Monbat – 2025 Q2 consolidated results review

Q2 2025 consolidated results

• Monbat’s Q2 of 2025 seems to be definitely a path to recovery. What looked like a vague direction a couple of quarters ago is now a clear trend. Sales marked a nascent increase and the main problems still persist. Their main issues 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 they have managed to organize debt maturity schedules to be significantly more manageable, but there is still a significant amount of work ahead.
• Sales increased 3.56% YoY to BGN 188.7 mln. As usual, there is no explanation what caused it. A worrying sign might be the fact that the growth was less that the Q1 YoY growth (13.7%) but that could be explained by a possible seasonality. On the other hand, hired services increased 17.2% (vs 13.3% in Q1 YoY) and payroll increased 11.9% (vs 15.4% in Q1 YoY), which could indicate a push by the management to address the need for a coherent sales strategy.
• Among the geographical markets South Africa and Algeria are the champions, which contributed most to pushing the sales. Other great performers are Romania, Hungary, Austria, Israel and Serbia. 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 be 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 is 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 of whether top management has the capacity to properly oversee efforts in each market and address issues and opportunities. All these questions are relevant for their main market in Africa – Tunisia, which is their main banking partner for the regions as well, where sales dropped noticeably. As mentioned, this will be a story to be followed in the following quarters.
• While Sales increased 3.25% to BGN 190mln, OPEX increased 6.55% to BGN 187mln. Major contributors were Cost of Materials (adding BGN 17.2mln) and changes in the balance of finished goods (adding positively BGN 12mln). Furthermore, Hired services and Payroll increased by 17% and 12% 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 9.8% to BGN 12.9mln. While inventory dropped by 5.2% to BGN 95.8mln from 101mln last year, Intangible assets marked a 49% spike to BGN 29.7mln. The largest push here comes from R&D products (52%) and trade marks (31%). 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 65.9% to BGN 2.8mln. On the other hand, the greater depreciation drove EBITDA to drop by just 21.7% to BGN 15.8mln. The EBITDA margin dropped 2.6% to 8.3%.
• Even if the decreased debt resulted in decreased financial costs (BGN 6mln vs BGN 7.8mln last year), the decrease in EBIT outweighed this positive move and Earnings before taxes went from positive BGN 2.5mln to a loss of BGN 2mln. The resulting Net Profit went from BGN 2.3mln to a Net Loss of BGN 2.7mln.
• The elephant in the room for Monbat over the last year has been its debt. It is still spread out in 35 facilities and 13 banks. We have covered the situation extensively in our previous reports. The problem is that considering the existing cash, the insufficient EBITDA and the maturing debt, it would be impossible for full repayment. As such, the company, or specifically its CFO, must have implemented the strategy to tour all banks regularly to renegotiate existing facilities. The positive signs for Q2 2025 are that clearly this has been giving the desired results (all Q2 maturing loans have been extended) and has given a little more breathing room. On the other hand, the total maturing debt in the next 4 quarters is BGN 86.3mln, which will inevitably lead to many more rounds of extensions. To give credit where it is due, it is clear that management has stuck to repayment plans on all loans as nearly all of them can be seen with decreasing balances. The net balance is negative BGN 4.6mln indicating the prevalence of repayments over drawdowns.
• 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 55.3mln (down from BGN 57.3 mln last quarter). It is a very good sign to see the total amount to UBB decreasing as they had used the opportunities for drawdown from some of their facilities to repay other debt in the past. The fact that BGN 41mln of the exposure towards UBB is maturing in Q3, however, means that there will be other rounds of maturity extension, but the short extensions that they got in Q2 will likely indicate a quarter by quarter review from the bank and careful monitoring of the exposure.
  • 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 was that this debt matured in Q2 2025 and the bank clearly extended the maturity with a year. 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), maturing in Q1 2026. It is interesting to see how this bank with significant exposure behaves about renegotiation considering the upcoming UBB debt and the company’s inability to repay both.
  • Raiffeisen Serbia – the same BGN 3.9mln exposure, maturing Q4 2025.
  • STB (Tunisia) – exposure decreased from BGN 16.35mln in Q1 to BGN 14.6mln in Q2.
  • Fibank – currently the second largest banking partner after the extended massive facilities last year. Exposures almost fully utilized with an outstanding debt of BGN 45.6mln and maturing in Q4 2027 and Q1 2028. On a positive note, BGN 2mln was repaid in Q2.
  • Mediocredito Italiano – exposure in Q2 decreased slightly to BGN 2.7mln.
  • Banca del Mezzogiorno – exposure in Q2 decreased to BGN 275 thousand.
  • Intesa Sanpaolo – a new bank with a new exposure of BGN 391 thousand maturing in Q2 2025.
• Maturities calendar and exposures in next year:
  • Q3 2025 – BGN 41mln to United Bulgarian Bank.
  • Q4 2025 – BGN 6.2mln – Raiffeisen Serbia, Banca Populare Pugliese and Intesa Sanpaolo.
  • Q1 2026 – BGN 27.2mln Investbank and Raiffeisen Romania
  • Q2 2026 – BGN 12.5mln – DSK Bank and Procredit Serbia
• The Cash at the end of Q2 was BGN 9.5mln.
• Receivables from related parties – BGN 62.4mln, 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 AD, Monbat’s main shareholder with 42.73% of the shares. According to Prista Oil Holding AD 2024 financial statements, which are public, we can conclude that the majority of the cash (BGN 8.3mln out of BGN 10.4mln) is blocked servicing LGs for suppliers and LGs needed for participation in auctions. Other receivables of Monbat are from the owners of Prista Oil Holding AD and associated companies owned by the same people.
• What lies ahead is interesting. We saw earlier in the year that Investbank agreed to roll their debt with a year. The new deadline will likely coincide with the major chunk from UBB, where UBB seems to be willing to extend deadlines quarterly, rather than annually, most likely pursuing a decline in their exposure to Monbat. The total maturing debt in the next 4 quarters is nearly BGN 87mln. If Monbat continues repayment with the same pace, it is likely to decrease to around BGN 63mln within the next 12 months and then to around BGN 40mln by YE 2027. This will be a crucial moment as in this period (Q4 2027-Q1 2028) they will face the big chunk owed to Fibank (BGN 46mln), which will either require negotiation with Fibank (well known for avoiding loan extensions and pursuing the collateral) or refinancing of the Fibank debt with debt from another lender. Either way, excellent financial discipline in the next 2 years will be the major prerequisite to keep the company out of trouble.
• The decreasing profitability, however, can play a harsh joke. In Q1 2025 we expected the annual EBITDA for 2025 to be between BGN 45mln and BGN 50mln. The Q2 2025 results, however, show the company going in negative territory and questioning whether even annual EBITDA of BGN 30mln is possible. Strict financial discipline can only limit some of the adverse effect, but the real way out would be the implementation of successful market strategies in each region. That cannot happen overnight, but as the numbers show, markets with nearly zero sales can grow significantly.
• Expansion of sales will be the other important task. We are not sure how successful they are as there are clearly large fluctuations in each country. They managed a double digit increase in Q1, but the Q2 performance was below expectations and the massive drops in developed markets like Spain and Italy show that not all market coverage is great.

Full report can be downloaded here.