Slovenia’s biggest listed companies face headwinds and tailwinds from a turbulent year

Slovenia’s biggest listed companies face headwinds and tailwinds from a turbulent year
By Clare Nuttall in Glasgow April 24, 2023

As results come through from Slovenia’s largest listed companies, there are stark differences in how the economic and political upheavals of the last year have treated them. 

Some, like pharma producer Krka, chemicals company Cinkarna Celje and Slovenia’s biggest bank NLB, reported very strong results. 

Others, notably fuel retailer Petrol, were the economic victims of the Ukraine war that resulted in a hike in inflation in Slovenia and elsewhere. 

Companies are “facing headwinds and tailwinds”, said Danijel Delač, the board member at InterCapital who gave an overview of the situation on the Slovenian capital market to a webinar organised by the Ljubljana Stock Exchange (LJSE) at the end of March.

According to him, the main impact is via commodity prices. This is similar to the threats faced by most European and American markets: high inflation and uncertainty. Despite these issues, the LJSE’s benchmark SBITOP index has recorded 14% growth YTD.

Strong sales and profit growth for Krka 

Novo Mesto-based generic pharmaceuticals company Krka reported record revenues and net profit in 2022. Unaudited net profit shot up to its highest-ever level of €363.7mn, an 18% year-on-year increase, while Krka's consolidated revenues grew by 10% y/y to over €1.7bn in 2022, the highest since its incorporation almost 70 years earlier. 

“In 2022 we faced many challenges and a volatile business environment, especially in some key markets, but thanks to our flexible and robust vertically integrated business model, and quick responses when needed, we delivered strong sales and profit growth,” said Brane Kastelec, finance director of Krka, during the LJSE webinar. 

Russia remained Krka’s single largest market, where sales shot up by 15% during the year to €387mn. Ten million people take Krka medication every day, according to Kastelec. Overall, the Eastern Europe region is Krka’s biggest market, despite a fall in sales in Ukraine, and it also reported significant increases in Kazakhstan and Uzbekistan. 

Investments by the Krka Group totalled nearly €106mn in 2022, up by 60% y/y. Looking ahead, Krka plans €130mn of investments this year, with the largest project being a new facility for the development and production of active ingredients in Slovenia. 

Higher prices all round 

Chemicals producer Cinkarna Celje was hit by the rising costs of raw materials, energy and services, but managed to hike its profit due to high selling prices. 

Unaudited results for 2022 show total sales were 18% higher than in the comparable period of 2021 at €227.2mn, while net profit was 27% higher at €42.3mn, and Ebitda up 27%. 

“Selling prices in 2021 and H1 2022 were rising faster than costs,” explained Ales Skok, president of the company’s management board. 

However, moving forward, “consumption is slowing due to inflation in Europe and the changing mood of consumers … reduced demand is already being felt in many segments,” Skok warned. 

NLB’s financial fortress

The president of NLB’s management board, Blaž Brodnjak, described the bank’s balance sheet as “a fortress”. The “very solid performance” in 2022 is “continuing throughout Q1”, said Brodnjak. 

He also stressed that NLB has not faced any fallout from the crises at SVB or Credit Suisse. Despite disruptions in the US and Swiss banking systems, the Slovenian banking system operates stably and with high liquidity, the Bank of Slovenia said in an update on the sector on March 21. 

Given its strong position, NLB is looking at further expansion after its takeover of Serbia’s Komercijalna banka, though according to Brodnjak there is nothing actionable at this moment. “Our ambition is not cooling down,” he said. 

Record volumes for Luka Koper 

Slovenia’s sole port operator, Luka Koper, recorded all-time high sales, profit and cargo throughput in 2022, despite the challenging economic situation, the company announced on February 23.

Luka Koper Group had an exceptional year in 2022, surpassing all planned financial indicators despite the difficult geopolitical situation, the company said in a statement published by the LJSE in April. 

The higher net revenue from sales was largely due to storage revenue, which was generated by longer hold times in warehouses. 

Net sales revenues of the blue-chip company climbed by 37% in 2022 to €313.5mn, while the net profit soared 133% to €74.2mn. Ebitda was higher by 87% y/y at €114.6mn in 2022.

"In 2022, the Luka Koper Group achieved record business results [and] all indicators exceeded the business performance of the previous year, excluding the investment expenditure, which was lower by €50.8mn, or by 3% from a year earlier," the company said.

Price caps hit Petrol’s business 

Of the major Slovenian companies, energy company Petrol was among the worst hit by developments during 2022. 

Matija Bitenc, member of the management board of Petrol, said 2022 was “not such a good year”, as the company was “faced very strongly with [a] situation on energy markets [that] resulted from the war in Ukraine”. Bitenc referred to “very turbulent times which had negative effects on our business”. 

Specifically, the regulation of motor fuel prices in Slovenia and other markets damaged the company’s performance. The company has initiated a procedure for amicable dispute resolution with the Slovenian and Croatian State Attorney Offices for the compensation for damage resulting from the capped fuel prices in Slovenia of €107mn, and a further €56mn in Croatia.

Slovenian blue-chip fuel retailer Petrol said on March 17 it posted a net loss of €2.7mn as a result of the uncertain business situation.

However, the loss was still lower than the planned loss of €12.1mn, which had been anticipated due to worsening business conditions caused by the energy crisis and measures taken by government to mitigate its consequences. 

For this year, the Petrol Group expects operations to continue to be strongly affected by the regulation of the selling prices of fuels and energy products, the exacerbation of purchasing conditions, and inflation, to which the group will respond by optimising costs.

Other energy companies also struggled. Slovenia’s largest energy trader Gen-I posted consolidated net profit of €29.5mn in 2022, a decline of 58% from a year earlier.

However, the company’s sales revenues increased by 21.5% to nearly €4.1bn, according to preliminary data published on the Ljubljana Stock Exchange (LJSE) website. Ebitda dropped to €52.7mn in 2022 from nearly €93mn a year before.

“Despite the turbulent conditions on the energy markets, the Gen-I Group operated stably in 2022 and ended the year above the expectations from the business plan, with most of the merit to be attributed to the activities on the international wholesale electricity and gas market,” the company said on March 20.