Fortenova Group publishes its financial results for H1/2023 and its 2022 financial statements.
In respect of the unaudited consolidated statements, for H1/2023 the company generated EUR 2.7 bn of total revenue, outperforming the same period last year by 9 percent. Adjusted operating profits amounted to EUR 101 million. Net debt has remained below EUR 1.1 billion, with the liquidity on the company’s accounts at EUR 279 million. All of the Group’s business divisions have recorded total revenue growth against the same period last year, though with reduced operating profits. The drop in operating profits is primarily due to the large increase in electricity and raw material costs, increase in salaries, as well as the selling price limits for specific product categories imposed by the Governments in the area.
In respect of financial results for 2022, the audited consolidated results the Group presented total consolidated revenues of more than HRK 40.7 billion or EUR 5.4 billion, exceeding the 2021 revenue by 30 percent. Consolidated adjusted operating profits grew by over 20 percent, amounting to more than HRK 2.3 billion or EUR 310 million, along with a positive net result. At the end of 2022 the net debt was slightly below EUR 1.1 billion, with a leverage ratio of 3.44 times (as per Lender defined terms), which represents half of the leverage ratio that the Group had in 2019, the year of Fortenova Group’s foundation. Cash on the company’s account at year end was EUR 290 million.
“The Group’s operating results continue to show that Fortenova Group has managed to separate its operational performance from its ownership issues, where the presence of sanctioned co-owners in the structure makes it more difficult to achieve a sustainable and efficient capital structure. With the recently executed refinancing with our existing lender HPS, we will no longer have sanctioned entities on the credit side of the Group which delivers on our plans “– said Fabris Peruško, Fortenova Group’s CEO and Member of the Board of Directors.
“The Group delivered outstanding results in 2022 with the growth with the highest ever cash EBITDA and the first full year positive net result coming only from ongoing operations. H1 2023, has as expected been more challenging given the impact of inflation on costs and consumer income and purchasing power. The Group has so far shown considerable resilience given these headwinds with the Retail Group in particularly continuing to perform very well.” – said James Pearson, Fortenova Group’s Chief Financial Officer.
Along with the financial performance indicators, Fortenova Group has also disclosed a thorough and comprehensive overview of the Group’s operating performance in 2022 in its second consecutive Sustainability Report, where it has presented a number of activities and initiatives related to the process of establishing the strategic framework for sustainability management. Those activities have had positive effects on all the markets on which the Group operates – among its customers, clients, business partners, in the local community as well as among its employees and other stakeholders.
The Group is particularly focused on working on its sustainability and on publishing the Sustainability Report, in spite of the numerous challenges that it faced last year. “At no point has this called into question our commitment to one of the company’s strategic priorities – the realization of our sustainability goals and the positioning of Fortenova Group as a responsible corporation. The Report has presented our most important actions when it comes to environmental, social and governance topics in the Group to the broader public and, moreover, offered an in-depth insight into our operations and our environmental impact. We see this thorough annual analysis of all our constituents as an excellent lever in improving transparency and raising awareness of our priorities” – Fabris Peruško concluded.
As presented in the Report, as part of each of the seven key topics that constitute the strategic sustainability framework, in mid-2022 the Group established internal working groups with a view to defining measurable initiatives for the period until 2030. Thus, for example, standing out within the “GHG Reduction” topic there is the project of Scope 1, 2 and 3 calculations for all Fortenova Group companies, intended to set up an action plan for achieving climate neutrality, while as part of the “waste management” topic, all Beverages Group companies are currently implementing the project of introducing the tethered cap. Konzum, for example, initiated the project called Recyclopedia, intended to educate consumers and prevent the creation of food waste in households and was declared the Best Donor for the fifth consecutive time. Along with encouraging short supply chains, a Supplier Code is in preparation as well. Last year the Group also conducted surveys regarding gender equality on all markets and adopted a Diversity, Equity and Inclusion Policy. An important aspect of the Group’s strategic framework is also the topic of initiating a project to identify climate risks and opportunities and build sustainability criteria into investment decisions.
Fortenova Group presented its detailed results for I-IX/2022 to the DR Holders, having confirmed the continuing excellent operating trends in all of its core businesses. As opposed to the preliminary results for the first three quarters that Fortenova Group had presented last week, this presentation featured the same key performance indicators in more detail, as shown in this presentation. The factors with the greatest positive impact on the growth of all of the Group’s performance indicators were the excellent tourist season, significant operational improvements, as well as inflation.
