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Agrokor's 1H13 sales and profitability up




Hypo Alpe-Adria-Bank


02 Sep 2013





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The local food-to-retail conglomerate Agrokor posted HRK332m pre-tax profit in 1H13 vs. HRK2.6m loss in 1H12 thanks to higher sales and lower G&A and net financial expenses. The top-line came in at HRK14bn (+3.6% yoy) driven by 2.9% yoy higher revenues of Retail&Wholesale division (R&W) which in our view mostly came from wholesale segment (notably ROTO) since Konzum (retail arm) recorded almost flat revenues relative (+0.4% yoy). Furthermore, Food, Manufacturing & Distribution division (FM&D) grew 5% yoy thanks to growth of Meat, Edible Oils&Margarines and Agriculture segments. On profits, EBIT grew 19.4% yoy and reached HRK829m driven by improved EBIT of R&W (+19% yoy), while FM&D’s operating profit increased 3.4% yoy. Consequently, overall EBIT margin improved 78bp yoy to 5.9%. Net financial loss improved significantly (-30.3% yoy) thanks to more favorable FX fluctuations (notably RSD, relative to 1H12). However, we believe that FX difference will be less favorable in 2H13 as our macro team sees further weakening of dinar. On balance sheet, Agrokor increased its indebtedness in 1H13 reflected in HRK698m (+6.4% ytd) higher net debt, that reached HRK11.5bn. In our view, this new leverage was mostly needed to back-up ca EUR100m-worth own shares repurchase from the EBRD in June. Nevertheless, net debt/EBITDA remained at the FY2012 level of 3.98x thanks to higher EBITDA in 1H13 (+15.7% yoy). Meanwhile, Mercator Group posted narrowed (-3.8% yoy) pre-tax loss of EUR15m in 1H13 thanks to opex cutting and lower net financial loss. The topline declined 3.3% yoy hurt by deteriorated performance on both domestic (- 3.8%) and foreign (-2.6%) markets. Revenues at home continued to fall on the back of depressed consumers’ sentiment and increased number of discounters (Lidl and Hofer) that are taking part of Mercator’s market share. Also, deteriorated foreign market sales were driven by lower revenues in Croatia (partially on divesting retail units), as well as an exit from Albania and Bulgaria last year. Despite intensified opex reductions (-17.4% yoy), EBITDA slumped 16.1% while EBIT halved amid deteriorated sales. Furthermore, the management’s efforts to improve leverage position resulted in EUR18m lower net debt of EUR990m. Further debt repayment will surely include monetization of Mercators’ real estate (MELR owns ca 72% of its retail area) while debt restructuring deal with its creditor banks is expected to be reached by the end of the year.

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