ANALYST FORECAST – Slovenian Companies Feel Heat of Global Tumult, 2009 Will Be Even More Torrid

The biggest Slovenian companies listed on the Ljubljana Stock Exchange (LJSE) released their financial results for the first nine months of 2008 by the end of last month. Their performance showed higher financial costs but analysts said operations next year will be affected even more by tougher conditions for borrowing and dwindling demand.

Benjamin Josar, president of the management board of local brokerage house KD BPD, said Slovenian companies face problems with financing as banks are more cautious and give loans reluctantly.

“It is the first direct influence of the crisis on the Slovenian real sector,” Josar told SeeNews on the sidelines of the 2nd Southeast Europe Financial Services Forum organised by SeeNews in Sofia earlier this week.

“In general Slovenian companies operated in line with plans [in the first nine months] or a bit lower,” Tilen Sarlah, an asset manager at local brokerage house Ilirika, told SeeNews.

Sarlah pointed to the performance of the country’s largest insurer, blue-chip Zavarovalnica Triglav , as an example of lower-than-planned results. The insurer posted a 48% drop in parent pre-tax profit to a preliminary 29.15 million euro ($37 million) in the first nine months of 2008 due to an increase in claims. The claims paid out by the insurer rose 16% to 305 million euro through September, due to a summer spell of thunderstorms.

“The pressure [of the global crisis] on the results can be observed. Maybe this pressure will be more obvious at the end of the year and later in the first quarter [of 2009],” Sarlah said, adding that it is difficult to say to what extent the global crisis will continue to impact local companies’ performance next year.

“I expect that a difficult period awaits us in the first half of next year. The second half of 2009 may be good,” Sarlah said. He added that all depends on the way the crisis and bank financing will develop.

Along with tougher conditions for borrowing, lower consumption of households, with people spending less, will also impact companies’ operations, Sarlah said.

Sectors that will be mostl affected will be those that are connected with the automobile industry and logistics, while telecommunications and pharmaceuticals will be affected least, Sarlah said.

“The crisis can be felt in the current results, but more in the companies’ forecasts for 2009,” Bine Pangrsic, an analyst with local brokerage house Medvesek Pusnik, told SeeNews. He said most of the companies are cautious in their forecasts and they expect flat or a bit lower scale of operations.

Pangrsic said the results of logistics companies and producers of luxury products will be pared most. He gave logistics company Intereuropa, airport operator Aerodrom Ljubljana, port operator Luka Koper and household appliance manufacturer Gorenje as examples.

“I think that 2009 will be easier for banks than 2008, but they will still have a lot of problems,” Pangrsic said, adding that the real economy will be affected more than the financial sector next year.

Credit rating agency D&B said in its December report that the direct impact of the financial crisis on Slovenia has been minimal, with no domestic bank being in distress, however, the real economy is set to be affected in a number of ways.

“Most evidently Slovenia is a small and open economy, with goods and services exports accounting for around 70% of GDP,” D&B said.

“Weaker demand across the EU, where most of Slovenia’s exports go, will therefore take a toll on growth,” it added.

Market analysts agreed that Slovenian companies’ nine-month results have no impact on their share prices on the LJSE, where trends are determined by movements on global markets.

The blue-chip SBITOP index and the broader 15-share SBI20 index of the LJSE have lost some 63-64% each since the end of last year when companies enjoyed hefty gains.

In October the Slovenian government's Institute of Macroeconomic Analysis and Development (UMAR) said it expects Slovenia's GDP to grow by 4.8% this year and 3.1% next year. Slovenia posted economic growth of 6.8% in 2007.

The Alpine country, which gained independence from socialist Yugoslavia in 1991, joined the EU in 2004, becoming its first South-East European member. In 2007 it became the 13th member of the eurozone.

($ = 0.7871 euro)