Smart Organic – 2025 Q1 review- Investments in expansion hurt profitability but creates opportunities

2025 Q1 consolidated results

• Smart Organic continued their sales growth in Q1 when sales marked a 32.2% increase YoY to reach BGN 28.9mln. The export share stood at 76%. Considering that exports were reported to be 66.7% in their annual 2024 results and 70.7% the year before by YE 2023, it is clear that a significant focus in SO’s expansion is placed on external markets, which clearly grow. It is a very positive sign to see a company, which considers this step before reaching saturation point on its domestic market. Considering the signed partnership agreements with major retailers in EU, this trend is likely to become stronger.
• Sales of products reached BGN 28.7mln marking a 32% increase. Of those, exports to the European Union were BGN 21.8mln. Within exports, the DACH region is the most important as it contributed BGN 13.9mln or about 64% of all exports. The DACH sales include own products, as well as the production of proprietary products of the retail chains they work with. The retailers they partner with are Lidl, Billa, Denn’s, Aldi, Hofer, Kaufland, dm, Rewe and Rossmann.
• Bulgarian sales were 24% and sales to non-EU countries amounted to 10%.
• OPEX increased 40.5% to BGN 25.3mln. Of those, the greater contributor was COGS, which shot up 69% to BGN 12.9mln. This shows the high dependency on external factors, such as the prices of the products, which they source. There is no disclosure whether the company hedges its expenses in this regard, it is likely that they do not. Considering the rise, however, with increasing sales volumes in the future, this need will become more apparent. Personnel expense marked a 30% increase reaching BGN 4.5mln. External services also increased 45.8% to BGN 3.7mln, about a third of which is transport services.
• As a result, EBIT decreased 4.8% to BGN 3.6mln, EBITDA increased 4% to BGN 4.6mln and Net Profit decreased 7.4% to BGN 3.1mln, bringing down the Net Margin from 15.4% to 10.8%.
• Assets grew by nearly 72% to BGN 115mln. Within Long-term assets, the main change was the increase of PP&E by BGN 10.7mln to reach BGN 44mln. This reflects the implementation of the new base in Bozhurishte. Within Short-term assets major movers are Cash (BGN 12.5mln added to reach BGN 14mln), Trade receivables (an 85% increase of BGN 12mln to reach BGN 25.9mln) and Short-term financial assets (adding BGN 9.6mln to reach BGN 10.5mln). The increase in Trade receivables is understood considering the increased B2B sales mentioned earlier where deferred payments are the norm. Delays beyond the agreed time period with such counterparties are rare. Short-term financial assets are share ownership of funds by Shroders (EUR 879Billion AUM) and Amundi (EUR 2,247Billion AUM). Inventory also increased 21.6% adding BGN 3.5mln to reach BGN 19.3mln, which is in line with increased production to cover the greater demand from the new trade partnerships.
• Within liabilities, total debt increased 53% to BGN 21.7mln. It is largely due to utilization of investment facilities for the completion of the Bozshurishte location, as well as working capital facilities needed for the expansion of trade (used for LGs, liquidity, etc.). Within that, the big change is in LT loans, which grew 60% to BGN 17mln. So far the company has 10 facilities, 9 of which are with United Bulgarian Bank. 3 of those will mature in Q3 2025. There are no liquidity issues, as cash is 3x all ST loans and repayment has gone as per schedule.
• Smart Organic does not provide breakdown of bank loans in their interim reports, the table below is the breakdown as per YE 2024.
• 05.2025 the company made a decision on its GSM to distribute a dividend in the amount of BGN 0.24 per share or 0.7% dividend yield.
• Clearly, Smart Organic is not a high yield stock as they are more concerned with utilizing the generated cash for their expansion. Considering the steps to partner with some of the largest retailers in the EU, this is a step in the right direction. They, however, wanted to send the positive signal of growing the dividends – it was BGN 0.20 in 2022, BGN 0.22 in 2023 and BGN 0.24 in 2024, which indicates that there is a financial discipline and predictability.
• 06.2025 the company announced that as of 04.06.2025 there had been a change in the ownership structure. The owner and CEO Yani Dragov transferred shares from the capital of Smart Organic AD to its subsidiary Organic Ventures EOOD, which resulted in a change of the directly owned shares by Yani Dragov (note, Organic Ventures EOOD is fully owned by Yani Dragov). As a result of the change, the direct ownership of Yani Dragov in SO went down from 85.13% to 58.68% and the indirect increased from 0.01% to 26.46%.
• 06.2025 – the company announced that they project record sales for H1 2025 in the amount of BGN 55.3mln on consolidated basis. Record sales were registered in May in the amount of BGN 9.9mln. The new production facility in Bozshurishte is gaining momentum. Additionally, there is a confirmed discount period for the DM stores in Germany for the month of September.

Full report can be accessed here.