Economy of Slovenia in 2017. Revenue Growth and Increased Profits in Joint Stock Companies

Improvement of economy in Slovenia, growth of employment rate and increase of salaries, as well as growth of private consumption—all this will soon impact on the performance of the largest Slovenian joint stock companies.

Economic Growth Will Average 14%

The forecasts are as follows.

Revenues from sales will decrease by 1%—from 11.2 to 11.1 billion euros.

However, if not to take into account the performance of the Mercator Company, which this year has sold a part of its non-core activities, the revenues could grow by more than 1%—from 8.6 to 8.7 billion euros.

According to experts, incomes will grow in the Krka, Luka Koper, Gorenje, Intereuropa, Telekom Slovenije, Sava Re and Zavarovalnica Triglav companies. It is expected that revenues will decline in the Petrol, Mercator and Cinkarna Celje companies.

It is planned that the earnings before interest, taxes, depreciation and amortisation (EBITDA), on average, will increase by 4%.

Experts predict that all joint stock companies and groups, with the exception of Cinkarna Celje, will maintain at least the same EBITDA figure as in the current year.

Net income, on average, will increase by 14% and reach one of its highest levels since the beginning of the economic and financial crisis in 2008.

The Mercator and Intereuropa companies have not yet published the data on the expected profit, the rest of the companies plan to increase their profits by 8–21%.

The Growth in Private Consumption and Recovery in the Real Estate Market

In the next two years, it is expected to continue favourable economic trends, economic growth and increase in gross domestic product (GDP). As the State Department of Macroeconomic Analysis and Development (UMAR) noted in its autumn report, the GDP will be accompanied by a high level of household confidence, growth in private consumption and recovery of the real estate market.

The GDP growth forecast for this year is 2.3%, and for the years 2017 and 2018—2.9% and 2.6%, respectively.

“Activity in Slovenia’s economy continues to grow steadily. The private consumption and the private investment have increased, while the net external demand remains an important driver of economic growth,” as noted in the Bank of Slovenia (Banka Slovenije—in Slovenian).

Luka Koper: the Best Figures in the History

The Luka Koper and Intereuropa companies have published the most optimistic plans. According to the forecasts, the port operator will surpass the record operating performance of this year, and the largest Slovenian logistics company, after the restoration associated with the past stranded costs, has returned to the growth path.

The net income from the sale of Luka Koper Group in 2017 will amount to 215.4 million euros, which is 8% higher as compared to the business assessment data for the current year. In the current year, the EBITDA figure is expected to exceed 14%, and the profit will increase by 18%.

In fact, Luka Koper is steadily moving towards the implementation of its ambitious plans, “in particular, experts highlight the rapidly growing turnover capacity of both strategic categories of containers and vehicles.” Thus, the cargo turnover will increase by 4% and reach 22.8 million tons.

Despite this, the Luka Koper representatives state that the achievement of set challenges will largely depend on the conduct of planned investments in the port infrastructure. The most important investment projects will be the increase in the container terminal capacity in the southern part of the pier I, the construction of a new berth for cargo vessels in the sector III, as well as the construction of a multipurpose warehouse on the pier II. To carry out these projects, the port operator will take out a loan.

Intereuropa is Back on the Path of Economic Growth

The Intereuropa Group plans to raise sales revenues up to 142 million euros. Economists expect the company’s EBITDA to increase up to 13.7 million euros and an increase in the earnings before interest and taxes (EBIT) amounting to just under 7 million euros.

The next year, they will direct the main efforts to the trade sector, will develop the existing contracts and look for the new ones, as well as achieve growth in all markets, except Ukraine. “Given the expected decline in sales profitability, we will continue to optimize the management of all costs groups. A lot of energy will be focused on the further computerization of business processes in the Group and on the care about the quality of our services,” the company representatives explain.

Selling unwanted or underused assets also remains an important part of the Group work.

Petrol: Economic Growth Thanks to Market Liberalization

The Petrol Company, the Slovenia’s largest trader of petroleum products, also plans to achieve better results. Its return on sales will remain at the level of 3.6 billion euros, the EBITDA figure will exceed the sum of 150 million euros, and the net profit will be slightly less than 75 million euros.

“In 2017, the economic growth is projected on the Company’s key market outlets in Slovenia and Croatia, but the economic processes will be controversial. To achieve these goals, we will pay special attention to the implementation of the commercial and the accompanying business processes,” the Petrol Company representatives report.

