A new board member joins Moravské kovárny after a net loss of CZK 29.8m

The business improved and the bottom line went the other way

Moravské kovárny, a.s. (the name means Moravian Forges; a.s. is the Czech joint-stock company) closed 2025 with an operating loss of CZK 24.4m. A year earlier the operating loss was CZK 45.8m. The core business therefore lost CZK 21.4m less than before. Over the same calendar year the net result moved the opposite way: from a net profit of CZK 15.0m in 2024 to a net loss of CZK 29.8m in 2025, a deterioration of CZK 44.8m. All figures are in CZK, for the company on its own, under Czech accounting standards, with an unqualified audit opinion for 2025.

Put side by side, the two years tell opposite stories. Read only the bottom line and 2024 looks like the healthy year and 2025 like the start of trouble. Read the operating line and it is the reverse: 2024 was the weaker year, and 2025 the one in which the business started to close the gap.

The margins show the same split. The operating margin improved by 2.9 pp, from -6.0% to -3.0%. The net margin fell by 5.7 pp, from 2.0% to -3.7%. Revenue rose 4.4% to CZK 800m, so the company was not shrinking either.

What sits between operating profit and net profit

Operating profit covers what a company earns from making and selling: revenue minus materials, energy, wages, depreciation and other running costs. Net profit adds everything below that line. In Czech accounts this is the financial result (interest paid and received, exchange rate gains and losses, dividends from subsidiaries, revaluation of investments) and then income tax.

In 2024 something below the operating line was strong enough to turn an operating loss into a net profit. In 2025 the same area pushed the result further into the red: the net loss is larger than the operating loss. Interest is not the main driver. Interest expense in 2025 was CZK 1.2m, which accounts for only part of the gap between the operating and the net result.

That leaves the usual suspects. A one-off financial gain in 2024, such as a dividend from a subsidiary, the sale of an investment or a favourable currency swing, would flatter that year and make 2025 look like a collapse when it is simply a year without the windfall. The tax line can do the same, in either direction. The accounts do not break the financial result into its parts; the financial result line and the tax line for both years would settle which cause applies.

In my view the operating line is the better guide to how this business earns money, and it improved.

The improvement is real, but smaller than it looks

Even the operating improvement deserves a second look. Part of it came from lower depreciation, which fell from CZK 47.3m to CZK 43.0m. Depreciation is the annual cost of machines and buildings spread over their life. When it falls, it often means older equipment has been fully written off and is not yet being replaced. Profit rises on paper, but no machine became more productive.

EBITDA strips depreciation out: operating profit plus depreciation and amortisation. It rose by CZK 17.1m to CZK 18.6m, which is less than the CZK 21.4m improvement in operating profit. The percentage change in EBITDA, 1,109.5%, looks spectacular only because the 2024 base was CZK 1.5m, barely above zero. The EBITDA margin moved from 0.2% to 2.3%. For a company with a heavy asset base, that is a thin slice of each koruna of sales left before paying for its equipment. I would not read the jump as a turnaround. Moravské kovárny has stopped losing money before depreciation and now sits close to break-even on that measure, which is a starting point rather than a result.

A strong balance sheet buys time, not results

The balance sheet explains why none of this is urgent. Equity was CZK 774m against total assets of CZK 895m, an equity ratio of 86.4%. Cash at the end of 2025 stood at CZK 201m, down CZK 13.4m over the year. Equity fell by CZK 31.6m, which is broadly the net loss flowing through.

The lead question for any loss-making company is who pays the interest. Here the answer is uncomfortable in principle and harmless in practice. With an operating loss of CZK 24.4m, none of the CZK 1.2m interest bill was earned by the business; it was paid from reserves. But the reserves are large relative to that bill. The risk is not that Moravské kovárny cannot pay its lenders. The risk is that a comfortable balance sheet lets a thin operating margin persist for years without anyone being forced to fix it.

The company also registered a new member of its administrative board (správní rada, the governing body of an a.s. under the one-tier system) in October 2026. The accounts do not say whether that is connected to the results, and I would not assume it is.

What to check in your own company

When your net result changes sign, do not start with the bottom line. Open your income statement for the last two years and write down three numbers for each: operating profit, the financial result, and tax. Then go through the financial result line by line and mark every item that will not come back next year: a one-off dividend, a sale of shares, a currency gain on a single large contract, a reversal of a provision.

Remove those items and recompute net profit for both years. That adjusted figure, not the reported one, is the base for next year's budget, for bonus targets and for the conversation with your bank. If last year's profit depended on a windfall, your plan should not.

Then do the same for depreciation. If operating profit improved partly because depreciation fell, ask your finance team which assets have just been fully written off and when they will need replacing. That replacement is next year's capital spending, and it will bring the depreciation back.

Moravské kovárny had a better operating year in 2025 and a worse accounting year, and the second hides the first. The bottom line says the company went backwards; the operating line says it went forward, slowly, from a weak starting point.