Monbat – 2025 Q1 consolidated results

• Monbat continued in Q1 2025 what looks like a path to recovery. While sales mark an increase, there are many warning signs, which create a mixed picture. Their main problems continue to be in 2 main groups: A) growing their sales and B) coping with the increased indebtedness and the portfolio of the lenders. This quarter, however, looks like a time when there is a will to handle the crisis and organize the debt maturity schedules in a more manageable way.
• Sales increased 13.7% YoY to BGN 103.5 mln (at Q4 2024 there was a drop of 1.8%). As usual, there are is no explanation what caused it. Considering previous periods, however, the 13.7% is much higher than the mediocre growth in those periods ranging from 0.6% to 3.8%. As such, this might be a sign that management has started to address the issue that the company did not have a clear sales strategy. While it is just a speculative guess from us, hired services increased by 13.3% and payroll increased by 15.4% compared to Q1 2024, which could indicate a tangible effort in that direction.
• We can see that the geographic markets are very diversified. The company has major presence in over 20 markets across the world, which are different by nature, mentality, ways of approaching sales and required certifications.
• Among the geographical markets Algeria, South Africa and Romania were the real champions, which contributed most to pushing the sales. Additionally, Israel, Austria, Finland, Hungary and Israel have contributed almost a similar amount. It is clear that in those markets a responsive sales strategy has been implemented, which allowed for many of them to grow from almost nothing to noticeable numbers. It will interesting to follow their development in the following quarters. In the same time, markets such as Italy and Spain nearly crashed and it is not known what caused it – flawed relationship management with retailers or inadequate approaches. It worth mentioning that while the diversification is extensive, i.e. Monbat does not have even 15% of its sales dependent on a single market, the total sums for a single market are akin to a company of significantly smaller size. It also begs the question whether top management has the capacity to properly oversee efforts in each market and address issues and opportunities. As mentioned, this will be a story to be followed in the following quarters.
• While Sales increased 13.7%, OPEX increased 14.2% to BGN 100.4mln. Major contributors were Cost of Materials (adding BGN 4mln) and changes in the balance of finished goods (dropping from BGN 4mln to BGN 0.2mln). Furthermore, Hired services and Payroll increased by 13.3% and 15.4% respectively. This could be a sign of an implemented sales strategy and if that is correct, we will see the results in the following quarters.
• Depreciation increased 18.4% to BGN 6.7mln. While inventory dropped by 6.3% to BGN 97mln from 103.6mln last year, Intangible assets marked a 51% spike to BGN 30mln. The largest push here comes from R&D products (70%) and software (30%). Such moves can be indicative of forward planning to position favorably in changing macro environment, which is a positive sign that there is a clear idea where the company is going. It is yet to be seen.
• Due to the higher expenses, EBIT marked a decline of 6.3% to BGN 3.7mln. On the other hand, the greater depreciation drove EBITDA up by 8.5% to BGN 10.3mln. The EBITDA margin, however, decreased by 0.4%.
• The creeping financial costs considering the increased indebtedness (BGN 3.15mln vs BGN 2.9mln last year) and the halved financial income, led to Earnings before taxes going down 50.6% to BGN 0.9mln and Net Income slashing 72% of its value to BGN 0.5mln. Net margin dropped 1.4% to reach 0.5%.
• Bond issue (ISIN: BG2100023170) liquidity hurdles – while the company had a problem meeting the principal payment requirement in Q1 2024 in the amount of EUR 8.4mln (BGN 16.4mln) and raising questions whether they would be able to meet the maturity payment in Q1 2025, Monbat was able to collect EUR 14mln (BGN 27.4mln) liquidity and repaid it in full on 20.01.2025.
• The big question over the last year has been Monbat’s bank debt – spread in 35 facilities and 11 banks – it seemed that it was getting out of hand primarily because the consolidated maturity structure and the upcoming bond payment. Considering the available cash, the insufficient EBITDA and the amount of maturing debt, it was clear that the management had to tour the banks extensively to renegotiate loan maturities and inject fresh liquidity. The fresh liquidity came in the form of 2 facilities from Fibank (a total of EUR 25mln) and 2 facilities from Investbank (a total of EUR 10mln). Additionally, the company went on to max out nearly all extended credit lines. The maturing debt of Eurobank of BGN 20.9mln was paid off in Q4 2024 and the bond’s bullet payment discussed earlier was paid off in Q1 2025.