In I-IX/2022 Fortenova Group has thus generated total consolidated revenues from continuing operations of HRK 30.3billion or EUR 4 billion, which is an increase of 38 percent in a year-on-year comparison. Net of the effects of the Mercator integration, total revenues from continuing operations were 15 percent higher compared to the same period of 2021.
At the same time the consolidated adjusted EBITDA of the period has grown 22 percent against last year’s and amounted to HRK 2.1 billion or EUR 275 million. In spite of the high cost of debt and the increased costs of energy and labour, in the first nine months of 2022 Fortenova Group generated profits from continuing operations in the amount of HRK 534 million, which is an improvement of HRK 918 million against last year’s loss of HRK 384 million.
At the end of September Fortenova Group had a cash position of almost HRK 2 billion on its accounts. In parallel, it has continued to reduce its leverage and brought the net debt to adjusted EBITDA, according to the definition of its creditors, down to 3.58 times at the end of the period, thus having halved it from 7.2 times which was the leverage ratio at the point of Fortenova Group’s incorporation.
In comparison to the non-consolidated results at the end of Q3 2021, the 18 companies from the Group’s core businesses – Retail and Wholesale, Food and Agriculture – realized 12 percent more total revenue, while the non-consolidated EBITDA of the core businesses grew by 11 percent.
Retail and Wholesale thus realized 9 percent higher revenue and 9 percent more EBITDA. When it comes to revenue, that growth was supported by numerous activities of the company related to price optimisation and network expansion, and partly also the high inflation, while the focus on store optimisation, synergies and energy saving measures resulted in higher EBITDA. The wholesale segment owes its 18 percent better result primarily to the recovery of the HoReCa channel. Among Fortenova Group’s retail companies, the best results were generated by Konzum Croatia, Mercator B&H and Mercator Serbia, which recorded revenue increases of more than 10 percent. In general, inflation also had the largest adverse effect on the results in retail, having increased the prices of products and services as well as labour costs.
The Food Division companies, on the other hand, were under strong pressure of higher logistics costs through the growth of fuel and raw material prices. Nevertheless, Fortenova Group’s Food Division overall generated as much as 24 percent more revenue, driven by both higher sales and inflation, with all of the companies having recorded double-digit revenue growth compared to the same period last year. A higher growth of EBITDA was neutralized by the aforementioned higher raw material prices, input cost inflation and salary increases and amounted to 2 percent compared to 1‑9/2021.
Revenues in the Agriculture Division grew 7 percent, primarily accounted for by pig breeding, cattle breeding and milk production, while EBITDA grew by 60 percent, mostly due to the growth of agricultural commodity prices and the strong control of operating costs.
While detailed operating results for the period 1-9/2022 will be disclosed by Fortenova Group next week, preliminary results have shown that the Group has within the first nine months of 2022 generated total consolidated revenue of slightly more than HRK 30 billion or EUR 4 billion, which is a 38 percent increase in comparison to its performance in the same period of 2021.
Net of the Mercator integration effects, total revenue from continuing operations has grown by 15 percent in a year-on-year comparison, primarily thanks to the good tourist season, significant operational improvements and partly also due to inflation.
At the same time consolidated adjusted EBITDA of the period grew by 20 percent against last year’s and amounted to more than HRK 2 billion or EUR 265 million. In spite of the high cost of debt and increased cost of energy and labour, over the period 1-9/2022 Fortenova Group also generated profits from continuing operations.
At the end of September Fortenova Group had a cash position of almost HRK 2 billion on its accounts. At the same time it continued with the deleveraging process and achieved a net debt to adjusted operating profits ratio at the end of the period of 3.6 times, thus having halved the leverage ratio that had amounted to 7.2 times at the time of Fortenova Group’s incorporation.
In H1/2022 Fortenova Group generated HRK 18.8 billion of total revenue from continuing operations, which is 57 more than in the same period last year mainly driven by the integration of Mercator. On a like for like basis revenue grew by 14%.
