Kruk SA (FRA:83I) Q3 2024 Earnings Call Highlights: Record Profits and Strategic Growth Amid ...

GuruFocus News
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Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Kruk SA (FRA:83I) reported a record nine-month profit of PLN959 million, indicating strong financial performance.

  • The company experienced a 14% year-on-year growth in recoveries from purchased debt portfolios.

  • Kruk SA (FRA:83I) maintains a moderate leverage ratio of 2.5, indicating prudent financial management.

  • The company is a market leader in purchasing consumer finance unsecured portfolios in its main markets, including Poland, Spain, and Italy.

  • Kruk SA (FRA:83I) successfully issued bonds to Polish retail investors, which were four times oversubscribed, reducing the margin from 4% to 3% over three months WIBOR.

Negative Points

  • Operating costs increased by 21% year-on-year, driven by higher legal and bailiff fees.

  • The company faced challenges in Spain, with recoveries below operating targets, although still above accounting forecasts.

  • There is a risk of additional taxation under the GloBE Pillar Two initiative, which could affect Kruk SA (FRA:83I) from 2027.

  • The supply of investment opportunities in Romania was lower than anticipated, affecting potential investments.

  • Cash EBITDA in Italy is subdued due to significant investments in legal processes, impacting short-term profitability.

Q & A Highlights

Q: How do you see NPL supply in Q4 and the upcoming 2025? A: Michal Zasepa, CFO, stated that the supply is strong with more portfolios available for purchase. They expect more portfolios from Poland and Romania, with somewhat less from Italy and Spain. For 2025, they anticipate a stable supply compared to 2024, with no significant changes expected in the primary market.

Q: Are there plans to issue bonds in Polish zloty or euro in the near future? A: Michal Zasepa mentioned that while they may consider issuing bonds, their strategy prioritizes bank funding due to its cost-effectiveness. If they issue bonds, it will likely be in Polish zloty for retail investors, similar to their last issuance.

Q: Can you elaborate on the positive revaluation in Poland and Romania? A: The CFO explained that they implemented a technical change in Q3 based on feedback from auditors and risk managers. This change led to higher positive revaluation and revenue recognition in Q3, particularly for Polish and Romanian retail assets, with less deviation expected in future recoveries.

Q: What is the impact of the GloBE Pillar Two taxation on Kruk SA? A: Michal Zasepa noted that the GloBE Pillar Two taxation could affect Kruk SA starting in 2027 if their revenue exceeds EUR 750 million in 2025 and 2026. The tax would be due in 2029, but the exact impact is still uncertain as the legislation is not finalized.

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