• Meanwhile, Investbank’s facilities were utilized at 100% and Fibank’s facilities at nearly 98%. Additionally, DSK’s EUR 5mln facility was fully used, as well as a large portion of UBB’s EUR 2mln facility, as well as other smaller facilities from UBB. Currently, the maximum amount which the company can withdraw from its existing loans from all banks is EUR 3.76mln (BGN 7.36mln) and EUR 2mln (BGN 3.9mln) is from Mediocredito Italiano. It is a working capital facility, but it is not clear how much it is tied to the group’s operations in Italy.
• Too big to fail? The exposures to some of the banks are big and failure would get the banks into a territory they don’t want to get in – lower quality assets (NPLs) for their reporting, court proceedings, bad publicity, etc. Instead, banks could push for partial repayment to decrease exposure and negotiate a repayment plan with extended maturity date, while in the meantime collecting penalty fees and interest on the outstanding debt.
  • United Bulgarian Bank – their main banking partner with the largest exposure of BGN 57.3mln (up from BGN 55.2 mln last quarter and BGN 49.9mln same time last year). In 2024 they repaid some of the facilities and renegotiated the rest for later maturity dates. While it could be concluded that bank management had some worries about the abilities to repay the loans (considering the move of shorter maturity dates of the loans), they must have allowed further utilization as the exposure grew nearly 15% to over BGN 57mln. A large portion of that debt will be maturing in Q3 2025 (BGN 43mln), which likely means that there will be another round of negotiations for maturity extension.
  • DSK Bank – debt was partially repaid in Q4 2024 and exposure decreased from BGN 13.9mln in Q2 to BGN 9mln in Q4. However, in view of the liquidity issues in Q1 2024, it was fully utilized. The issue is that this debt matures in Q2 2025 and by the time of the writing of this report, it is likely that the debt has been renegotiated. Considering their repayment history and the type of the loan (working capital facility), it is likely that the bank has decided to stick around and collect interest and fees in the meantime.
  • Investbank – fully utilized (EUR 10mln), but we see that maturity has been extended with a year till Q1 2026.
  • Raiffeisen Serbia – the same BGN 3.9mln exposure, maturing Q4 2025.
  • STB (Tunisia) – exposure increased again from BGN 14.5mln in Q4 to BGN 16.3mln in Q1.
  • Fibank – currently the second largest banking partner after the extended massive facilities last year. Exposures utilized at 98% with an outstanding debt of BGN 47.6mln and maturing in Q4 2027 and Q1 2028.
  • Mediocredito Italiano – exposure in Q1 decreased slightly to BGN 2.9mln.
• Maturities calendar and exposures in next year:
  • Q2 2025 – BGN 13.9mln to DSK bank and BGN 7.8mln to Raiffeisen Romania.
  • Q3 2025 – BGN 42.9mln – United Bulgarian Bank.
  • Q4 2025 – BGN 3.9mln Raiffeisen Serbia
  • Q1 2026 – BGN 19.6mln – Investbank
• The Cash at the end of Q1 was BGN 9.6mln.
• Receivables from related parties – BGN 61.6mln, increased from BGN 61mln in Q4 2024. It is likely that practically nothing of this account can be used to repay debt as 61% of that account (BGN 38mln) is receivables from Prista Oil Holding EAD, Monbat’s main shareholder with 42.73% of the shares. We do not have Prista Oil Holding EAD 2023 financial statements, but if they are similar to the 2022 financial statements, which are public, we can conclude that the majority of the cash (BGN 7.1mln out of BGN 9.5mln) is blocked servicing LGs for suppliers. Other receivables are from the owners of Prista Oil Holding EAD and associated companies owned by the same people.
• Going forward, we see that Investbank agreed to roll their debt with a year. It will be interesting to see which facilities get priority in repayment over the next 12 months as liquidity will persist to be one of the 2 main problems as described above. Considering the sales growth, we can expect EBITDA ranging from BGN 45 to BGN 50mln by YE 2025, which would cover ca. 70% of the maturing debt in 2025. Considering the dates, however, repayment will not be as straightforward as it looks and the ability to negotiate further debt extensions (namely with United Bulgarian Bank and likely Investbank again in Q1 2026) will be crucial. One thing is sure – there are steps in the right direction to restructure and organize debt the right way to get out of the problems. How long it will take is yet to be seen.
• Expansion of sales will be the other important task. They managed a double digit increase in Q1, but the massive drops in developed markets like Spain and Italy show that not all market coverage is great. On a positive note, the small amounts per market show that the potential for growth is significant. Considering they sell through resellers, their ability to build relationships with key distributors in each market can play make-it-or-break-it role for the future of Monbat.

Full report can be read here.