28 March 2022 - Russia has lodged a strong protest with Croatia after Foreign Minister Gordan Grlić Radman called Russian President Vladimir Putin a war criminal, the Russian Embassy in Zagreb said in a statement.  

Insulting language and unfounded accusations against the President of the Russian Federation are absolutely unacceptable, the statement said.

Russia also protested because Grlić Radman had referred to the Russian government as a regime and wished that it would not stay in power for long.

Such irresponsible behaviour of a representative of the Croatian leadership is destroying the tissue of Russian-Croatian relations, which are marking 30 years this year, the statement said.

The government in Zagreb was called upon to refrain from triggering negative consequences for relations between the two countries.

In conclusion, the Embassy stressed the need for adherence to the universal rules of international communication and diplomatic etiquette.

Last Wednesday, speaking in an interview with Croatian Radio, Grlić Radman said Putin was a war criminal and expressed hope that "the Russian autocratic regime" would not last for long.

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

For more, check out our business section.

February the 24th, 2022 - Croatian cyber-soldiers are being used to help Ukraine out in its hour of need as Russia launches its invasion of that Eastern European country.

As Poslovni Dnevnik writes, Croatian cyber-soldiers who are being sent to the aid of Ukraine during these tremendously difficult times are part of the CRRT, a team for rapid action in cyberspace, which was established by Lithuania, Estonia, Croatia, the Netherlands, Poland and Romania as one of the European Union's ultra modern and enhanced defense cooperation projects.

The Republic of Croatia is among a group of six European Union (EU) member states that are helping Ukraine by mobilising its military cyber forces for rapid action. It is one in a series of reactions from European Union allies to the Russian military's incursion into another part of territory that Russia is formally but illegally trying to seize from Ukraine - the self-proclaimed separatist republics of Donetsk and Luhansk, which Russia recognised as independent states very recently.

According to Lithuanian defense sources, the CRRT, including the aforementioned Croatian cyber-soldiers has been activated to help Ukrainian institutions cope with growing cyber threats as Russia begins its invasion of Ukraine which has been strongly condemned across the board. This is the first time that this new European defense project has been activated in real circumstances. In a request for help, the Ukrainian Government said it expects CRRT members to be physically deployed in the City of Kiev in order to help defend key Ukrainian Government computer networks and systems.

So far, there has been no confirmation that the CRRT member states have agreed to physically send their military cyber experts, or that Croatia has agreed to send its people, be they Croatian cyber-soldiers or others, to Kiev, as reported by Vecernji list.

For more on Croatian politics, foreign policy and diplomacy, make sure to check out our dedicated politics section.