In accordance with the provisions of the Code of Best Practice for WSE Listed Companies, the Ljubljana Stock Exchange Rules, and the applicable legislation, the company Gorenje, d. d., is publishing the following announcement:

Velenje, May 24, 2017 – In the first quarter of this year, Gorenje Group stepped up its sales of premium and innovative dishwashing and cooking appliances, and, consistently with the strategic plan, boosted sales in markets beyond Europe, as well as in Benelux and Eastern Europe. High growth rates were also seen in sales of small domestic appliances and heating equipment. Thus, we wrapped up the first quarter of 2017 with operating profit (EBIT) of EUR 7.9 million, up 16 percent over the last year's equivalent period, and with net profit of EUR 2.1 million, which is a million and a half above the last year's first quarter figure.

From January to March this year, we generated EUR 305.7 million of sales revenue, which is a good seven percent better than in last year's first quarter, and 3.4 percent more than budgeted. Of this amount, nearly EUR 251 million comes from our core activity of home appliances, which is 3.4-percent more than in the first quarter of 2016.

We also notably improved our EBITDA which amounted to EUR 20.6 million, topping the figure for the first quarter of 2016 by 11.6 percent. In addition, we cut our relative debt and average financing expense, and improved our financial liability maturity profile so that long-term sources account for 66 percent. We also completed our fifth issue of commercial paper with total nominal value of EUR 40 million, and issued five-years bonds with total nominal value of EUR 19.5 million.

Growth rate highest in markets beyond Europe

In markets outside Europe, our growth reached 37.7 percent, which reduces our reliance on the mature European markets. Considerable growth was also seen in North America, Australia, the Middle and Far East, Caucasus, and Asia. Non-European markets account for 12.1 percent of total core activity Home revenue, which is 3 percentage points more than a year ago.

Our sales were also up in the markets of Benelux where we are advancing our market share with sales under our premium brand Atag. We increased our sales by five percent in Eastern Europe and by no less than 50 percent in Ukraine.

In Germany and Great Britain, we cancelled some sales campaigns for entry-level appliances with sub-par profit margins, as we are looking to reposition our brand in terms of pricing. This resulted in somewhat lower revenue in the first quarter of 2017.

Premium appliances already account for 30 percent of total major domestic appliance sales, and innovative appliances account for over 22 percent

Breaking down the structure of sales in the first quarter, we boosted our sales under the premium brand Asko by nearly a quarter, and our sales under the Atag brand by 6 percent. At the same time, we improved the structure of our major domestic appliance sales so that revenue from sales of premium appliances was up 13.3 percent, revenue from innovative appliances was up by nearly a tenth, and revenue from dishwashers was up 20 percent. In addition, high growth rates were also seen with small domestic appliances (32.3 percent) and heating equipment.

Nearly EUR 8 million invested into development in the first quarter

In order to fuel the Group's long-term competitiveness, we continued to increase our carefully targeted investments into marketing and development. We allocated EUR 7.6 million for development in 2016, which is 2.5 percent of total Gorenje Group revenue. Key development novelties include the new modular platform for built-in refrigerator freezers for the Gorenje brand, new Gorenje Ora-Ïto designer line, and the Gorenje Retro Special Edition refrigerator featuring the design of the popular Bulli van, a result of co-branding with Volkswagen.

We increased our total investments by EUR 3.1 million to EUR 14.8 million. Of this amount, EUR 8.7 million was invested into technological equipment mostly used in new product development.

Effective cost management

In the first quarter, we successfully managed the upstream prices for global raw and processed materials, and optimized our logistics costs and use of material in manufacturing. By sourcing our components from the most competitive countries, we adjusted the cost of raw and processed materials to the sales and manufacturing volume. In the first quarter of the year, the average number of employees at the Gorenje Group was 10,978, which is 448 more than in the last year's first quarter. Growth is a result of average production volume in Velenje and Valjevo. The labour costs thus increased by 4.7 percent which, however, is lower than the rate of revenue growth.

Throughout the rest of the year, we shall continue to pay a lot of attention to efficient management of key risks that include risks in upstream prices of global raw and processed materials, operating expenses, attainment of the planned volume of operations, and the Group's competitiveness which we shall seek to maintain and improve by promoting further sales growth, improving our sales structure, developing innovations and new products and services, optimizing our supply chain and complexity, and by careful planning as we continue to generate value for all our stakeholders consistently with the strategic plan dynamics.

Gorenje Group operations and performance in the second quarter are consistent with the planned interim dynamics.

The 24th regular Shareholders Assembly of Gorenje d.d. will take place on July 14, 2017.

The Gorenje Group business report for the first half of 2017 will be released on August 25, 2017.

Disclaimer: The English text for all announcements is for information purposes only!

The information of this announcement will be available on the official web site of the company Gorenje, d. d., Velenje, Slovenia, www.gorenjegroup.com, at least 5 years from the date of the announcement.