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MERCATOR, d.d., Ljubljana

Mercator Group generates profit in the first half of 2015, after years of negative first-half bottom line; Group's positive performance trend sustained

Pursuant to the Rules and Regulations of the Ljubljana Stock Exchange and the relevant legislation, the company Poslovni sistem Mercator, d.d., hereby announces the following:


Despite the challenging conditions in the market, Mercator Group generated EUR 1,287 million of net revenue in the period 1–6, 2015, which is 1% less than in the corresponding period of the year before. Due to the changes in the revenue profile following the consolidation of trade operations within the Agrokor Group, the data is not entirely comparable to last year. Revenue structure by markets has changed considerably from the previous year. In Serbia, revenue increased considerably as the retail units of the company Idea, d.d., were transferred to Mercator - S, d.o.o. In Croatia and Bosnia and Herzegovina, on the other hand, there was a substantial drop in revenue due to the shift of Mercator's retail activities to the company Konzum, d.d.

In the first half of the year, Mercator Group significantly improved the profitability of its operations, generating operating profit of EUR 33.4 million and net profit of EUR 15.3 million for the period. On the one hand, the notable performance improvement is a result of focus on the core activity, reflected in higher investment into refurbishment of the existing retail network, stepped-up activities for advancing Mercator's competitiveness in the market, and focus on more profitable markets as a part of consolidation of trade operations in the region following the merger with the new owner. On the other hand, successful continuation of cost optimization efforts has also contributed to better performance.

Despite the one-off losses due to the fire in the Ljubljana warehouse and the resulting sub-optimal operating processes with additional internal cost rationalization, Mercator Group successfully continued its cost optimization activities. As a result of successful financial restructuring, Mercator's net finance expense decreased by 43% in this year's first half relative to the corresponding period of the year before.

In the period 1–6, 2015, Mercator Group boosted its investment activity, allocating EUR 26.5 million for investment, or 2.5-times more than in last year's equivalent period. Update of the retail network in Slovenia accounted for 70% of total investment. This included refurbishments of twelve neighbourhood stores, five supermarkets, two hypermarkets, and one convenience store in the first half of the year. Investments into refurbishments have had a positive effect on performance.

In the first half of this year, Mercator also increased its investment into wholesale operations. On March 31, 2015, it successfully completed the takeover of wholesale operations of the company ERA GOOD, d.o.o. Mercator expects the acquisition to increase the volume and scope of FMCG wholesale offer, as well as improvement of business efficiency and competitiveness of its wholesale operations.

As a part of the process of focusing on the core activity, Mercator further pursued in the first half of this year the process of divesting its non-core operations. In April 2015, a sale and purchase agreement was signed between Mercator, d.d., and Don don, d.o.o., for Pekarna Grosuplje – the Grosuplje bakery. Today, on August 25, 2015, the necessary permission was issued by a respective regulator, thus enabling undisturbed continuation of the necessary formal procedures. Completion of this transaction is anticipated in the second half of 2015.

In June 2015, the company Franck acquired the ground coffee brands Santana and Loka. Products under these two brands will continue to be produced at the plants of the company Mercator - Emba, d.d., in Logatec.

By divesting its non-core businesses, Mercator found strategic partners who will allow further development of both the bakery and ground coffee production, which will yield positive long-term effects for the consumers and other key stakeholders.

In the second half of this year, Mercator Group will continue to pursue its business restructuring activities. It will continue to step up investment activities to improve its market position and competitiveness.


Business Report of the Mercator Group and the company Poslovni sistem Mercator, d.d., for the period 1-6 2015 is attached herewith.



This announcement shall also be published as of August 25, 2015, on the company website at www.mercatorgroup.si, for a period of no less than five years.

Poslovni sistem Mercator, d.d.
Management Board
Date: 25.08.2015