Page 22 - bne magazine July 2022_20220704

22 I Companies & Markets bne July 2022
War and soaring prices take toll on Southeast Europe's listed companies
Clare Nuttall in Glasgow
The war in Ukraine, rising prices and supply chain disruptions are taking their toll on listed companies from Croatia, North Macedonia and Slovenia, company executives and stock market officials from the three countries told a two-day investor conference at the end of May.
Companies from sectors including food, pharmaceuticals, automotive components production, tourism and IT are affected by the crisis, as outlined at the CEE Investment Opportunities conference organised by the Zagreb and Ljubljana stock exchanges on May 26 and 27. While only some have direct exposure to the combatants – such as Croatian IT company Span’s Ukrainian subsidiary or auto components producer AD Plastik’s business in Russia – all are affected by the hikes in food and energy prices.
The Zagreb Stock Exchange’s (ZSE’s) main index Crobex is
now trading around pre-coronavirus (COVID-19) levels, and
is “performing nicely” compared to Western Europe and the
US, according to Danijel Delac, board member of InterCapital Securities. However, as the impact of the war makes itself felt, Delac warned at the conference that “profit margins [of listed companies will] be affected by commodity price explosion and it remains to be seen what the effect will be on dividend payouts”.
Delac listed the headwinds facing companies. "Energy prices exploded, all kinds of inputs are exploding. It's hard to project trends in next years, at the moment that is really a challenge,” he said.
Filip Petrushevski, CEO of Investbroker AD, the co-founder of the Macedonian Stock Exchange, has seen a similar recovery on the exchange in North Macedonia, which started last year when it achieved the biggest turnover in more than 10 years. The exchange’s main index, the MSE-MBI10, was up by 30% in 2021.
However, Petrushevski said that while the recovery had begun last year, there was not a full recovery when the war started. He also noted that the impact of international events tends to hit the Macedonian Stock Exchange later than the Slovenian and Croatian exchanges, meaning more pain most likely lies ahead.
“2021 was the year of recovery, [with] GDP growth in Q2 [the] highest in recent history but also coming after highest
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decline in Q2 2020. With the coming of vaccines things stated reopening and GDP growth ended the year at 4.1%, but reopening had its own issues – the deterioration of supply chains and upward pressure on energy prices made the process of getting back to normal more challenging,” Petrushevski told the conference.
“While there were favourable expectations about 2022, escalated geopolitical tensions, disruptions of supply chains and growth of prices of primary commodities on the intentional market make the assessment for the economy pretty much unfavourable.” He warned that the situation could still worsen if there is a further escalation of the
war, more sanctions, further tightening of monetary policy in developed countries, as well as citing risks related to the pandemic, such as the emergence of new variants of coronavirus.
Span’s Ukrainian business
One of the companies from the region that has been directly affected by the war in Ukraine is Croatian IT company Span. Span held a successful IPO in 2021, using some of the proceeds to fund its international expansion. Today it has more than 1,200 clients on six continents, including major international companies Starbucks, McDonald’s and Tate & Lyle. While relatively small, its Ukrainian subsidiary had been growing strongly.
“Our activities in the war-ravaged areas have not stopped, so we are still providing support to our users in Ukraine,” its presentation said.
“About 60% of businesses are still working, especially in western Ukraine,” said Petra Keca Vidovic, Span’s investor relations manager. Span moved the female members of its Ukrainian team to Zagreb after war broke out, but only a few of the men left Ukraine. Among Span’s biggest customers in Ukraine
are metals company Azovstal, whose steel plant was almost completely destroyed in a months-long seige, and Metinvest.
Keca Vidovic says Span was growing in Ukraine until the end of February. “We will stay there to help them as much as possible and be one of the significant partners in the reconstruction of Ukraine on the software side if possible,” she added.