Earnings Report /
Croatia

Atlantic Grupa: Record results in 2019

  • FY 19 sales up 3% yoy to HRK5.4bn – the highest amount in the company’s history

  • Net profit at HRK390.4mn (+59.8% yoy) and EBITDA at HRK778.7mn (+26.1% yoy)

  • With such strong FY 19 results above our expectations, we are in the process of updating our model

InterCapital
28 February 2020
Published byInterCapital

Atlantic Grupa has done it again – another year and another record broken. FY 19 sales went up 3% yoy amounting to HRK5.4bn, the highest amount in the company’s history. There was revenue growth in almost all business and distribution units due to excellent results of the majority of its own as well as principal brands. If we exclude the effect of revenues of the Strategic Business Unit Sports and Functional Food, which was fully disinvested at the beginning of April, and the effect of the absence of sales of the Neva range, the revenue growth would be 5.4%. 

With such strong FY 19 results somewhat above our estimates, we will look into updating our model and keep the price under review currently. 

Own brands recorded sales of HRK 3.4bn (-0.9% yoy), primarily as a consequence of disinvesting the Sports and Functional Food segment. If we exclude sales of brands from the Sports and Functional Food segment, its own brands would record a 1.9% sales growth. Principal brands recorded sales of HRK1.5bn (+11.6% yoy), with growth mainly based on the increase in sales of principals Ferrero, Rauch, Hipp, Asahi and Unilever and new principals including Mars in Croatia, Red Bull in Serbia and Hipp, Ficosota and Beiersdorf in MacedoniaA significant 9.8% yoy growth was recorded by the pharmacy chain Farmacia with sales of HRK453.5mn due to the increase in sales of the existing and new Farmacia locations. In 2019, five new retail locations were opened and now Farmacia consists of 90 pharmacies and specialised stores. 

EBITDA amounted to HRK778.7mn (+26.1% yoy), or HRK 688.5m (+11.7% yoy) without the effect of the new standard – IFRS 16 leases. The biggest impact on the increase in EBITDA came from the disinvestment of the non-profitable segment Sports and Functional Food and the increase in sales in most business units, despite the increase in cost of services and staff costs. To specify just how important the disinvestment process has been for Atlantic Grupa, one should note that the positive effect from the disinvestment of non-profitable non-core segments amounted to HRK140mn.

Below the operating line, net financial loss amounted to -HRK37mn, which represents an improvement of 26% yoy. Finally, net profit amounted to HRK390.4mn (+59.8% yoy), representing yet another historic result for the company.

Atlantic Grupa continued to deleverage their operations with net debt down by 37% since the beginning of the year and now amounts to HRK547.1 (excluding IFRS 16 effects). When compared to the Group’s normalised EBITDA, this translates to a net debt/EBITDA of 0.9x (down from 1.5x at the beginning of the year).

Outlook 2020

  • Management stated that the focus in 2020 will be on strengthening the position of prominent regional brands, internationalisation of certain brands, primarily Argeta and Donat Mg, development of distribution operations, acquiring new principals, and further disinvestment of non-core business operations that do not have a significant growth potential. 
  • Sales expected to grow 1.3% to HRK5.5bn, EBITDA up 1.1% yoy to HRK 730mn and EBIT up 2.6% yoy to HRK455mn. Capex is expected at cHRK280mn.