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Equity Squibs from the 15 March




Hypo Alpe-Adria-Bank


15 Mar 2013





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Slovenian generic drug producer Krka Group released unaudited consolidated financial statements for FY12 with 1.8% yoy lower net profit of EUR159.8m. Sales increased 6.3% yoy (slightly below peer group average sales growth +6.8% yoy) to EUR1.14bn underpinned by growth in East Europe Region which grew up 24% and constitute 31% of group sales. In the Russian Federation, which is the largest market in East Europe Region as well as Krka’s largest single market, Krka sold EUR244.2m, a quarter more than in 2011. West Europe and Overseas markets, 23% of group sales, grew up 5% yoy, mainly increased by partners operating in the new overseas markets and strengthened sales network in few markets. Region Central Europe and Slovenia were laggards, both recorded sales down by 2% and 11%, respectively. Strong price reductions caused by austerity measures in the field of health care in Hungary were the key factor in negative growth in Central Europe. On profits, EBITDA decreased surprising 5.5% yoy and thereby scalping EBITDA margin by 310bp to 24.7%. The main drag to EBITDA was opex increase (+8.2% yoy) due to 11.2% yoy higher distribution costs and COGS increase (+12.2% yoy). Net financial result was significantly better than in 2011 thanks to increased financial income, saving bottom line from a bigger drop. Management guidance for 2013 is a 5% increase in sales and net profit on the same level like in 2012. Targeted dividend payout ratio remains unchanged at cca. 30%. Company plans to invest EUR182m in 2013, 19% more than in 2012, mainly in expanding and modernizing production and R&D capacity. The largest maker of home appliances in Slovenia, Gorenje posted 19% yoy lower pre-tax profit of EUR14.8m in FY12 mostly on the back of deteriorated sales performance (-9% yoy). The overall top-line came in at EUR1.3bn while segment analysis shows decrease in sales of Ecology (-14.2% yoy) and Portfolio Investments unit (-17.9% yoy). The former was hurt by lower volume operations due to expiry of 5-year contract with Slovenian industrial partner. On a more positive note, Home segment grew by 1.7% yoy supported by strong sales increases in the last quarter on East Europe markets. On profits, Gorenje’s EBIT grew by 3% yoy thanks to 12% yoy lower COGS as the result of more favorable purchases of raw materials, as well as improved sales product mix. Consequently, operating margin inched up to 3.6% in FY12 (vs 3.4% in FY11) while EBITDA margin reached 7.2%. However, the bottom line was affected by increase in net financial loss that amounted EUR30.9m partially due to higher impairments of certain investments. A look at balance sheet reveals improvement in leverage position as net debt fell by 1.1%, but also more favorable maturity structure (64% share of long-term financial liabilities in total fin. liabilities). Also, net debt/EBITDA remained at 4.2x in FY12. Looking ahead, the management plans further restructuring of manufacturing operations that will include moving the production of certain products from Sweden to Slovenia. The latter will put significant pressure on company’s performance, particularly in 1H13. It is estimated that overall restructuring processes will result in EUR15m-worth annual savings while full positive effect should be manifested in 2014.

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