At the same time the Group’s consolidated EBITDA for the first six months of the year exceeded a billion kuna which is 74% more than in the same period last year, while on a like- for-like basis the adjusted consolidated EBITDA grew by 19%.
The fastest growth of revenue was recorded by the companies from Fortenova Group’s Food Division, while the Agriculture Division saw the fastest growth of EBITDA.
Net profits of the period, after exclusion of currency exchange impacts, amounted to HRK 12 million, as against the loss of HRK 213 million after exclusion of currency exchange impacts in H1/2021. At the end of H1/2022 Fortenova Group also had HRK 1.7 billion of cash on its accounts and continuing its already long-term deleveraging trend, it closed H1/2022 with a debt to operating profit ratio moving 3,94 times.
“The strong realization in the first half of the year continues the positive trend that we recorded throughout the last year, with positive underlying business improvement accelerated by the integration of Mercator into Fortenova. This underlying growth is shown by the Group’s total revenue from continuing operations in H1/2022 has grown by 14% on a like for like basis excluding Mercator. These excellent operating results were generated in spite of the negative impacts of inflation on the increase in prices of labour, energy and raw materials and the consequently increased costs across the supply chain. The ’22 tourist season in Croatia is almost at the level of the record year 2019, which is an additional driver for our results that will show its full benefit in the third quarter of the year, which is the most important time period for us” – said Fabris Peruško, Fortenova Group’s CEO and Member of the Board of Directors, commenting on the half-year results.
“Looking further forward the expected changeover to the euro will have an additional long-term positive impact on the Group’s credit profile, as after the conversion 80 percent of our business will be generated in euros. Additionally, the currency risk for our debt will be eliminated,” – Peruško said. He also noted that the process of ownership transformation and the divestment of shares held in Fortenova Group by Sberbank continues and that over the course of H1/2022 the final prerequisites for a court ruling on closing the Extraordinary Administration Procedure in Agrokor will have been met.
James Pearson, Fortenova Group’s CFO, commented that the Group had a very positive first half of the year, having focused on market realization and achieving the planned operational improvements.
“Following the significant deleveraging achieved by Fortenova Group in 2021 by the transactions related to Mercator, the Frozen Food Business Group and a number of non-core business and property disposals, in 2022 we have continued to generate higher revenues and operating profits, which brought about a further decrease in the leverage ratio, which now amounts to 3.94 times which reflects the increasing financial strength of the Group. ” – Pearson said.
Fortenova Group’s 2021 total consolidated revenue from continuing operations amounted to HRK 31.4 billion, with consolidated adjusted EBITDA in the amount of HRK 1,955 million and a net profit of HRK 523 million after the gain on the sale of the Frozen Group. The Group closed the year with HRK 1,872 million in cash on its accounts.
These results equate to a growth of consolidated revenue from continuing operations of 65 percent and adjusted consolidated EBITDA growth of 52 percent vs 2020. The main driver of the consolidated results performance is due to Mercator Poslovni Sistemi, being consolidated into Fortenova Group’s results as of May 1st, 2021.
Compared to the 2020 year-end results, the 18 companies from the Group’s core business, excluding the Frozen segment that has been sold and including full year of Mercator Group companies, recorded on a like-for-like basis a revenue growth of 5 percent, an increase in EBITDA of 20 percent, and an increase in EBIT of 64 percent.
These positive growth trends have continued in 2022 and in Q1 2022 our 18 companies from the Group’s core business realized on a like-for-like basis higher net sales revenues by 6 percent, higher EBITDA by 2 percent and higher EBIT by 6 percent, compared to Q1 last year.
„We had very strong performance last year and in the beginning of this year with the key achievements being Mercator’s refinance, transfer and integration along with immediate delivery of planned synergies, closing of Frozen segment sale and resulting deleveraging in Q3 ‘21 as well as significant operational improvements and a good summer season. As a result, our net profit of HRK 523 million shows an improvement of HRK 1.8 billion compared to 2020 and our cash position remains very strong, with HRK 1.9 billion at the end of 2021.
We can look back at a really excellent year, in terms of the results and strengthened capital and financial structure that have set the foundations for continued growth. All activities that we have pursued were aimed at increasing our value as well as Fortenova Group’s overall corporate and social responsibility, in the sense of impact we have on the economies across the region as this region’s largest employer.
