February the 28th, 2023 - The Croatian AD Plastik company hasn't been immune to ongoing geopolitical issues causing havoc for the economy, and while figures of 826 million kuna for 2022 sound encouraging, it's a big step down when compared to 2021.

As Marija Brnic/Poslovni Dnevnik writes, according to all announcements, the crisis with the shortage of semiconductors is gradually coming to an end and it is expected that it should end by the end of this year, at least according to Marinko Dosen, the CEO of the Croatian AD Plastik company. Issues following sanctions against Russia owing to their horrific invasion of neighbouring Ukraine have caused issues for just about every company, and AD Plastik hasn't been immune.

The group's operating income fell by 26.6% compared to 2021, to 826 million kuna. Normalised EBITDA amounted to 0.94 million kuna and was also lower by a staggering 99.3%, and with the adjustment values included, the net loss at the group level amounts to almost 80 million kuna in total.

The Croatian AD Plastik company's problems go hand in hand with current geopolitical ones and war in Europe. It has two factories in Russia, which stopped production after their main customers left Russia after the beginning of the aggression against Ukraine in February 2022. In the meantime, production did manage to be established in one of them, but with very significantly reduced capacities.

Back in pandemic-dominated 2021, which wasn't either for most business either, 27% of a grand total of 1.23 billion kuna in revenue was generated in Russia, while in 2022, that share fell to around 14%, with revenue on the EU and Serbian markets falling to 14%, and in Russia - by 61%. The Croatian AD Plastik company therefore focused almost entirely on the European market, and 205 million euros worth of work was contracted in 2022, mostly for Stellantis, with the start of serial production for most of the contracts set for 2024.

The positive thing for the Croatian AD Plastik company's report is the associated company EAPS from nearby Romania, in which it holds 50 percent ownership, and which, thanks to the business it contracted with Dacia Duster, achieved an increase in revenue of 35% (standing at 725 million kuna) and profits of 150% (76 million kuna).

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August the 2nd, 2022 - The Croatian AD Plastik company has contracted a job worth a massive 31.2 million euros with the French-Italian enterprise Stellantis, and it isn't the first time it has succeeded in doing so.

As Poslovni Dnevnik writes, the Croatian AD Plastik revealed last week that it has contracted new jobs for the European market worth a huge 31.2 million euros in total.

"The AD Plastik Grupa (Group) has contracted new business with the buyer Stellantis for the European market, with expected revenues of 31.2 million euros and an expected duration of the project of seven years," reads the statement according to a short announcement on the Zagreb Stock Exchange.

This is already the third significant deal the Croatian AD Plastik company has managed to contract with the French-Italian automotive group during this year alone. It's worth noting that back in March this year, the Croatian AD Plastik company reported on a deal contracted with Stellantis worth 71.5 million euros, and at the end of June, it did the same with a contract worth an even higher 85.9 million euros.

On Wednesday last week, the Croatian AD Plastik Grupa reported on its business results for the first half of this year, in which a net loss of 59.46 million kuna was recorded. This loss includes value adjustments in the amount of 75 million kuna made on the basis of an assessment of the recoverability of the assets of the Russian companies of the group, which is of course something which required an overhaul following the Russian invasion of Ukraine and all of the sanctions placed on the country as a result.

The Group's operating income amounted to 433.09 million kuna, which is 30.4 percent less, and the normalised EBITDA of 18.58 million kuna is a significant 77.5 percent lower.

In the report from AD Plastik Grupa, they stated that the half-year results of the group's operations were largely characterised by geopolitical events and the consequences of the semiconductor shortage crisis on the market.

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June the 24th, 2022 - The Croatian company AD Plastik has contracted a job which will last for nine years worth a massive 859 million kuna.

As Poslovni Dnevnik/Darko Bicak writes, the most important Croatian player in the production of auto parts, AD Plastik Group, has contracted new deals with the Stellantis Group for the European market, with expected revenues of 85.9 million euros over the projected duration of the project, which is nine years.