Mercator: Sale of Subsidiaries and Search for Profit

The increase in profit is a key task for the Mercator Group, which has been owned by the Croatian Agrokor Company since 2014. The optimization of production and the closure of unprofitable markets, according to experts, should have a positive impact on the Group’s work outcomes.

The Mercator representatives count on 2.4 billion euros of income, which is below the planned figure for the current year. It is worth noting that in September 2016, the Company sold the largest manufacturer of fashion textiles Modiano, and in early December—the Intersport network of sportswear and equipment stores. “The most significant reduction of income will be noted in Croatia and in Bosnia and Herzegovina because in 2017, these markets will only have the activities related to the real estate,” the representatives of Mercator explain the reasons for the decline of income.

Next year, 68.5 million euros are planned for investments. The lion’s share of this amount is intended for the project on building a logistics and distribution centre in Ljubljana scheduled to open in 2019.

For Cinkarna Celje, this Year IS a Record One, and the Year 2017 Promises to Be Even Better

In the next 12 months, Cinkarna Celje, the main star of the stock market this year, will shine even brighter. In 2017, the Company expects to receive 150 million euros of sales return. However, it is 9% less than in the current year, but it is necessary to take into account the fact that the program on production and sale of titanium sheets is cancelled, causing a decline in revenue by 20 million euros.

Experts predict that the net profit will grow by 17% to reach 10 million euros. The impressive economic growth is the result of increased return on sale of titanium dioxide. It is worth noting that already this year the Company will reach record levels in its production and sales volumes.

The Triglav Company Expects More Awards

The Zavarovalnica Triglav Insurance Group is also optimistic about the prospects of the new fiscal year. It plans to continue running a “financially robust and profitable business.”

The Group management expects to increase consolidated gross premium. As in previous years, similar trends are observed in the field of risk insurance. Due to low interest rates, the investments are expected to cause lower incomes. “In accordance with the strategic guidelines, the Group will continue to consolidate its position in the existing insurance service markets,” the representatives of Zavarovalnica Triglav note.

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The Telekom Figures Go Up

The Telekom Slovenije Company has ambitious plans for the next few years. Already in 2017, the net sales revenue, the EBITDA figure and the net profit should increase.

“The Telekom Company works on a complex market of telecommunication services, where large investments are needed. The Company applies great efforts to perform resource optimization of work and to find new market outlets, such as the electricity market,” Urban Belič, the investments manager in Alta Skladi, d. d., says.

In the following year, the Company’s management expects growth in the operating income and the net profit of 41.3 million euros, which is more than 21% higher than the figure planned for the current year.

The Gorenje Company Has Bright Prospects As Well

The Gorenje Company, the manufacturer of household appliances from Velenje, has not yet submitted any plans for 2017, but its profitability in the current year has improved markedly as compared to the last year.

“The Gorenje Company has predicted a decrease in debts and an increase in productivity even for the last quarter of this year. After a fall in share price, the Gorenje products are relatively inexpensive as compared to the competitors’ products. Next year, we can expect the payment of dividends, the improvement of the work outcomes, the increase in profitability and the reduction in debts,” Urban Belič explains.

All Are Closely Watching the Krka Company

The flagship of the Ljubljana Stock Exchange, the Krka Company (Novo Mesto), has not yet disclosed its plans. In the third quarter of this year, the Company’s work performance was worse than expected, which unpleasantly surprised its investors.

“If to believe the administration forecasts, next year, the Krka Company will produce a little more of operating income and net profit than in the current year. At present, the projected net profit figure is decreased by a third—to 105 million euros,” Urban Belič says.

The management of the Krka Company projects economic growth in the markets outside Europe. The influx will be enabled, including by purchases. The Company is currently developing 180 new generics that will enter the market in the coming years. In 2017, Krka plans to put on the market 15 new medications.

Banks: Increase in Profit and Decrease in Loans to Enterprises

“The banking system again generates income. Its stability and resistance to risks have increased due to recapitalization and partial rehabilitation of problem loans,” the Bank of Slovenia notes.

Economists point out that banks do not make a significant contribution to the Slovenia’s economic recovery, “The dynamics of lending to households is again positive, however, lending to the corporate sector, despite the measures of the monetary policy, continues to decline.”

“In the future, banks are likely to face a decline in profitability due to the likely persistence of low interest rates. The higher costs for compliance with the new regulatory framework will show up as well. Business models of banks will have to adapt to this new environment,” the Bank of Slovenia experts also admit and add that further consolidation of Slovenian banks is essential for economic growth.