GORENJE, d.d., Velenje
The two-year restructuring program completed in 2013 lays the foundation for revenue growth and profits in 2014
Gorenje Group revenue in the first two months of 2014 exceeds the figure for the last year's equivalent period
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:
At today's session, Gorenje, d.d., Supervisory Board was presented the unaudited consolidated financial statements of the Gorenje Group and its parent company Gorenje, d.d., for the year 2013. Gorenje Group unaudited consolidated financial statements remain consistent with the performance estimate presented by the company upon adopting the 2014 Business Plan. Economic environment in 2013 was exceptionally harsh; moreover, the Group completed in 2013 a restructuring program that had lasted two years. Gorenje Group net revenue in 2013 amounted to EUR 1.24 billion; in 2014, the figure is planned to reach EUR 1.29 billion. As a result of numerous negative effects, the Group's result for 2013 was a net loss of EUR 25 million; adjusting for these effects, the Group would have wrapped up the year with a profit of EUR 1.7 million. The result planned for 2014 is a profit of EUR 12.1 million. The trend for revenue from the core activity of home products and services in the first two months of this year is positive as it exceeds the figure for the corresponding period of the year before by 3.6%.
OPERATIONS AND PERFORMANCE IN 2013
Increase of market share despite the extremely harsh market conditions
Conditions in the white goods markets were highly challenging in 2013. Nevertheless, Gorenje Group succeeded in maintaining the revenue from its core activity of manufacturing and sale of home products and services at the same level as in the year before. With revenue of EUR 1.07 billion, the core activity accounts for as much as 86.2% of total Group revenue, which is 1.4 percentage points more than in 2012. Revenue was negatively affected by the unfavourable changes in exchange rates; adjusting for these changes, revenue in core activity would have been higher by 1.3%. Based on such figure, the Group's market share in Europe rose from 4.00% to 4.26%. Gorenje improved its market position in its two most important markets, i.e. Russia and Germany, as well as in Austria, Croatia, Ukraine, Slovenia, Romania, Bulgaria, England, and Poland.
The Group's total revenue in 2013 amounted to EUR 1.24 billion, which is 1.8% less than in 2012, as a result of the divestment of the furniture business and lower revenue at the companies in the Portfolio Investments segment.
Extensive two-year restructuring program completed in 2013
In 2013, the Group completed its extensive two-year restructuring program which also included strategic relocations of manufacturing operations. In 2012, Gorenje first relocated its kitchen appliance production from Finland to Czech Republic; in 2013, production of washing machines, dryers and dishwashers was shifted from Sweden to Velenje, and production of free standing refrigerators was moved from Velenje to Serbia. The successfully completed relocations have resulted in major savings in production costs, which will have a positive effect on performance in 2014 and beyond.
In recent years, Gorenje also restructured its sales network in order to optimize its business models and to adapt to the changes in market conditions. Notable activities in this respect were carried out in France, Turkey, USA, Croatia, Slovenia, Czech Republic, and Slovakia. The activities to restructure the sales network in order to improve the efficiency of sales activities will continue in 2014.
In recent years, cost rationalization has been implemented in all business fields, with particular emphasis on costs of material and services, which represent more than 58% of total Gorenje Group operating costs. Moreover, activities to curb the increase in labour costs and to improve labour productivity have also been carried out.
Further deleveraging of EUR 35 million in 2013
The restructuring program also included activities to improve the Group's financial strength and to reduce its overall debt. These activities included measures to improve the generation of cash flows from operating activities, as well as measures to improve working capital management, divestment of non-core and underperforming assets, and capital increase through seasoned equity offering.
Gorenje Group's profit from operating activities before depreciation and amortisation (EBITDA) amounted to EUR 78.2 million last year. In 2014, EBITDA is planned to improve to EUR 93.7 million, which will decrease the net financial debt to EBITDA ratio at the end of 2014 to 3.6.
In 2012 and 2013, the Group divested a total of EUR 36.8 million of non-core assets, allowing considerable deleveraging. A public offering of newly issued stock was carried out in the second half of 2013, by which nearly EUR 27 million of fresh capital was raised to be used for development projects and deleveraging.
These measures resulted in a decrease of the Group's financial debt by EUR 35.3 million to a total of EUR 397.4 million in 2013, thus carrying on the deleveraging efforts from 2012 when the debt was cut by EUR 51.4 million. Net financial debt was cut by EUR 20.4 million in 2013 to EUR 358.8 million. Further divestment of non-core and underperforming assets, and improved inventory and complexity management are expected to result in a further decrease in gross financial debt by at least EUR 30 million in 2014.
Performance in 2013 marred by negative effects; adjusting for these, the Group would have completed the year with profit
Gorenje Group performance in 2013 was affected by numerous negative effects, including impairments of financial investments (Merkur, Probanka, Cimos etc.), negative effects of divestment of the furniture segment, negative currency translation differences, and other effects. Total net impact of these effects in 2013 was EUR 26.7 million, which in turn had a substantial effect on the Group's results in 2013. Including these negative effects, Gorenje Group EBIT in 2013 amounted to EUR 36.3 million, while total net loss stood at EUR 25 million. Adjusting for these negative effects, Gorenje Group results for 2013 would have been positive with profit of EUR 1.7 million.
BUSINESS PLAN for 2014
Gorenje Group planned net sales revenue for 2014 stands at EUR 1.29 billion, which is 3.7 percent more than in 2013. The Group's plans furthermore include operating profit (EBIT) of EUR 46.4 million and net income (profit) of EUR 12.1 million, as well as strengthening of finances by deleveraging and higher cash flows from operating activities. The notable improvement of performance is to result from intensive restructuring program carried out by the Group over the last two years, which involved strategic relocations of manufacturing operations, restructuring of sales network, cost rationalization, divestment of non-core and underperforming assets, capital increase through public equity offering, and other measures to improve the Group's financial position. Harsh business environment is expected to persist in 2014. Nevertheless, Gorenje is planning a considerable increase of revenue in core activity, improvement of the structure of sales, as well as major activities in new product development and further optimization of operations.
POSITIVE TRENDS IN THE FIST TWO MONTHS OF 2014
Performance in the first two months of this year indicates a positive trend as the Group revenue is 9 percent above the figure from the first two months of last year, while revenue from core activity of home products and services are higher by 3.6%. The Group's home product sales were higher than in the first two months of 2013 in Russia, Germany, Slovenia, Czech Republic, and Slovakia. Gorenje is closely following the development of political turmoil in Ukraine and countering the effects of the resulting business and financial risks as much as possible with a number of measures.
Upon the announcement of the unaudited financial statements, Gorenje President and CEO Mr Franjo Bobinac commented: "Performance in 2013 was challenged by exceptionally harsh market conditions, as well as the final efforts within the two-year restructuring program. The restructuring activities have laid the foundations for improvement of Gorenje Group's efficiency and competitiveness in the future, which is reflected in the planned growth of revenue and profits in 2014. Performance in the first two months of this year is already a reflection of the positive trends mapped out in our business plan."
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The information of this announcement will be available on the official web site of the company Gorenje, d.d., Velenje, Slovenia, www.gorenje.com, at least 5 years from the date of the announcement.