Stellantis NV is a multinational car manufacturing corporation founded only in 2021 based on a cross-border merger in a 50-50 ratio between the Italian-American conglomerate Fiat Chrysler Automobiles (FCA) and the French PSA Group. The company is headquartered in Amsterdam, and last year they reported operating income of 15.3 billion euros.

Stellantis' core business is the design, development, production and sales of cars from its sixteen brands: Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS, Fiat, Fiat Professional, Jeep, Lancia, Maserati, Mopar, Opel, Peugeot, Ram and Vauxhall.

At the time of the merger, Stellantis had approximately 300,000 employees and a presence in more than 130 countries with production facilities in 30 countries. This is a significant step forward for the Croatian company AD Plastik, which has faced challenges due to the war in Ukraine and the consequent EU sanctions against Russia.

Namely, the company based in Solin, Russia, has two factories, where it generated as much as 27% of its total revenue. Back in 2021, the Group generated more than 305 million kuna in revenue in Russia. There is no forecast for 2022 owing to the ongoing dire situation in Ukraine following Russian invasion in February this year.

Their main customers on the Russian market were Renault and Volkswagen, which hold half of the market there. Both companies suspended operations in Russia, a move which was also reflected within the Croatian company AD Plastik.

Marinko Dosen, President of the Management Board of AD Plastik, recently pointed out that the shutdowns are temporary, but also that it's difficult to predict the final impact on their business in the Russian market, and that AD Plastik's Russian factories are ready to continue production.

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March 18thund 2020 - An overview of the Croatian equity market and how it reacted to the Russian invasion of Ukraine.

On the 24^th of February 2022, a full-scale Russian invasion of Ukraine began. The world was struck and this was also evident when looking at the capital markets which reacted very suddenly and there was a lot of volatility in the markets.

The Croatian equity market can be observed by looking at the benchmark index CROBEX10 which is made up of 10 Croatian blue-chip companies with the largest free-float, liquidity, and market capitalization. CROBEX10 fell by 6,47% on the first day of the invasion falling from 1284.56 to 1201.42. The downward trend has started even before that which is not odd since financial markets are to a large extent forward-looking.  CROBEX10 reached its peak on 19^th January at 1342.93 and has from there slipped down to 1152.36 on March 8^th, cumulatively falling by 14,19%, and technically speaking entering into a correction phase. From March 8^th to March 17^th at the time of writing this article CROBEX10 has soared back up by 6,57% and it reached 1228.

When comparing Croatian CROBEX10 with other European and American market indices we can see that some Indices experienced an even more drastic market sell-off. Most notably Polish WIG fell by 11%, Hungarian BUX fell by 10%, and Slovenian SBITOP and Austrian ATX dropped 7% on the first day of the invasion. 

Some of these indices have managed to return near the price levels as before the war while others are still deep in the red zone. As of 17^th of March, Austrian ATX is at -9%, Cezch PX and Hungarian BUX at -6% while Croatian CROBEX10 is at -4% compared to their price levels on the 23^rd of February.

When looking at CROBEX10 and its 10 constituents we can see that on the first day of the invasion the biggest drop can be seen in Ad Plastik -18%, Atlantska Plovidba -12%, and Podravka -9%.

It is interesting to see how the market reacts to an unpredictable event such as this war and it is the best indicator of the extent of exposure these companies have to Russian and Ukrainian markets. As of the 17^th of March, most of these companies are near the price levels before the war. Two companies that made an official statement to ZSE and which are clearly exposed to these markets are AD Plastik and Podravka which is also seen in their price level which is currently -33% and -7% respectively, compared to the price levels before the escalation.

AD PLASTIK

AD Plastik is a Solin-based manufacturer of automobile components. Unfortunately, AD PLASTIK is largely impacted by the Russian Ukrainian war. They have two factories in Russia which together account for around 25% of their revenue according to their statement published by ZSE. These two factories sell exclusively to the Russian market and through them, AD Plastik is exposed to the fluctuation of the Russian Rubble. The AD Plastik share price was falling from the start of the war on the 24^th of February until March 7^th falling by 44% and whipping out nearly 300 million HRK from their market capitalization. As of 17^th March, its share price has scaled up to 105 HRK which is a 20% increase but it is still 33% lower than the share price before the start of the war.

