Prime Transaction: BVB, OMV Petrom and Alro - among the best performers in the second quarter, from our exchange

• "We can expect the stabilization trend on the operational side of OMV Petrom to continue in the second half of 2024"

• "For the rest of the year, it is expected that the downward trend in Hidroelectrica's profitability will continue"

• "In the second half of the year, the negative influence of the turnover tax will persist, which will continue to drag down BRD's results"

The Bucharest Stock Exchange (BVB) had good results, in the second quarter, with a base effect determined by the listing of Hidroelectrica, other good results coming from OMV Petrom (SNP), also as a result of a base effect and from Alro (ALR), used to more negative results lately, according to analysis report of Prime Transaction, available in the attachment.

In the opposite area, Teraplast (TRP) deepened its loss this year, Hidroelectrica (H2O) reported a rather large decrease in profit as a result of the hydrological and market context, and the two banks included in the material, BRD - Groupe Societe Generale (BRD) and Erste Bank (EBS) also had profit decreases, but smaller, it is also mentioned in the analysis signed by Marius Pandele.

• OMV Petrom - considerable improvement in quarterly results

The positive base effect compared to the second quarter of 2023, when a "solidarity contribution" worth almost two billion lei was registered, led to a substantial improvement in the quarterly financial results of OMV Petrom, according to the analyst.

And in terms of revenue, things went better than in the first three months of the year, with the group's sales revenue increasing by 3.72% to 8.7 billion lei, compared to a 9.8% decline in the first quarter, with growth coming solely from fuel sales.

On the other hand, the increase in several categories of expenses caused the operating result to decrease by 8.91%, up to 1.42 billion lei in the second quarter of 2024. But, the decrease in the quarterly operating result was not transmitted to the net, the reason being the solidarity contribution of 1.98 billion lei, paid by OMV Petrom in the second quarter of 2023, while in the second quarter of this year the company paid nothing.

Under these conditions, the consolidated net result went from a loss of 536.78 million lei in the second quarter of 2023 to a profit of 1.23 billion lei in the second quarter of 2024.

"Without the basic effect from the solidarity tax, we are basically talking about a quarterly stagnation. A stabilization trend is observed on the operational side, also manifested in other energy and utilities issuers, and in the absence of other disruptive factors that could intervene in the next period, we can expect this trend to continue in the second semester of 2024 ", the material states.

• Hidroelectrica - accentuation of the rate of decrease in revenues and profit, in bad conditions for both production and price

Hidroelectrica's results continued to deteriorate, with the pace of decline being even greater in the second quarter of the year than in the first, both for revenue and profit, Prime said.

Revenues fell by 29.44% to 2.61 billion lei in the second quarter of 2024, after a 22.49% drop in the first three months of the year. And this time, both the quantities sold and the average selling price fell, both in the wholesale and supply segments.

"Considering that Hidroelectrica's energy production is determined by external factors, not being adjusted according to the sales price, as is the case with fossil fuels, the decrease in sold quantities is mainly attributable to hydrological conditions, here being present and a base effect, with 2023 being very good from this point of view," the report states.

The large decrease in revenues, in conditions of stability on the expenditure side, caused the quarterly operating profit to decrease by 40.78%, to 1.52 billion lei, in the second quarter of 2024, while the net profit had a decline of 38.64%, up to 1.36 billion lei.

"For the rest of the year, it would be expected that this trend will continue, given that the heat wave has continued, and the price on the supply segment will remain lower than that of the second semester of 2023," the report states.

• BRD - decrease in profit at a faster rate than in the first quarter

After a slight decline in consolidated net profit in the first quarter of the year, things moved in the same direction for BRD - Groupe Societe Generale, but at a faster pace, according to Prime.

The income from the main activity continued to grow at a pace similar to that of the previous quarter, with net interest income appreciating by 7.74%, up to 709.5 million lei, compared to 6.81% in the first quarter, and commissions by 5.15%, compared to 8% in the first quarter. Operating expenses grew faster than revenues, the main reason for this being the introduction of the turnover tax for banks, which generated an expense of 31.47 million lei in the second quarter of 2024.

Under these conditions, the net profit had a decrease of 13.66%, to 367.31 million lei, higher than the decrease of 4.61% in the first quarter of the year.

"In the second half of the year, the negative influence of the turnover tax will persist, which will continue to drag down the group's results, and the increase in income is unlikely to be very high in the current context of the money market. The main factor that could pull profit in the opposite direction is the cost of risk, but this is very difficult to estimate and varies quite a bit from period to period," according to the report.

• BVB - the estimate for the second semester is a decrease in both revenues and profit compared to the similar period of the previous year

The analyzed quarter was the last one in which we saw in the results of the Bucharest Stock Exchange a positive base effect compared to the previous year determined by the listing of Hidroelectrica, from the third quarter this will reverse, according to Prime.

The increase in transaction value compared to the second quarter of 2023, when investors were waiting for the electricity producer's IPO, caused the group's service revenues to rise by 64.5% to 20.85 million lei, most of the increase being generated by the Central Depository's revenues.

Operating expenses also increased, but much lower than revenues, so that the operating result went from a loss of 0.8 million lei to a profit of 4.76 million lei. The half-yearly net profit increased by 243.92% to 5.48 million lei, in the second quarter of 2024.

"However, we do not expect it to remain here, because in the second half of the year the negative base effect will appear compared to the period after the listing of Hidroelectrica, one of the best in the history of the local Stock Exchange. Therefore, the estimate for the second semester is for a decrease in both revenues and profit compared to the same period of the previous year," according to the Prime report.

• Alro - result well above that of the second quarter of 2023

The context in the international markets was in favor of Alro, leading for the first time, after several quarters, the net result for the period since the beginning of the year, the analyst mentions.

The biggest contribution to the improvement in results came from higher revenues, with revenues from customer contracts increasing by 16.26% quarter-on-quarter to 893.5 million lei in the second quarter of 2024, a much higher increase than the of 1.71% registered in the first quarter.

Cost of goods sold increased, but at a much slower rate than revenue, by only 5.66%. The operating profit had a significant increase of 76.48 million lei, from 9.1 million lei to 85.58 million lei, while the net result from continuing activities increased by 51.41 million lei, from a loss net of 28.09 million lei in the second quarter of 2023 to a net profit of 23.32 million lei in the second quarter of 2024.

"Things seem to have turned around for Alro, but even so we cannot talk about a return to substantial profits, but only about a break-even. The market it operates on is volatile, so it is difficult to estimate in which direction the results will go in the next period", according to Prime.