization of tool revenue was achieved, which affected the overall revenue generated. 

    In the 9M period EBITDA amounted to HRK 133.5m which represents a 3.6% 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. Therefore, the company is now enjoying the benefits of the awaited serial production of new projects, notably the new Twingo and the Clio 5. Profitability-wise, EBITDA margin is down to 12.2% (from 13.7%). Note that this can be contributed to the Hungarian Tisza Automotive as the company contributed to the Group wide revenue growth, however to a lesser extent it affects the EBITDA growth. 

    Below the operating line, the net financial loss fell to HRK -11.5m (from HRK -33.5m recorded in 9M 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 6.3% YoY to HRK 63.9m.  

    Turing our attention to the balance sheet, AD Plastik’s net debt rose 12% since the beginning of the year and now amounts to HRK 428.5m. However, as this translates into 2.58x 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 and for financing part of the tools for new projects. Note that the effect should be mitigated once the tools are sold to the clients.   

    AD Plastik’s 9M results show a strong improvement, however until we derive a functioning model, we keep the share price under review.