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GORENJE, d.d., Velenje

2014 performance estimate and 2015 business plan

Gorenje Group plans further improvement of profitability in 2015

Pursuant to the provisions of the Rules and Regulations of the Ljubljana Stock Exchange, d.d., Financial Instruments Market Act (ZTFI), and the Corporate Governance Code of the Ljubljana Stock Exchange and Warsaw Stock Exchange, the company Gorenje, d.d., Velenje, hereby makes the following announcement:

Velenje, January 30, 2015 At today's session, Gorenje, d.d., Supervisory Board was presented the Gorenje Group 2014 end-of-year performance estimate and approved the 2015 business plan. Gorenje Group performance in 2014 was affected by challenging and uncertain conditions in Ukraine and Russia. Economic slowdown and strong rouble depreciation had a negative impact especially on the last quarter performance. Despite the considerable impact of these two markets on operations and performance, the Group wrapped up the year 2014 with notably better results than in 2013, which is also a result of the positive effects of restructuring carried out in the last two years. Estimated revenue is 0.3% higher than in 2013. EBIT is estimated at EUR 40 million, which is 10.2% more than in 2013. After ending the year 2013 with a loss of EUR 25 million, the Group generated an estimated profit of approximately EUR 0.1 million in 2014. Net debt was cut by EUR 26 million. In 2015, Gorenje Group continues to intensively pursue its activities for improvement of profitability and financial strength. Based on a variety of activities, EBIT for 2015 is planned at EUR 43.1 million, which is 8% more than the 2014 estimate. EBITDA for 2015 is planned at EUR 92.9 million, which is 11.4% more than the figure estimated for 2014. The Group is planning to end the year 2015 with a net profit of EUR 6.1 million.


Effect of uncertain conditions in Russia 

The business environment remains challenging for home appliance industry in 2015. Due to economic slowdown and depreciation of rouble, Russia is contributing the most uncertainty in this respect. Therefore, Gorenje Group has developed several scenarios for the business plan. 

In Russia, Gorenje Group is expecting a decrease in revenue this year, for the first time after a decade of growth. This market is also one of main reasons why the Group revenue, planned at EUR 1.22 billion for 2015, is lower (by 2.3%) than the estimate for the year before.

Higher sales of premium and innovative products and higher revenue in non-European markets 

Gorenje Group is planning further improvement of profitability in 2015. Key activities geared towards this goal include increase of high-end product sales from 16.4% of total sales volume in 2014 to 17.2% in 2015. Higher sales of innovative products are also planned, increasing their share from 7.1% (in 2014) to 7.2%, while the share of small domestic appliances sales is planned to rise from 3.8% to 4.1%. Moreover, the Group is planning to increase its revenue in non-European markets by 2.5%, especially with stronger sales in the Middle and Far East, and Australia.

Improved operating profitability

In addition to improved product and geographical sales structure, improved operating profitability will also be a result of raw and processed material, logistics and other services, and labour cost optimization, and the positive effects of pricing policy adjustment.

According to the realistic scenario, the Group is planning operating profit (EBIT) of EUR 43.1 million in 2015 – an increase of 8% over the 2014 EBIT estimate – and net profit of EUR 6.1 million.

Further deleveraging

Gorenje Group has been successfully improving its financing situation in the last two years. In 2014, estimated net debt was cut by EUR 26 million; this year, the Group is planning to shave off further EUR 11.5 million. This will be attained by better management of working capital and complexity of finished products and merchandise. Moreover, proceeds from divestment of non-operating assets will also be used for deleveraging. With the EBITDA planned at EUR 92.9 million, the net financial debt to EBITDA ratio will decrease to 3.46.

Gorenje President and CEO Franjo Bobinac comments: "Despite the harsh business environment, we succeeded in increasing our market shares in most markets in 2014 and in improving Gorenje Group's profitability and financial strength. Conditions in some of our key markets remain uncertain this year. We continue to pursue the activities to alleviate the negative impact of the rapidly changing environment, focusing on further improvement of operating profitability and financial strength. We will offer our customers some new upmarket products such as the new generation of built-in cooking appliances and Asko dishwashers, which supports the attainment of our goals."


Performance challenged especially by turmoil in Ukraine and Russia

Gorenje Group operations in 2014 were affected by political tensions in Ukraine, lasting several months. As a result, the Group revenue in this market was nearly EUR 27 million lower than in 2013. Starting with the third quarter of 2014, a stronger economic slowdown was seen in Russia, which included a plummeting rouble.

After generating a positive result in each of the first three quarters of 2014 and wrapping up the first nine months of the year with a net profit of EUR 4 million, Gorenje Group saw its profitability dwindle in the last quarter of 2014 as a result of extreme rouble depreciation.

Gorenje Group tackled the aggravation of economic conditions in these two markets, which are highly important for its sales volume and profitability, in better shape than in the past, mostly owing to successful restructuring of manufacturing operations and sales network in the period 2012–2013. Thus, the Group improved its operating profitability in 2014 despite the hostile environment. Estimated operating profit (EBIT) reached EUR 40 million or 10.2% more than in 2013. According to the estimate, the Group completed the year with a net profit of approximately EUR 0.1 million, after seeing a loss of EUR 25 million in 2013.

Group revenue rose by 0.3% relative to 2013, to EUR 1.24 billion. The Group generated higher revenue in Germany, USA, Slovenia, Romania, Bulgaria, Czech Republic, Hungary, Slovakia, and the Far East, and increased its market shares in most of its markets.

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

The information included in this announcement will also be available at the official website of the company Gorenje, d.d., Velenje, at www.gorenjegroup.com, for a period of no less than 5 years from the date of announcement.

Gorenje, d.d., Management Board
Date: 30.01.2015