The additional burden was the release of their 2021 financial statements on the 24^th of February, which showed a drop in operating revenue by 6.8% and a drop in their EBITDA margin by 273 bps. This is most likely caused by the chip shortage and other supply chain problems in the automobile industry.

On a positive note, on March 9^th, they made a public statement announcing a new contract with Stellantis Group and Motherson Group for the European market which are together worth 73,6 million Euros.

PODRAVKA

Podravka is Koprivnica based food and pharmaceutical company. According to their statement published on ZSE, the group’s exposure to Russian and Ukrainian markets account for less than 6.5% of their sales revenue. Belupo, their pharma division, had 37,1% of international sales in Russia according to their 2020 annual report. Considering that their pharma division had significantly higher EBITDA margins In 2021 with 20.5% compared to 10.6% in the food division, it Is likely that investors expect a decrease in EBITDA margins in the coming period.

On the positive side, their 2021 financial report recorded a 2.8% increase in the group’s sales revenue and a 64 bps increase In their EBITDA margin.

To conclude, the Croatian equity market has been through a few turbulent weeks and has managed to partially recover but we are still surrounded by a high level of uncertainty, with the war in Ukraine still raging, with rising inflation, and the upcoming interest rate hikes it will be a challenge for the whole world and especially for the European continent.

Disclosure: I do not own any of these shares and this article is purely for informational purposes and should not be used as the basis for any investment decisions.

SYMBOLS

EBITDA – earnings before interest taxes depreciation and amortization

WIG - Warsaw Stock Exchange General Index (WIG) 

BUX -Budapest Stock Exchange  Index

SBITOP – Ljubljana Stock Exchange  Index

ATX - Austrian Traded Index

PX- Prague Stock Exchange  Index

S&P500 - Standard and Poor's 500  Index

EURO STOXX 50 - stock index of Eurozone stocks 

CROBEX- Zagreb Stock Exchange  Index

Sources: zse.hr , pse.cz , RGFI , marketwatch.com , wienerborse.at, ljse.si

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December the 3rd, 2020 - The ongoing coronavirus pandemic has caused numerous often very serious issues for economic activity all over the world, but despite these woes, the Croatian AD Plastik Group has contracted 24 million euros in new business for no less than Suzuki's redesigned S-Cross model, the auto parts manufacturer from Solin announced on Tuesday.

As Poslovni Dnevnik writes, the AD Plastik Group will deliver various exterior and interior components from three of its locations, so that, in addition to its Hungarian factory, components for this Japanese car manufacturer will be delivered from factories in Solin and Zagreb for the very first time.

The Croatian AD Plastik Group has also become a development partner for Suzuki and a supplier in its painting technology. The company is responsible for the development of some extremely demanding products, which gives the project even more significance, and at the same time, Magyar Suzuki Corporation recognised the factory in Zagreb as one of the best in the entire region when it comes to painting technology, according to the AD Plastik Group.

The estimated duration of the project is currently seven years, and the start of serial production is planned for the end of 2021 at the Hungarian factory - Esztergom.

A member of the management board for the sales and projects of the AD Plastik Group, Mladen Peros, pointed out that one of their strategic goals during the acquisition of the production location over in neighbouring Hungary was the diversification of their customer portfolio.

''The job we've contracted is very important for the future development of the business because we've expanded our cooperation, contracted aspect positions with added value and also entered the panel of development suppliers. We agreed on part of the work as a first-tier supplier, and part as a second-tier supplier through the company Euroasia, which is their long-term logistics partner,'' explained Peros.

As a development supplier, the AD Plastik Group is responsible for the development and validation of products, processes, tools and devices. In addition to injection molding technology, the project includes dyeing, blowing, chromium plating, extrusion and the assembly of various types of technology that include vibration and ultrasonic welding.

