Earnings Report /
Croatia

AD Plastik Group: Top line growth offset by difference in production cycle

    Filip Gracin
    InterCapital
    30 April 2019
    Published by

    In Q1 2019 the AD Plastik Group recorded an 8.4% YoY increase in sales which amounted to HRK 345.4m. The growth in sales was mostly driven by the Tisza Automotive company, which was acquired in July 2018. When breaking down operating revenue by markets, the EU & Serbian market recorded sales in the amount of HRK 277.2m, which represents a 15.8% YoY growth. Note that the increase in revenue came despite the fact that the number of newly registered vehicles in the market was down 3.3% YoY. However, also note that the segment’s growth was largely influenced by the revenue of the acquired company Tisza Automotive. Meanwhile the Russian market recorded sales in the amount of HRK 71.1m (-15.3% YoY). The decline in operating revenue was affected by decreased revenue from the sales of tools and a significantly weaker average ruble against the euro exchange rate compared to the same period last year. 

    EBITDA is down by 11.8% YoY to HRK 45.9m. However, note that this year’s EBITDA is not fully comparable to the previous year due to the different stages of the company’s production cycles. Namely, the first part of the year witnessed the final stages of the production cycle for AD Plastik’s key vehicles (phase 1 of the Twingo, Smart and Renault Clio). As a result, the costs of modifying the serial production of those respected models weighed heavily on Q1's results. However, EBITDA is expected to recover by the end of the year as the production of new models kicks in. 

    Below the operating line, the net financial result improved significantly, amounting to HRK 0.8m (from HRK -10m recorded in 2018). The net financial result was more favourable primarily due to the lower negative exchange rate differences, which were partly a result of the decline in foreign currency exposure of Russian companies and partly due to the strengthening of the Russian ruble since the beginning of the year. Finally, as a result of the aforementioned, AD Plastik’s bottom line decreased 12.5% YoY to HRK 27.9m.

    Turning our attention to the balance sheet, indebtedness rose as AD Plastik's net debt went up 10% since the beginning of the year to HRK 419.6m. This was due to investments made into equipment and the financing of the production of new tools for customers. However, considering that AD Plastik’s current indebtedness translates to 2.7x net debt/EBITDA, we see no immediate reason for concern. 

    When talking about the 2019 outlook, the Management stated that they expect FY 2019 sales to rise 10% YoY, while EBITDA margin is expected at 13% and net profit margin at 6.5%.

    AD Plastik’s Q1 results were affected by the change in production cycle, which should be mitigated by the end of the year, however until we derive a functioning model, we keep the share price under review.