Although exact figures are not yet known, Slovenian companies expect their energy costs to balloon after the government decided last week to increase the contribution in the energy bills for supporting renewable energy sources, Slovenian Times reported. Some companies estimate their contribution could be even four times higher. Pharma company Krka technical director Marko Lampre told the Slovenian Times that a 300% rise in the contribution would increase the company's total energy bill by around 13%.
Krka’s main source of energy are natural gas, liquid petrol gas, electricity and extra light fuel oil as a back-up fuel. Most of the energy cost should appear in the cost of sales, however we have not found a breakdown for cost of sales in the company’s financial statements including the 2011 Annual Report. We believe Krka’s share price momentum may have been broken yesterday after such news (Krka shares were down 4.5% yesterday after a 20% run in the last month). We are waiting for management comments to have more clarity on the potential impact on margins and the bottom line.