Podravka Group Increased Revenues in the First Half of the Year, Challenges Include Rising Prices of Raw Materials and Energy

In the first six months of 2023, Podravka Group achieved sales revenues of 346.3 million euros, which is 25.6 million euros, or eight percent higher compared to the same period last year. Revenues from the Food segment amounted to 265.2 million euros, an increase of 11.2 million or 4.4 percent compared to the first half of 2022. The Pharmaceuticals segment recorded a significant growth of 21.6 percent, or 14.4 million euros, achieving 81 million euros in revenue.

The Group’s operating profit before depreciation (EBITDA) reached 48.3 million euros in the first six months of this year, 0.1 million euros less than in the same period last year.

However, the contribution of Food to the Group’s EBITDA is lower than last year as the food business continues to be strongly affected by the costs of raw materials, packaging, and energy. Specifically, in the Food segment, their costs increased by 9.3 million euros, which is 8.3 percent higher than in the same period last year. Significant attention is therefore still focused on controlling all costs, along with mitigating them by optimizing the production assortment, managing production processes, and making changes in procurement processes.

The net profit of Podravka Group amounted to 45.2 million euros. Compared to the first six months of 2022, this represents an increase of 18.9 million euros. However, this growth is under the one-time impact of tax incentives amounting to 19.7 million euros, which were granted to Podravka by the Ministry of Economy and Sustainable Development based on the Investment Promotion Act. Podravka received the status of a support beneficiary based on investments in capacity expansion and increasing business competitiveness through the construction of a new LDC and equipping factories in Koprivnica and Varaždin.

The total tax incentive must be reported in the first year of using the tax incentive. When excluding the effects of its application, the normalized net profit of the Group in the first six months amounted to 26 million euros, which is 0.4 percent higher compared to the same period in 2022. The normalized net profit of Pharmaceuticals increased by 65 percent and amounted to 13 million euros, the same as Food, which still shows a significant negative impact from rising raw material costs, resulting in a profit decline of 27.9 percent.

– I am satisfied with the results in the first half of the year, despite the fact that the Group’s operations are still exposed to strong price increases in energy, raw materials, and packaging, especially in Food. Despite some calming of market turbulence and actively seeking the most favorable conditions, the realized prices are still significantly higher than those we paid in 2022. I am also pleased with the advances in sales in our foreign markets, especially the first results of cooperation with Atlantic Group, as well as the results of restructuring sales in the Polish and German markets, which will enable greater sales profitability in Poland, as well as greater presence and profitability in the German market.

At the same time, I am extremely pleased that we have once again managed to reach an agreement on a new wage increase for workers. The wage increase of about five percent from July 1 is part of our ongoing efforts to improve the material position of workers, but it also creates a solid foundation for the introduction of a new pay system, which we reached an agreement on with the unions a few days ago – said Podravka’s CEO Martina Dalić.

Recently, the current round of negotiations regarding amendments to the Collective Agreement of Podravka Group on the introduction of a new pay system has been completed. Podravka is thus introducing a fairer and more modern pay system that will replace the existing tariff system dating back to 1997. The implementation of the new pay system will start on December 1 of this year. Jobs will be classified into pay grades according to the complexity of the jobs, rather than according to educational qualifications, and the base for calculating all salary supplements has also been increased.

The investment cycle of Podravka Group is also being carried out as planned, and during the first six months of this year, investments of nearly 29 million euros were realized. These include the beginning of the construction of a logistics-distribution center and a tomato processing plant, the procurement of new machines and equipment, and the opening of new jobs. The realization of the investment in the second phase of investments in solar power plants has also been initiated, which will cover the remaining roofs in Koprivnica, Dugopolje, and Varaždin with solar panels. During the first half of 2023, the restructuring of Žito in Ljubljana continued, resulting in the completion of the first major investment in Pekara Vič, worth about five million euros.

As a company that continuously cares about socially responsible business and sustainability, Podravka Group presented its Sustainable Business Strategy for the period from 2023 to 2030 at the beginning of May. It defines clear goals contained in four strategic pillars of action – a clean environment, healthy nutrition, care for employees and the community, and responsible corporate governance. To achieve these goals, Podravka will invest one hundred million euros, as announced in the statement.