Revenue in Q2 2022 increased by 9% and amounted to HRK 1.24bn, driving the H1 2022 sales to an 8.8% YoY increase, amounting to HRK 2.42bn. The increase was driven by the Food segment revenue growth, which increased by 11.5%, while the Pharmaceutical segment declined by 0.3%. The increase in the Food segment was driven by increases in sales across almost all BUs, with the highest absolute growth recorded by BU Basic Food (HRK 72.1m or +21.3%), and BU Bakery (HRK 38.3m or +14.3%). Meanwhile, BU Culinary recorded only a slight 0.1% increase. It should also be noted that Podravka made the reorganization of its Food segments due to the integration of Žito, so new segments were introduced. Pharma segmentwas down by 0.3%overall, with own brands decreasing by 1.4%, mainly as a result of the decreased sale of prescription drugs, especially in Russia. At the same time, OTC drugs category increased by 5%, while other sales category of the Pharma segment increased by 4.1%, due to the increase in sales in Croatia and B&H. Gross profit amounted to HRK 881.1m, +4.5% YoY, which is slower than the revenue growth due to higher COGS. This was primarily recorded in the Food segment, where prices of raw materials and supplies increased by HRK 133m (+21.6%), and Podravka notes that additional increases are expected in H2 2022.
In H2 2022, EBITDA amounted to HRK 365.2m, +2.4% YoY, because of higher operating expenses, which increased by 9.7% YoY. Breaking this down further, COGS increased by +11.5%, general and admin. costs increased by +6.5%, and selling and distribution costs increased by +10.8%. The increasing trend in prices of energy, raw materials, and supplies is something that has already been recorded by the Company in Q1 2022, and the current situation is not ideal, with gas prices already significantly higher on a YoY basis (Podravka notes that after 1 October 2022, new gas contracts will be at least 7 times higher if current prices remain). The net financial result amounted to HRK -3.2m, mainly due to unfavourable movements in foreign exchange differences on borrowings and lower interest expenses. Finally, net profit after MI amounted to HRK 198.2m, a 0.7% increase YoY. Podravka also continues its deleveraging policy, decreasing the total borrowings by HRK 105.4m, resulting in net debt of HRK 168.6m, and net debt to EBITDA of 0.3x.
Overall, the current macroeconomic situation and inflationary pressures are having negative effects on the cost structure of the Company, something that, as Podravka notes, will continue in H2 2022. The decrease in Pharma is below our estimates, while growth in the Food segment is slightly above our estimate. H2 2022 sales stand at 49% of our 2022 estimates, so it is closely in line with our projections, and as such, we keep our current HOLD recommendation