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GORENJE, d.d., Velenje

Gorenje business performance in the first three months 2005, successful and in line with the plan; conditions on the sales and purchase markets are still exceptional difficult. About the business performance discussed also the Supervisory Board at the 21. Supervisory Board Meeting, held on May 12, 2005.

Consolidated Financial Report Summary of Gorenje Group for January-March 2005, according to IFRS

Summary of the non-audited consolidated Financial Report of the Gorenje Group for the period January - March 2005, according to the International Financial Reporting Standards.

In the 1st Qtr. 2005, consolidated net revenues from sales of the Gorenje Group amounted to SIT 54,030 million, implying a 13% increase over 1st Qtr. 2004 and 23% of the 2005 plan. From the total growth, 7% of the growth was a result of the incorporation of the company Mora Moravia, a.s. (Cooking appliances producer, Czech Republic), into the Group from the January 2005. Gorenje Group EBITDA rose to SIT 4,214 m (SIT 4,057 m), up by 4% and reached 23% of the annual plan 2005. Profit before tax amounted to SIT 1,326 m, showing 14% increase in comparison with the 1st Qtr. 2004 (SIT 1,167 m) and realised 24% of the 2005 plan. Net profit rose by 6% to SIT 1,027 m (SIT 973 m) and reached 21% of the annual plan for the year 2005.

The beginning of 2005 on European markets has been distinguished by the continued low level of economic growth, low level of customer confidence, and reduced international competitiveness resulting from weak dolar compared to euro. All these elements have been reducing demand for permanent goods, including household appliances and other home products, at the same time raising competition edge and price burden on European market. The consequences of last year's entry of Slovenia into the ERM II system and subsequent fixation of EUR/SIT exchange rate, in addition to the still relatively high domestic inflation rate in 2004, has created additional cost strains for net exporters like the Gorenje Group.

The paramount challenge in the year 2005 is expected in the area of extremely high prices of strategic raw materials and components, especially the steel plate, other steel products, non-iron metals, and finally the petrochemical products. And whilst good news is that the growth of most raw material prices has been slowly settling, however at record high levels, the price of petrochemical products have still been growing as a consequence of the crude oil price increases.

The EU WEEE Directive regarding treatment of waste electrical and electronic equipment, comprising also large and small household appliances, enters into force in all EU countries in August 2005. Based on this Directive, the manufacturers of electronic and electrical equipment will be responsible also for the treatment of these appliances after the expiry of their useful life, both for those sold prior the implementation of the Directive, as for those sold after it. The Group will put every effort to transfer the recycling costs as much as possible to the buyers of the products. Final effects of the implementation of the Directive is still impossible to forecast, due to the existing ambiguity of executive documentation in numerous member countries.

The above negative impacts of adversary economic elements will have to be neutralized as much as possible during the year 2005 above all by the optimization and search for cheaper alternative supply sources, selective price increases of household appliances and enhancement of their sales structure, and rationalization of costs in all segments of operations. The Management Board will continue to carry out all business operations which are expected to contribute to the final achievement of forecast business objectives for the year 2005.

The attached report will be also available on the Gorenje Group web-site: www.gorenje.com.


Gorenje, d.d.,
Management Board


Date: 12. 5. 2005

Attachments: Gorenje Group financial report summary January-March 2005