The Slovenia Times

Positive Half Year Results



When it comes to good performances, those are not limited to one sector only but are recorded across different sectors, from pharmaceuticals to telecommunications and retail.

The right medicine

The group around pharma company Krka generated EUR 92.4m in net profit in the first half of 2011, which is one percent up compared to the same period last year. Krka generated sales of EUR 488.7m, up two percent year-on-year, while the group sold goods and services worth EUR 528.8m, a six percent increase.
The biggest share of products for foreign markets went to Central Europe (30 percent), followed by Eastern Europe (25 percent), Western Europe and overseas markets (21 percent) and Southeastern Europe (14 percent). Most of Krka's goods and services went to Russia, where it generated sales of EUR 92.8m, up five percent compared to the fist half of 2010.

Keeping up with crisis

Similarly, Slovenia's 'best neighbour' continues with upward trend financially, reporting in August a EUR 18.52m net profit for the first half of 2011 - a 4.9 percent increase year-on-year. Revenues increased by 6.1 percent to EUR 1.42 billion, exceeding plans by 48.1 percent.
Mercator's supervisors, however, are cautious and acknowledge the volatility of the current economic situation in the countries where the retailer operates.
"In the first six months all of Mercator's markets saw an increase in the number of unemployed, while dearer raw materials had a negative impact on consumption. Also still noticeable is an increase in default on payments and loan activity by banks remains below pre-crisis levels," the press release says.
Mercator's measures included lowering the prices of more than 2,000 products, which required an investment of almost EUR 12m in this period. The Mercator group spent a total of EUR 67.78m on investments in the first six months of the year, mostly for the development of its retail network. The surface area of the company's operations expanded by more than 31,000 square metres, almost half of which where in Serbia.

Hitting the jackpot

Although it was expected the company will make a loss of at least half a million euros, Slovenia's biggest casino operator Hit recorded revenues to the tune of EUR 96.1m and a pre-tax profit of EUR 2.2m in the first seven months of 2011. The company paid EUR 25m of gaming taxes in the mentioned period and lowered its liabilities to banks by EUR 7m to EUR 101m, Hit CEO Drago Podobnik stated.
The number of visitors to Hit slot parlours and casinos increased by one percent to 757,000, while the number of overnight stays in its hotels grew by almost 16 percent to 82,000 in comparison with the same period last year.
Podobnik said the company is working hard to attract guests from foreign markets in the light of the decrease of visitors from Italy, where the competition in the form of almost 30,000 slot machines was becoming increasingly strong. He added the company succeeded in attracting some wealthy guests from Russia and Ukraine to the casinos in Nova Gorica and Kranjska Gora, and it was hoping to attract visitors from the Scandinavian countries and China.

Good...but is it good enough?

The beverage maker Pivovarna Laško nearly doubled its net profit in the first six months of 2011, generating EUR 11m compared to EUR 6.2m for the same period in 2010. The group's net revenues amounted to EUR 161m, up nearly 4 percent year-on-year. Pivovarna Laško CEO Dušan Zorko said the results were good but they were not good enough for the banks. He expressed hope the banks will show understanding for the company's efforts to reprogramme the loans, as the group was entering new markets.
Pivovarna Laško chief supervisor Vladimir Malenkovič expressed belief that simply reprogramming the loans will not be enough, therefore, the beverage maker will have to make additional divestment. He expects the management of Laško to inform the supervisory board at a session planned for September about a cost-cutting plan for the group that employs 1,800 people.

Favourable results

Telekom Slovenije meanwhile, recorded a five-fold increase in its net profit in the first six months of 2011, generating EUR 25.1m. Revenues were, however, down three percent to EUR 402.3m, according to an earnings report released by the company.
The results are favourable, Telekom Slovenije chairman Ivica Kranjčevič told the press, adding the group has already come close to achieving its yearly goal - EUR 28.1m in net profit.
The group registered EUR 138.3m in earnings before interest, tax, depreciation and amortisation (EBITDA), up five percent compared to last year, while its earnings before interest and taxes (EBIT) stood at EUR 40.3m, a 61 percent increase.
Telekom Slovenije has implemented a number of measures for lowering costs, restructured the activities of its affiliates abroad, implemented changes in sales and marketing, renewed its business processes and optimised its operating capital, all in line with its strategic plan for the period until 2015.
The group has meanwhile severely cut back on investments. Most of the total sum, EUR 30m, went to Telekom Slovenije (EUR 13.5m), its mobile arm Mobitel (EUR 8m) and its subsidiaries in Macedonia (EUR 2.5m).

Low on energy

Energy company Petrol reported EUR 21m in net group profit in the first half of the year, which is down six percent on the same period last year. Meanwhile, net sales revenues rose by 17 percent to EUR 1.5bn.
EBITDA rose by 11 percent year-on-year to EUR 51.8m and operating profit by 16 percent to EUR 35.1m, according to a semi-annual operating report posted on the web site of the Ljubljana Stock Exchange last month.
The strained economic situation continued to affect the group's operations in the first six months of the year, the management stated in the report. Despite the projection of a 2.2 percent economic growth for Slovenia this year, business conditions will remain strained, mainly due to payment defaults and failures of construction and other companies, Petrol said. As other negative factors affecting the company's operations, the management pointed to the forecast increase in unemployment and inflation.
At the end of June, the group operated 444 service stations, of which 313 in Slovenia, 81 in Croatia, 38 in Bosnia-Herzegovina, six in Serbia, three in Kosovo and three in Montenegro.

Writing down the losses

Banks are similarly struggling with achieving higher profits. Slovenia's second biggest bank, NKBM, generated a net profit of EUR 5.6m in the first six months this year, which is a nearly 50 percent drop compared to the same period last year, when its net profit reached EUR 10.2m. The bank says that poor net profit was the result of write-offs amounting to EUR 31.6m.
The management is nonetheless satisfied with the bank's performance, according to the bank's press release. The bank's pre-tax profit stood at EUR 7m, amounting to 50.1 percent of annual plans. In the same period last year, NKBM's pre-tax profit was EUR 15m.
Slovenia's largest bank, NLB, generated a modest EUR 0.9m in after-tax group profit in the first half of the year. The profit at the core bank was EUR 1.2m. NLB's operations continue to be affected by impairments and provisions, although these are not as high as in the first half of last year when the bank reported EUR 34.6m in after-tax loss for the group and EUR 20.1m loss for the core bank.
Provisions and writedowns, however, were down 16 percent year-on-year to EUR 90.9m at the core bank, while dropping by 24 percent to EUR 125.6m for the group, but remain high in the face of prolonged turmoil in some sectors of the home economy. NLB stiffened the terms for the approval of new loans both with respect to project eligibility and collateral. But the crisis continued to impact the investment portfolio and the need for extension of loans for the most affected industries. The financing of the non-banking sector was down two percent compared to 2010 to EUR 9.02bn at the core bank and EUR 11.66bn at the group.
Although not all companies are recording sky-high profits, most remain on the right side of zero. However, with worrying forecasts about unemployment and rising inflation, some expect that annual results will paint a different picture.


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