Czech company Karo Leather heading for record profits as growing demand drives the company forward
Karo Leather, a Czech leather processing company, published its financial results for the first half of this year on Thursday. The company successfully launched production at its new factory in Brtnica and confirmed its annual target for operating profit.
Karo Leather, whose shares are traded on the Start market of the Prague Stock Exchange, revealed key financial indicators for the first six months of the year. The company processed 507,000 sqm of leather at its plant in Boršov, mainly for the furniture industry, generating sales of CZK 116.6m.
Although sales this year are below expectations, Karo attributes this to the fact that customers prefer cheaper materials, which affects overall turnover. However, the group stresses that its priority is to add value to each square metre of leather and therefore the choice of raw materials does not have a major impact on its profitability.
Operating EBITDA reached CZK 30.2 million with a margin of 25.9%, enabling the Group to confirm its full-year EBITDA target of CZK 103 million. With its current production capacity, Karo could achieve EBITDA of up to CZK 270 million within five years.
Demand for Karo Leather products is growing, mainly due to the flexibility of production, higher capacity thanks to the new factory in Brtnica and the advantageous location in the heart of Europe. On the other hand, this puts Italian suppliers at a disadvantage, who face rising logistics costs.
The company plans to increase sales volume by 17% to 1.180 million square metres this year and targets 1.315 million square metres of processed leather by 2025.
Although Karo Leather has so far reported a net loss, which rose to CZK 19.3 million last year, the company explains that this is related to investments in new production facilities. The company expects to achieve a net profit this year thanks to EBITDA growth, and expects a significant increase in profits from 2025 onwards.
The value of Karo Leather’s shares has quadrupled to the current 160 crowns per share since going public in 2019, bringing the company’s market value to 800 million crowns. The majority of the shares, 79%, are owned by the founders and senior managers, while the remaining 21% is held by retail investors and funds.
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