Prime Transaction: "BVB, OMV Petrom and BRD - among the best financial results in the fourth quarter"

The Bucharest Stock Exchange, OMV Petrom and BRD-Groupe Societe Generale are among the companies with the best reported financial results for the fourth quarter of last year, according to an analysis report by the Prime Transaction brokerage house.

At the opposite pole, TeraPlast managed to narrowly avoid the annual loss, but without confirming the tipping point anticipated by the Prime team three months ago. In the AeRO Market, 2B Intelligent Soft and 2Performant Network saw profit declines in the fourth quarter, but both companies met their estimates from the annual Revenue and Expenditure Budget.

• "Although BRD's net profit went in a favorable direction, the evolution of net interest income signals a "cooling" of the banking market"

BRD-Groupe Societe Generale predictably confirmed the trend seen in the second half of last year in the money market, the report said. The decrease in interest rates in the context of tempering inflation caused the net interest income recorded by the bank to have a weaker dynamic than in the first nine months of the year, increasing by only 10.74%, to 715.44 million lei in the quarter of fourth quarter 2023.

On the other hand, net commission income returned to the plus, reaching 187.06 million lei in the fourth quarter of 2023, after nine months down by 2.11%. Overall, net banking income had a quarterly evolution similar to that of net interest and commission income, increasing by 9.28%, to one billion lei, after having increased by 11.41% in the first nine months of the year, scores those from Prime.

The biggest impact on the financial results this time came from the cost of risk, which had a positive impact of around 80 million lei. Under these conditions, the net profit reached an increase of 33.41%, to 428.92 million lei in the fourth quarter of 2023, while for the whole year, the profit reached 1.66 billion lei, the highest since after 2005 and almost certainly the largest in the bank's history.

"The increase in the net cost of risk, a situation that we also saw in the first part of the year, suggests that the decrease in interest rates is compensated by an improvement in the situation of customers, who end up in default less often", it is stated in the Prime report. "Although the net profit went in a favorable direction, growing at a faster pace than in the first part of the year, the evolution of net interest income signals a "cooling" of the banking market, which could lead to a decrease in profit this year"

• OMV Petrom - results above expectations, but also influenced by a non-recurring element

For OMV Petrom, last year ended on a positive note, with an increase in net profit, despite the negative evolution of operating income, an important contribution to this evolution having a positive base effect compared to the similar quarter of the previous year, mention in the Prime report.

The group's sales revenues continued the downward trend they had shown in the first three quarters of the year, reaching 10.28 billion lei in the fourth quarter of 2023 (-39.86%), after a decrease of 35.53% in the first nine months of the year. Most of the decline came from secondary business lines.

On the other hand, the decrease in expenses and the positive base effect given by the impairment adjustments in the fourth quarter made the operating result grow at a rather fast pace, by 75.26%, to 1.96 billion lei, after which in the first nine months of the year had decreased by 48.78%. The effect of the increase in the operating result was mitigated by the appearance of the solidarity contribution that OMV Petrom began to register this year and which added an expense of 374.7 million lei, in the fourth quarter of 2023.

Net profit increased by 29.51% in the last three months of last year, up to 1.48 billion lei, compared to a decrease of 72.17% in the first nine months of the year. "The result is above our expectations, even if it is strongly influenced by a non-recurring element, as was the case in the similar quarter of the previous year. The stabilization of the gas and electricity markets should eliminate the volatility we saw in 2022 and 2023, and this year we should see some results that are more driven by company performance than the external context." it is mentioned in the report.

• "The spectacular results of the BVB in 2023 are difficult to repeat"

Hidroelectrica's listing continued to produce effects for the Bucharest Stock Exchange, contributing to a considerable increase in the value of transactions in the second half of the year, Prime says.

The total value of brokered transactions increased by 71.57% in the last quarter of the year compared to the same period in 2022, which led to a close percentage increase in trading revenues on the regulated market, excluding public offerings. In total, revenues from services rose by 68.26%, in the last quarter of the year, to 22.37 million lei.

The net result went from a loss of 0.28 million lei in the fourth quarter of 2022 to a profit of 4.12 in the last three months of last year. For the whole year, the net profit increased by 145.6%, to 25.62 million lei, the recently ended year officially becoming the second best in BVB history, after 2007, when a net profit of 29.04 million was recorded lei.

"The spectacular results of 2023 are difficult to repeat, being influenced by a non-recurring element such as the listing of Hidroelectrica, currently the largest Romanian issuer on the BSE. We could, however, see an improvement compared to previous years, especially if we manage to reach the category of emerging markets according to the MSCI criteria", say those from Prime Transaction.

• TeraPlast - fourth quarter loss due to higher operating expenses

TeraPlast reported a fairly large quarterly loss, largely due to a negative base effect, according to the report. This time the weak result was no longer based on falling revenues, but on higher operating expenses. The most important category of expenses, that of raw materials, consumables and goods, increased by 10.86%, to 102.26 million lei, a rate of growth double that of revenues from contracts with customers.

The net result worsened quite a bit, from a loss of 1.01 million lei in the fourth quarter of 2022 to a loss of 5.66 million lei in the fourth quarter of last year. The reason for such high dynamics is the base effect from the last quarter of 2022, but the level of loss this time is one that was not influenced by non-recurring items. Even with the rather large loss in the last quarter, for the whole year the net result remained positive, however, decreasing from 15.37 million lei in 2022, to 1.14 million lei in 2023. "Taking into account the company's estimates, we should see a return to the revenue growth trend this year, but this will not necessarily be accompanied by a return to higher profit margins," the report says.

About 2B Intelligent Systems or Bento those from Prime Transaction show, in the fourth quarter, the net profit decreased by 53.2%, to 0.98 million lei, and for the whole year the net profit had an increase of 133.26% , at 13.06 million lei. But the quarterly results are rather weak. "Given the specifics of the company, such situations are to be expected, the results being dependent on the contracts concluded and the moment they are implemented", say those from Prime.

Agroland Business System, 2Performant Network and Bittnet Systems are other companies whose results were dissected by the Prime Transaction team in this report.