It's also worth mentioning that the Suzuki S-Cross is among the ten best-selling vehicles in all of Central and Eastern Europe, and it is a crossover that has the features of a compact car with solutions used in off-road models.

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ZAGREB, Sept 28, 2020 - Croatian plastic car parts manufacturer AD Plastik said on Monday it had sealed several new deals with carmakers that would be carried out in the coming years.

The company, based in the southern town of Solin, has agreed with the PSA Group the manufacture of grab handles for the Peugeot 308. The project is scheduled to begin in the second quarter of 2021 and last for nine years.

Also agreed was the manufacture of grab handles for TOGG, Turkey's first car maker, for the electric C-SUV.

Grab handles for both companies will be manufactured in Mladenovac, Serbia, and the total value of the deal is €1.4 million. Serial production is scheduled for the second quarter of 2023 with an estimated project duration of five years.

The manufacture of visible interior components for the new Alfa Romeo Tonale has been agreed with the FCA Group and will take place in Croatia. The total value of this deal is €4 million. Serial production is due to start in the first quarter of 2022 with an estimated project duration of eight years.

In Russia, new deals have been sealed with the VW Group and the Renault-Nissan-AvtoVAZ Alliance, worth a total of €2.2 million. Serial production for the first batch of projects is scheduled for 2021 with an estimated duration of three and a half years and six years respectively. Serial production for the second batch is planned for 2022 with an estimated project duration of four years.

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ZAGREB, Sept 8, 2020 - Plastic car parts manufacturer AD Plastik wins Golden Key Award as the best large exporter in 2019, IT firm Infobip is the best medium-sized exporter and Jadran-una has been honored as the best small company, it was announced at the 15th Croatian Exporters Convention on Tuesday.

Addressing the convention, Prime Minister Andrej Plenkovic congratulated the exporters, saying that commodity exports had been rising steadily for the past 10 years and their share in GDP had increased from 16.7% to 28.5%.

He said that only 15% of Croatian companies generated revenues on foreign markets, while they employed 51% of the active workforce. He added that these companies place over 60% of their investments in research and development, generating three-quarters of total profits and nearly four-fifths of total investment in research and development in Croatia.

Speaking of boosting the export-oriented industry, Plenkovic cited reindustrialization and strong support to enterprises in using smart and clean technologies, greater use of energy from renewable sources, and digital transformation.   

"That is the path to increasing competitiveness," the prime minister said, adding that the government's focus would be on developing sectors with great growth potential such as information and communication technologies, pharmaceuticals, biotechnology, pure technologies, such as solar and hydrogen, and new technologies, including 3D printing, nanotechnology, and robotics.

He also pledged further investment in education, railways, and broadband internet infrastructure.

"Our ambition is to create 100,000 jobs over the next four years, that is before the end of our term," Plenkovic said.

He highlighted two objectives of importance for exporters - the adoption of the euro and entry into the Schengen area.

The backbone of the Croatian economy

The head of the Croatian Exporters Association, Darinko Bago, praised the government for how it was handling the crisis caused by the global coronavirus pandemic, citing the government's social sensitivity and efforts to preserve jobs and help the tourist industry.

"Exporters are the best that Croatia has, they are the backbone of the Croatian economy," Bago said, adding that exporters expected the government to continue to be socially sensitive, but also to intensify localization and regionalization.

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ZAGREB, March 20, 2020 - The AD Plastik car parts manufacturer said on Friday that it was forced to suspend most of its production in Croatia, Serbia and Hungary due to its customers, global automobile companies, halting their production.

"As our customers, leading automobile manufacturers, have stopped their production (...) we have been forced to halt most of our production in Croatia, Serbia and Hungary," the company said in a press release on the effect of the coronavirus on its business, published by the Zagreb Stock Exchange (ZSE).

AD Plastik underscores that it cannot predict how long the current situation will last, since it depends on the situation on the global market and its customers' activities.

For the time being, the company's production units in Russia operate according to plan, and project activities to develop components for new vehicle models are continuing, AD Plastik says.

