Baltic Q1: Complete Earnings Season Summary
The Baltic market showed strength during the first quarter earnings season, with the OMX Baltic index rising 7,85% from 24. March to 23. May. However, the results were mixed: the energy sector and selected technology companies showed strength, while banking and parts of the industrial sector were pressured by rising costs. The season was characterized by cross-sector contrasts and better-than-expected consumer confidence.
Results: LHV Group's first quarter net profit fell by 32,5% year-over-year to 19,7 million euros. The bank's net revenues decreased by 7,2%, while operating expenses grew by 21,4%.
Reasons: The main reason for the profit decline was rapidly growing personnel and administrative expenses, which significantly exceeded revenue levels and heavily pressured profitability.
Market reaction: The stock reacted negatively to the results, falling 1,1% on the day of the earnings release, and has continued to decline since, trading near its 52-week low.
Results: Tallinna Sadam's first quarter operating profit fell by 31% year-over-year to 5,8 million euros, while sales revenue remained flat.
Reasons: Profit was reduced by increased maintenance, fuel, and electricity costs. The decline was also amplified by the previous year's high base, which included a one-off insurance compensation.
Market reaction: The stock fell 1,2% on the day of the earnings release and has continued its downward trend, reflecting investor concerns over rising costs and stagnant revenues.
Results: The company's operating profit growth accelerated to 34,5% in the first quarter, reaching 9,8 million euros. Sales revenue grew by 17,8%.
Reasons: Growth was driven by continued strong demand for liquefied natural gas (LNG) regasification services, with revenues growing over 31%.
Market reaction: The market received the strong results well. The stock rose 4,5% on the day of the earnings release and has managed to maintain the achieved level, showing investor confidence in the LNG segment's prospects.
Results: SAF Tehnika made an impressive turnaround, reaching a net profit of 2,5 million euros from a loss in the previous year. Sales revenue grew by 157%.
Reasons: The explosive growth was driven by sales more than tripling in the European market, which compensated for more modest results in other regions.
Market reaction: The stock reacted to the exceptionally strong results with a 5% rise and has climbed even further since, reaching a new 52-week high.
Results: Nordecon turned the previous year's loss into an operating profit of 1,1 million euros. Sales revenue grew by 32,1%.
Reasons: The growth was driven by strong performance in both the building and infrastructure construction segments. Additionally, the volume of uncompleted construction contracts grew by 31%, providing confidence for the future.
Market reaction: Despite the strong profit turnaround, the stock reacted modestly, rising only 0,3%, and has remained at a low level, suggesting the market's expectation to see sustained profitability.
Results: Merko Ehitus's first quarter operating profit fell sharply by 86,7% to 1,3 million euros. Sales revenue decreased by 32,9%.
Reasons: The main reason for the profit decline was a 70% drop in apartment sales. However, the outlook has improved, as the construction contract portfolio more than doubled to a record 826 million euros.
Market reaction: The stock reacted neutrally to the weak results, falling only 0,2%. The market seems to be focusing on the record order portfolio, which promises stronger revenue in the future.
Results: Tallink's recovery continued, and the first quarter operating loss decreased by 36,5% year-over-year to 17,2 million euros. Sales revenue grew by 8,8%.
Reasons: The result was improved by growth in both passenger numbers and cargo volumes, indicating a stable recovery in demand on the company's main routes.
Market reaction: The stock received the results positively, rising 0,9%, and has maintained its level, reflecting investor confidence in the normalization of the company's operations.
Results: Apranga's operating profit growth accelerated to 38,2% and sales revenue grew by 8,6%, showing a strong start to the year.
Reasons: Growth was driven by increased sales in both youth-oriented stores and the business wear segment, indicating broad-based consumer demand.
Market reaction: The stock's initial reaction was modest, but in the following weeks it has shown a strong rise, suggesting growing investor optimism regarding retail prospects.
Results: TKM Grupp's operating profit returned to growth, increasing by 24,8% in the first quarter. Sales revenue grew by 6,3%.
Reasons: The main engine of the growth turnaround was the strong recovery of the car trade segment, whose sales revenue grew by nearly 50%.
Market reaction: On the day of the earnings release, the stock fell 1,4%, as weakness in the Selver segment caused concern among investors. The stock has remained at a similar level.
Results: Telia Lietuva's operating profit growth slowed to 9,4%. Sales revenue grew by 7,6% at the same time.
Reasons: Growth was driven by mobile service revenue, but higher energy and advertising costs hindered faster profitability growth.
Market reaction: The market reacted positively to the stable results, the stock rose 3,7% and has held its position, reflecting the stability of the telecom sector.
Results: Ignitis's operating profit decline almost stopped, decreasing by only 0,5% year-over-year. Sales revenue grew by 21,5%.
Reasons: The stabilization of results was driven by growth in electricity sales revenue, which managed to almost completely compensate for increased electricity purchase costs.
Market reaction: The stock reacted neutrally to the results, falling slightly by 0,2%. Investors are likely waiting for a clearer turnaround towards profitability growth.
Results: DelfinGroup's operating profit growth slowed, but remained at a strong 37,3% level. Sales revenue grew by 14,9%.
Reasons: Growth was supported by an increase in interest income from consumer loans, but faster-than-expected growth in loan losses slowed the pace of profit.
Market reaction: The stock reacted to the strong growth with a 5,2% rise. Although part of the initial gain has been given back, the stock remains above its pre-earnings level.
Results: Harju Elekter's results were disappointing, as operating profit fell by 82,9% year-over-year. Sales revenue decreased by 6,2%.
Reasons: The sharp decline was driven by the almost complete disappearance of profitability in the manufacturing segment and a 10,6% increase in labor costs.
Market reaction: The market reacted negatively as expected, and the stock fell 5% on the day of the earnings release. Since then, the stock has recovered slightly but remains under pressure.
Results: Infortar turned the previous year's loss into an operating profit of 21,4 million euros. Sales revenue grew by 12,9%.
Reasons: A large part of the profit turnaround came from a positive change in the value of financial instruments, rather than core operations. However, the result was also supported by growth in energy product sales.
Market reaction: The stock reacted positively to reaching profitability, rising 1,1%, and has continued a slight upward trend even after the earnings release.
Conclusion
The first quarter in the Baltic markets highlighted clear sectoral differences. The energy sector (KN Energies) and selected technology companies (SAF Tehnika) showed exceptional growth, while the financial sector (LHV Group) and parts of the industrial sector (Harju Elekter) struggled with rising costs and shrinking profitability. Mixed sentiments prevailed in construction: Nordecon showed a strong turnaround, while Merko Ehitus's profit fell, though a record order portfolio provided hope for the future.
A positive surprise of the season was consumer resilience. The results of retail (Apranga, TKM Grupp) and passenger transport (Tallink) indicated stronger-than-expected demand. At the same time, cost control remained a central challenge for many companies, as the growth of wage and operating costs hindered profit growth even under conditions of growing revenue.
Overall, the season was essentially mixed against the backdrop of a general market rise. In the next quarter, investors will be closely watching whether cost pressures begin to ease and whether strong order books can be realized into actual profit.
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