Mennica Skarbowa, Poland’s largest dealer of investment gold and other precious metals, generated revenues of PLN 175.1 million in the first quarter of 2023, while in the first quarter of 2022 the company generated revenues of PLN 369.4 million. The high value of sales in the first quarter of the previous year was mainly the result of one-time events such as the outbreak of war in Ukraine and the ongoing COVID-19 pandemic in the Omicron variant, which caused above-normal interest in investing capital in safe assets, i.e. gold. The company’s management board expects a return of the seasonality that existed before the pandemic, when most sales were made in the second half of the year. A similar situation is observed almost all over Europe, which experienced declines in gold sales in the first quarter of this year. However, comparing Mennica Skarbowa’s Q1 2023 revenues to Q1 2019, the pre-pandemic period, which amounted to PLN 51 million, it is possible to see the effects of the company’s steady, successive work to increase sales by expanding sales channels and product availability. 

The first quarter of 2023 was characterized in Europe by a long-unseen decline in demand for physical gold in the form of bars and bullion coins. Although global demand increased year-on-year by 5%, this was primarily the result of purchases in South-East Asia and the Middle East. In the United States, as a result of the Silicon Valley bank collapse in March, quarterly demand rose year-on-year by 4%, while the European market saw a 53% year-on-year decline in demand at the time. The most important European market – Germany – closed the first quarter with a year-on-year result of -73%. With sales of 12.6 tons, Germany recorded its lowest quarterly result since 2010, when the World Gold Council has been publishing detailed data.

Major European dealers confirm these data from the level of their wholesale and retail sales, at the same time indicating a trend that we are also observing in Poland – a significant increase in gold buying from the secondary market. This is undoubtedly a result of the high bullion quotations and the level of interest rates, which now encourage people to put their capital in deposits. Despite the fact that we recorded a decline in sales compared to last year, it is worth noting that the Company nevertheless maintained a high level of gross margin on sales at around 4.6% and further controlled the amount of operating expenses. We intend to increase our results in the coming quarters, mainly due to the expansion of our distribution network, both retail and online. Our analysis also shows that we are returning to the seasonality observed 3-4 years ago when we generated better sales in the second half of the year. Gold is still popular in Poland, and we have developed such a position in the market that allows us to look with optimism at the next quarters and even years in terms of gold sales says Jarosław Żołędowski, President of the management board of Mennica Skarbowa.

The company’s profit on sales in Q1 reached PLN 3.2 million, compared to PLN 18.4 million in Q1 2022. The decrease was mainly due to a decrease in the value of revenues generated. Operating profit amounted to PLN 3.2 million compared to PLN 18.4 million in Q1 2022.

Financial income of PLN 1.6 million was mainly due to foreign exchange differences posted at the average exchange rate of the National Bank of Poland. The company’s management board notes that the company uses exchange rate hedging on an ongoing basis and does not speculate on gold and euro prices. The aforementioned phenomena are typical economic conditions for the business, where the vast majority of purchases are made in euros. Finance costs of PLN 0.8 million in Q1 2023 were mainly due to interest on loans used by the company to finance its ongoing commercial activities.

Preparation for sales growth in subsequent periods, especially in the second half of the year, resulted in the adoption of a policy of high stocking, among other things, in order to smoothly execute the sale of goods “on hand”, which in influenced the growth of the company’s current assets. The stock of goods at the end of the first quarter of 2023 amounted to PLN 95.9 million, an increase of 19% compared to the end of 2022. The high stock of goods was a product of two factors. Part of the goods were customers’ orders that were received after the end of the quarter. The other part was goods accumulated for sales in the following quarter. After all, meeting the huge demand that still prevails in the gold market requires stockpiling the commodity for smooth sales.

The level of the issuer’s current liabilities increased from PLN 98.1 million at the end of 2022 to PLN 111.7 million at the end of Q1 2023. The rise is a consequence of an increase in the level of trade payables resulting from the high number and value of orders, as well as an increase in the value of loans allocated for the increase in the period’s stocking.

It is noteworthy that the last three years (2020-2022) were stimulated by the time of the pandemic and the war in Ukraine, therefore this period was characterized by above-normal demand for gold. Based on historical trends in the precious metals industry, the issuer’s management board estimates that the following years will be characterized by seasonality of sales, but already at higher levels of turnover than in the years before 2020. However, a sustained higher gross margin on sales will allow to generate satisfactory revenues despite lower market demand.