Earnings Report /
Croatia

Atlantic Grupa: Results in Line with Estimates

  • In 9M 2022 Atlantic Grupa sales increased 10.8% YoY, because of both volume and prices growth

  • It is app. in line with our estimates as we expected 2022E sales growth of 8.3% YoY

  • Management of Atlantic expects profitability to improve from 2024 which is in line with our analyses

Tea Pevec
Tea Pevec

Head of Research

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InterCapital
2 November 2022
Published byInterCapital

In 9M 2022 Atlantic Grupa sales increased 10.8% YoY, because of both volume and prices growth and it is app. in line with our estimates as we expected 2022E sales growth of 8.3% YoY. The sales were up due to strong tourist season in Croatia, while Croatian sales made 35% of total sales in 9M 2022 and grew 11% YoY. Other markets also performed strongly, with Serbia (23% of sales) and Slovenia (17% of sales), growing 15% and 8% YoY, respectively. The best results are recorded by the SBU Beverages (+19.0%) and SBU Coffee (+15.9%) and SBU Pharmacy business (+13.2%). SBU Savoury Spreads grew 7.3% YoY in 9M, while its growth in 3Q slowed down to 1.5% YoY. Own Brands recorded sales of HRK 2,986m (+10.7% YoY), following the growth of almost all categories. Principal Brands recorded a 10.2% YoY growth with sales of HRK 1,286m, as a result of strong growth of business with principals Red Bull, Rauch and Mars.

EBITDA amounted to HRK 667.8m, representing a 20.3% YoY decrease which is in line with our estimates for a decrease in profitability due to a faster increase in operating expenses (+16.1% YoY). Cost of goods sold increased 9.5% YoY as a result of growth of sales of principal brands (+10.2% YoY). Looking at costs by size, the biggest one pertaining to 32.3% in sales - material & energy costs - grew 32.5% YoY, as production materials grew 31% YoY and energy 78% YoY. Still in Q3 slow down to 29.1% YoY growth of this cost item was evidenced. On the other hand, other operating expenses, the third biggest cost item with 9.1% in sales sped up its growth in Q3 to 26.6% and in 9M grew 16.3% YoY. Costs of services (part of other operating expenses item) were up 12% (vs. 7% in H1), due to higher sales and significantly higher transport and logistics costs, because of higher fuel prices and salaries compared to the same period of the previous year. Employee expenses, the second largest cost item with 15% of sales, slowed-down its growth to 4.9% YoY (vs. H1 growth of 6.6%), with no. of employees basically flat YoY amounting to 5,477. Marketing and selling expenses were down 1.2% YoY, because of disposal of Bebi brand. EBITDA margin was down 441 bp YOY, while management’s expectations for the whole 2022 is a decrease of app. 400 bp YoY. Finally, net profit amounted to HRK 270m, representing a 32% YoY decrease, and is almost the same as our 2022E net profit for 2022E.

9M top-line results are above our estimates, because of stronger increase in prices of main products as opposed to what was envisaged by our model. Current financials are in line with our 2022 estimate as 9M 2022 EBITDA stands at 91% of our 2022E, and we expect that current trend of margin pressures to persist in the final quarter. Our target price of HRK 408.00, stand at 21% above market, as our company report was done in June when company’s share was priced much higher due to lower interest rate environment. Management of Atlantic expects profitability to improve from 2024 which is in line with our company analyses, so we keep our current recommendation.