We are fully focused and determined to maintain the company's vitality in order to meet our customers' demands and are taking all measures necessary to continue doing business, AD Plastik said in the press release, noting that it communicates with its customers and suppliers on a daily basis and is ready to continue with production as soon as its customers make their first requests.

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ZAGREB, March 2, 2020 - AD Plastik, the Croatian Air Traffic Control, and Lidl Croatia have won the Deloitte Green Frog awards for the best sustainability report, progress in reporting, and originality in reporting in 2019, Deloitte Croatia announced.

The AD Plastik Group won the Green Frog Award 2019, awarded by Deloitte Croatia for the best sustainability report, and this year the Croatian Employers Association (HUP) and Global Compact Network Croatia joined the jury as full members.

The award for progress in reporting was also presented, and it was won by the Croatian Air Traffic Control. Also, the award for originality in reporting was given for the first time, and it was won by Lidl Croatia.

The awards ceremony was held at the "Employment with impact" conference, organised by Deloitte, HUP, and Global Compact Network Croatia.

The Deloitte audit director and head of the Green Frog Initiative Ivana Turjak Čebohin pointed out that the social accountability, environmental and human rights awareness was increasing.

"These trends on the contemporary market have caused positive changes in Croatia, and the number of companies publishing non-financial reports is growing every year. Non-financial reporting is beneficial both to those companies which are legally obliged to do it, and to those who are not," emphasised Čebohin.

The advisor for sustainable development and socially responsible business in HUP and Global Compact Network Croatia Executive Director Vali Marszalek said that companies were becoming more aware of the fact that, in order to maximise benefits and create long-term value for their business, they had to take into account not only shareholders' expectations, but also the expectations of suppliers, employees, buyers, consumers, and local communities.

"The subject of this year's conference, the employment of disabled persons, is extremely important for the business sector, especially as we are talking about the enormous potential of billions of people across the globe who, due to their circumstances, have to develop skills such as persistence, problem solving, innovative thinking, and readiness to experiment in order to adapt to the world around them," emphasised Marszalek.

On behalf of the AD Plastik Group, the award was accepted by the chair of the board for socially responsible business, Zoja Crnecki, who said that socially responsible business was a part of the company's business model and one of the most important components of its development policy.

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While bleak and uninspiring stories about the state of the Croatian economy and doing business in Croatia continue to circulate across news and media portals as well as in newspapers, not everything is so bleak, you just need to look a little harder. Croatia's AD Plastik has contracted brand new jobs for the European Union market worth a massive 46.8 million euros.

As SEEbiz writes on the 16th of April, 2019, Croatia's AD Plastik d.d. has contracted the new jobs for the European Union for the PSA and FCA Group.

The job of the production of speaker carriers for the Citroen Picasso and C-Elysee PSA Group cars was contracted, which is worth 1.7 million euros, with the start of production scheduled for 2020 with a projected eight-year duration. With the very same buyer, the production of side panels for the Citroen C3 in the value of an additional three million euros, with the start of production planned in 2020, is also in the works, with a projected duration of four years.

New operations for the production of guardrails/handrails for several PSA Group vehicles (Peugeot 208, Peugeot 2008, Citroen DS3 Crossback and Opel Corsa) have been agreed with a total value of 20 million euros attached to them, with a projected ten-year duration, and the works begining during 2019. The Opel Adam Crossback is yet another vehicle from the aforementioned group, for which the engine manufacturing, costing 1.4 million euros, has been contracted with Croatia's AD Plastik, with the anticipated start of serial production being next year, and the duration of the project standing at seven years.

Croatia's AD Plastik d.d. also arranged and contracted 20.7 million euros' worth of new jobs for the FCA Group for the Jeep Compass and Fiat 500e cars. For the Fiat 500e, interior components and air intakes will be produced at AD Plastik's factories, and the total value of the project is 13.9 million euros. The project duration is projected at eight years and serial production is planned for 2020.

For the Jeep Compass, handgrip production contracted at 6.8 million euros has been agreed and the start of serial production is planned for next year with an estimated four year project duration.

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