Investors Awaiting HT’s Business Results

Investors on the Zagreb Stock Exchange will focus today on HT’s shares, after the company reported a decline in revenue and profit in the first half of the year, indicating that the recession continues to erode the business results of domestic companies.

Of the 8 analysts from brokerage firms who participated in Hina’s survey, 6 expect a continuation of Crobex stagnation today, while 2 expect a decline. The Crobex index jumped 1.31 percent yesterday to 1,863 points, while Crobex10 rose 1.34 percent to 992 points. Regular trading in shares amounted to 20 million kuna, which is about 7 million more than the previous day.

“The main focus of investors in the domestic market today will be HT’s business results. With slightly higher liquidity, Crobex could be in stagnation with a negative sign, as a series of financial reports from companies showing declines in revenue and profit, if not losses for domestic companies, will flow into the stock exchange today. Additionally, there are no incentives coming from global markets,” says Maja Bešević, an analyst at the investment company Abacus brokers.

This morning, HT reported that in the first half of the year it recorded a decline in total revenue of 3.9 percent compared to the same period last year, to 4.04 billion kuna, while net profit decreased by 24.7 percent to 802 million kuna. In the second quarter of this year, HT Group achieved total revenues of 2.09 billion kuna, which is 1.9 percent less than in the same period last year, while net profit fell by 13.9 percent to 438 million kuna.

The continuation of the recession in Croatia, high unemployment rate, and a 6 percent fee on services in mobile networks continue to affect business operations. Therefore, even with the consolidation of Combis, the Group still expects a moderate decline in revenue in 2010, according to HT’s report. “As with previously published financial reports of domestic companies for the second quarter, it is evident that the decline in economic activity continues to erode HT’s revenues and profits. From this perspective, HT’s results are not surprising,” assesses Bešević.

And the recovery of personal consumption in Croatia is still not in sight. The State Bureau of Statistics (DZS) will today publish the first estimate of retail trade turnover for June, which will most likely show that consumption has fallen for the 21st consecutive month, but at a slightly lower rate than in May, when consumption weakened by 3.7 percent year-on-year. Six macroeconomists surveyed by Hina estimate that in June, compared to the same month last year, the decline in retail trade turnover was between 1.5 and 4.7 percent. On average, they expect a decline of 3.1 percent.

Recently, economic indicators have been more in focus for investors on global stock exchanges. Thus, on Wall Street on Thursday, stock prices slightly fell for the second consecutive day, after very uncertain trading during which conflicting signals were exchanged – good business results from companies and weak macroeconomic data. Stock prices also fell this morning on Asian exchanges for the same reason.

“New guidelines for investors will be provided today by the release of data on U.S. gross domestic product for the second quarter, which is estimated to have grown by 2.5 percent, with its component – personal consumption – at 2.4 percent. If the final data is weaker than expected, it could further cool stock markets worldwide, given that the S&P 500 index has risen by as much as 6.8 percent since the end of June,” notes Bešević. Crobex has been up only 0.4 percent since the end of June.

Bešević adds that the perception of investors regarding the state of the domestic economy is reflected in the fact that Crobex is down 7 percent since the beginning of the year. In comparison, the U.S. S&P has recovered earlier losses and is down only 1 percent since the beginning of the year. And from the global shipping market, somewhat more positive news is coming. The Baltic Dry Index (BDI) for bulk cargo rates increased by 6.3 percent compared to last Friday, reaching 1,942 points, thanks to rising rates for capesize vessels and iron ore prices. (H)