I am especially proud of the fact that everything that we have done has also resulted in meeting one of our most important goals – raising the investment strength of Fortenova Group, which is now in the position to pursue a regional investment cycle worth over EUR 130 million in ‘22. All our investments are focused on more sustainable and more efficient operations, so that they can further build on their leading positions. I would also like to emphasize that in addition to all of that, in 2021 we have set very ambitious ESG objectives and have prepared our first Sustainability Report, which will be published in the coming days” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, summarizing the key features of the 2021 operations.
James Pearson, Fortenova Group’s Chief Financial Officer, said that “We continue to deliver on our planned financial strengthening and simplification of the Group. Through the transactions dealing with Mercator, Frozen Group as well a number of non-core and real estate sales we reduced debt in 2021 by HRK 4.4 billion which led to an underlying leverage ratio of 4.3x at year end. This is a significant decrease from the 6.8x leverage ratio we had at the beginning of the year and demonstrates the great step we have taken.
The results are also a testament to ability and great resilience of the Group’s employees. Despite covid, earthquakes, supply chain pressure, inflation etc they continue to deliver whether improving customer service, improving existing offers or developing new ones all of which is all leading to the reported results.” – Pearson said.
Fortenova Group, now reporting with Mercator consolidated from 1st May 2021, and also benefiting from improved trading condition vs H1/2020, recorded a consolidated revenue from continuing operations increase of 35 per cent. In addition, H1/2021 adjusted consolidated EBITDA was 14 per cent higher, and the Group recorded a net profit in the amount of HRK 318 million vs a loss in H1/2020. At the end of H1/2021 the Group also had more than HRK 1,8 billion of cash on its accounts so maintaining its strong liquidity position. These were the key highlights of Fortenova Group’s half-year results presentation to its depositary receipt holders.
“With consolidated revenues from continuing operations of HRK 12 billion, adjusted consolidated EBITDA of HRK 1.1 billion and HRK 318 million of net profit we can proudly say that behind us is the best first half of the year ever, not only in terms of performance, but also in terms of several major projects having been closed, which have placed the Group on track in terms of strengthening its profitability. First and foremost of these is business integration of Mercator and its consolidation into our financial statements from 1 May 2021. Given the excellent tourist season, the Group is continuing to trade strongly in Q3, and this along with the synergies that we are achieving in Retail, and the expected closing of the Frozen Food Business Group sale to Nomad Foods will mean that the Fortenova Group’s financial position will continue to improve” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, commenting on the results achieved in H1/2021.
When it comes to non-consolidated results of the core businesses pertaining to 21 companies in the Retail, Food and Agriculture divisions of Fortenova Group, the total generated net sales revenue increased by 2.4 per cent, EBITDA grew by 12.5 per cent, while EBIT was as much as 39.5 per cent higher compared to the same period last year, when Mercator is included on a like for like basis.
In terms of the respective divisions, Food division generated the best improvement in results compared to last year, with a 12.5 per cent higher net sales revenues, 23.6 per cent higher EBITDA and 40.1 per cent higher EBIT in the first half of the year, following the impact of COVID-19 on H1/2020 results and the launch of several innovative products on the market in 2021.
The Retail division saw revenue growth of 1.2 per cent, EBITDA grew 10.9 per cent and EBIT grew 65.9 per cent, with Mercator included on a like for like basis. These improvements are a result of synergies, improved general trading as well as the wholesale segment in Konzum experiencing a strong recovery, following the relaxation of COVID-19 measures and the opening of HORECA channels.
Due to the major decrease in pork selling prices vs H1/2020, the Agriculture division incurred a decline in revenue of 12.5 per cent, which resulted in an EBITDA decline of HRK 19 million and EBIT decline of HRK 21 million.
“In H1/2021 Fortenova Group was very focused on in-market execution, delivering planned improvements to the business, and completing a number of key projects. This focus on delivery is clearly shown with improved operating performance, the divestment of the Frozen Food Business Group fully on track, Mercator debt being refinanced alongside 89.73% of its shares transferred to Fortenova Group and its integration into the Retail Division proceeding very successfully, as well as several non-core business divestment transactions being completed, enabling further focus on the core divisions. Overall, this has been a very positive H1 for the Group.” – said James Pearson, Fortenova Group’s Executive Director of Finance.