In the 2021/2019 system, considering the above criteria, the Śnieżka Group performed better in terms of sales in Poland and Ukraine. The fact that customers from these markets opted for premium products had a positive effect, while the weakening of the Ukrainian hryvnia exchange rate, which had an impact on the value of revenues generated in Ukraine, converted into zlotys, was a negative factor.
On the contrary, sales in Hungary and Belarus dropped. As for the Hungarian market, this is the consequence of the reorganization of the sales force in Poli-Farbe, changes in the portfolio of offered goods and a sales decline of decorative products on the entire Hungarian market. The sales deterioration in Belarus was triggered by unfavourable social and political environment, a change in the operating model and the weakening of the Belarusian ruble against the zloty. Despite the fact that the contribution from the Belarus segment to the Group’s sales revenues in recent quarters has clearly decreased (to 2.1% at the end of H1), Śnieżka-BelPol, operating on that market, remains profitable.
Profits under pressure of raw material and packaging prices
In the first half of 2021, the Group generated a consolidated net profit of PLN 39.0 million, i.e. 25.6% lower than in the corresponding period of the previous year. The operating profit (EBIT) amounted to PLN 46.0 million (-28.3 y/y), EBITDA – PLN 63.5 million (-21.3% y/y), and the net profit attributable to the shareholders of the parent company – PLN 36.5 million (-23.7% y/y).
The decline in profits compared to 2020 is primarily the result of a high base – record-breaking sales in May and June last year. In the opinion of the Company, this was a one-off disruption of the long-term trend in end-customer behaviour, caused by the COVID-19 pandemic A significant price increase of raw materials used in the manufacture of paints and varnishes as well as packaging turned out to be a new, unobserved phenomenon earlier affecting profits and margins. In some cases, the cost increase was several dozen percent higher.
The first half of this year recorded also unfavourable exchange rates. The Group companies import raw materials for production, which are settled mainly in Euro. Therefore, the higher EUR/PLN exchange rate additionally increased the cost of purchasing raw materials.