LPP on the shoulder blades. The decline in the stock exchange value of shares is only the beginning of the company's problems

Luc Williams

Here's your morning brief – everything you need to know about what's happening in the economy right now.

Inflation 2.8 percent

After three years inflation in Poland she returned to inflation target, if we assume that it is the level of 2.5%. with a 1 percentage point wide range around this level. In February, according to new data from the Central Statistical Office, it fell more than analysts' expectations, to 2.8%. On a monthly basis, the price level in February increased by 0.3% compared to January. Exactly a year ago, inflation was at its peak, above 18%. annually.

Inflation 02/2024 / Media / Rafał Hirsch

We can therefore assume that the problem with too high inflation in Poland has passed, but according to many economists, this is not true, because the current decline is temporary and results mainly from base effects (the calculations exclude the months from last year, when prices rose faster). In the second half of the year, inflation will increase again, probably to around 4-5%, and if so unfreezing electricity prices will result in a significant increase, perhaps even up to 8%. About a more lasting decline in inflation again to current levels according to the last one NBP inflation projection We will only be able to talk in a year if the government unfreezes electricity prices, or in two years if it does not.

The Central Statistical Office, like every year, also changed composition of the inflation basket, adapting it to our preferences and purchasing structure from last year. As a result, the share of food in this basket increased from 27 to 27.6 percent. and the share of the “housing use and energy carriers” category, which includes, among others, electricity, gas, fuel and garbage collection increased from 19.6 to 20.4 percent. These are by far the two largest categories in the Polish basket. The share of our expenses in restaurants and hotels, as well as on recreation and culture, also increased slightly.

On the other hand, the share of transport, due to last year's drop in fuel prices, decreased from 9.9 to 9.2 percent. This year, spending on clothes, shoes, home furnishings, communications, education and health will also weigh less in the inflation basket.

7.8 billion deficit after February, 21 billion in February

After January surplus in the state budget there is no trace left. In February, it amounted to as much as PLN 21.5 billion deficit. Not counting the annual budget results for December, which traditionally show huge holes due to the accumulation of various expenses at the end of the year and booking part of the next year's expenses “in reserve”, the February deficit is nominally the largest in history.

And we owe it largely to the possibility of submitting it online since mid-February annual PIT settlement and quickly obtained refund of tax overpayment. There must have been a lot of such refunds in the second half of February, because budget revenues from PIT tax, after taking into account the refunds, dropped to PLN 2.8 billion, from PLN 11.3 billion in January. In its announcement, the Ministry of Finance also writes about the higher share of local governments in PIT income than a year ago, which means that less income remains in the state budget.

In addition, budget expenses were 28% higher in February. higher than a year ago, mainly due to larger subsidies for local governments raises for teachersbigger subsidies for ZUS for “800 plus” payments and transfer of larger funds to Armed Forces Support Fund.

The budget deficit calculated for the last twelve months has just increased from PLN 83.1 billion to PLN 93.4 billion and is also nominally record high.

Budget deficit February 2024 / Media / Rafał Hirsch

Fallowing is to be voluntary

European Commission officially withdrew from these elements Green Dealwhich aroused the greatest Farmers' protests in Europe. So-called “fallow”, i.e. leaving some fields unsown each year is to be voluntary, and farmers who decide to do so will receive additional financial support. Secondly, a number of ideas are transferred from the EU level to the level of governments in individual countries, so these governments will be able to suspend or delay these ideas, depending on the situation in the country. Thirdly, farms with an area of ​​less than 10 hectares will not be able to be penalized or even controlled for compliance with the regulations related to the Green Deal. In Poland, this means that most farms are exempt from this obligation.

Of course, for now it is only a proposal from the European Commission. For it to become law, he must accept itEuropean parliament and confirm Council of the European Unionthat is, in this case agriculture ministers all EU countries.

Farmers, at least those in Poland, unfortunately are not ending their protests for now and still intend to block the roads.

LPP crash after Hindenburg, record turnover

LPP shares, the largest clothing company in Poland, owner of, among others, Reserved brands fell on Friday to stock exchange by as much as 35.8 percent after the company Hindenburg Research published a long report that LPP, despite its declarations, had not completed the project business activities in Russia. Hindenburg is a very well-known and respected company on the market, which in the past has similarly revealed errors, omissions and even fraud in other well-known and listed companies, which caused them to lose several dozen percent of their value.

Hindenburg himself always made money from this, because he previously held the so-called short positions in shares companies of their choice, allowing them to make a profit when their prices drop. He did the same in the case of LPP, which he informed himself. For this reason, also in the case of LPP, the effect was stunning. Investors completely ignored the company's announcements denying Hindenburg's revelations and suggesting that everything Hindenburg found could be explained transitional period contained in agreement on the sale of the company's Russian assets.

Valuation of LPP shares March 2024 / Media / Rafał Hirsch

The panic in the company's shares was so great that it also managed to break an all-time record in terms of turnover during the trading session. On Friday, they exceeded PLN 6 billion, although in this context it is also important that they expired on that day futures contractsand their settlement always increases the turnover level.

LPP Company claims that he does not conduct business in Russia, Hindenburg wrote untruths, so he reports the case to the prosecutor's office. Today, a conference of the LPP management board was announced with the participation of the main shareholder who rarely appears in the media, Marek Piechocki.

Whether or not LPP actually operates in Russia is not just an ethical and image issue. The company takes out loans in… PKO BPfor which lack of activity in Russia is one of the conditions for granting loans. In addition, it is also a matter of possible disclosure of untruths in financial reports, which may result in serious consequences.

Holders of LPP shares can try to console themselves with the fact that Hindenburg often wins in such situations (because he is often right), but not always. The famous attack of this organization a year ago on the company Adani, the richest man in India, ended with the discontinuation of the investigation into all charges and the loss made up for by the price of Adani's shares on the stock exchange. However, it lasted almost a year, and the initial losses of the company's shareholders were huge.

Better data from China

Industrial production In China in January and February it was as much as 7% higher than a year ago. These are the best data on this subject in almost two years. They are also better than previous market expectations. Retail sales increased by 5.5% in this period. which means a slowdown in growth, because in December it exceeded 7%. but these are also better data than expected. Investments increased by 4.2%, and the expected increase was 3.2%. For the first time in a long time, we have something in the data from Beijing that looks like economic recovery, although economists, including those quoted by Reuters, remain skeptical and claim that it will be difficult to maintain such growth dynamics in the coming months.

However, the financial market has something to be happy about for now, the indexes in Asia are clearly positive today, just like and index futures in Europe and the United Statesso the beginning of stock exchange quotations in Europe today also looks optimistic.


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