Earnings Report /
Croatia

Adris Group: Diversification has its merits

  • Tourism segment affected by the pandemic, so sales down 39.7%

  • Food segment – sales +25% YoY as closure of restaurants steered demand towards retail chains

  • Insurance showed resilience with flat GWPs while net profit of CO is up by 7.5% YoY

Tea Pevec
Tea Pevec

Head of Research

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InterCapital
6 May 2021
Published byInterCapital

In Q1 2021 Adris’ sales amounted to HRK 964.9m which represents a 2.9% YoY increase. Meanwhile, net profit soared from HRK 3.5m to HRK 10.7m while net profit after minorities is somewhat improved compared to Q1 2020 (+3.5m HRK).

Tourism segment

Sales of the Tourism segment amounted to HRK 41m and were 39.7% lower than in Q1 2020. However, this doesn’t come as a surprise when considering that Q1 2020 was mostly uninterrupted by the effects of the COVID-19 pandemic, while Q1 of 2021 was entirely impacted. EBITDA amounted to HRK -23m (vs HRK -21m in Q1 2020) and net loss to HRK -106m. However, one should note that Q1 does not play a significant role in the overall FY result of Croatian tourist companies. We remain relatively positive on the Croatian tourism outlook for 2021.

The Food segment recorded sales in the amount of HRK 126m, representing a 25% YoY increase

The segment benefited from the closure of many restaurants which steered demand towards retail chains. As a result, in Q1 2021, Cromaris sold 2,638 tons of fish which represents a 30% YoY increase. Foreign markets continued to dominate the sales structure by accounting for 88% in terms of quantities sold and 89% in terms of sales.

Insurance segment

Adris’ result was further backed by a solid performance of Croatia osiguranje, which reported relatively flat GWP development (-0.2%) of HRK 741.63m. Of that, the non-life segment, which accounts for 86% of total GWPs, remained flat (+0.1%), while life noted a slight decrease of 2% YoY. When looking at net premiums earned, one can note an increase of 3.2% or HRK 22.9m. The increase in net premiums earned came on the back of the non-life segment (+4.4%). Gross claims paid amounted to HRK 389.3m, which represents a very solid decrease of 28.6% or HRK 156.1m. Such a decrease could be attributed to the fact that in Q1 2020 Croatia osiguranje paid out significant claims related to the Zagreb Earthquake. On the operating expenses side, acquisition costs increased by 22.6%, mostly on the back of other acquisition costs.

When looking at the net investment income, one can note a decrease of 27% to HRK 107.5m, partially due to lack of FX gains reported in Q1 2020.  In 2021, Adris noted a very solid bottom line increase of 7.5% to HRK 128m.

Overall, Adris’ Q1 2021 results were obviously driven by the food and insurance segment as the tourist operations remain burdened by the pandemic. Furthermore, we believe that similar trends might be expected in the upcoming quarter while we expected growth, especially tourism, in Q3. Lastly, we find that the diversification strategy showed its importance during the Covid crisis and that the company is strongly positioned to benefit from pandemic wearing down.