Friday, 25th May 2012, Velenje / Slovenia

In the first quarter, Gorenje sees lower revenue yet higher profit than last year

In the first quarter of the year, Gorenje Group revenue totalled at EUR 299.1 million which is slightly below the planned figure. The lag behind the plan is chiefly the result of harsh economic conditions in Europe; in addition, revenue is lower than in the first quarter of 2011 due to the divestment of Istrabenz Gorenje. Despite lower sales, profit exceeds both last year's results and the plan.

Sales in particular markets where Gorenje's profitability is above average (e.g. Russia) were better than planned; moreover, the company successfully pursued optimization of all types of costs. Group net income (profit after taxes) in the first quarter thus amounted to EUR 2.1 million, which is notably above the planned figure of EUR 0.8 million. Results from operating activities (EBIT) amounted to EUR 9.2 million, which is consistent with the plan. Gorenje Supervisory Board discussed the first quarter results of the Group and its parent company at its session held on May 24.   

Harsh conditions in the markets

Hostile economic environment continues to dampen the demand for home appliances in this year. European home appliance market where Gorenje's core activity of home products and services generates 90% of its sales revenue is in decline.
This was reflected in lower consolidated sales of the Gorenje Group, amounting to a total of EUR 299.1 million in the first quarter of the year, as well as on revenue from the core activity which, at EUR 245.7 million, is 2.4% lower than in the equivalent period last year. Group sales dropped in Netherlands, Benelux, Ukraine, France, and Slovenia; on the other hand, they rose in Russia, Germany, USA, Australia, Serbia, and Czech Republic. Lower revenue in core activity is also a result of a slip in furniture sales.   
The lag behind last year's Group sales revenue is, to a notable extent, also a result of the divestment of the company's stake in Istrabenz Gorenje in July last year, and the ensuing loss of revenue from this company. Therefore, the revenue of Istrabenz Gorenje should be eliminated from last year's data to allow comparability between the two quarters. After such adjustment, Gorenje Group sales for the first quarter of the year are 5.6 percent lower than in the first quarter of 2011. Before the adjustment, sales revenue was 19.2% below the last year's result.

Profit exceeds last year's figure and plans despite lower revenue

Despite the lower sales revenue, Gorenje Group improved its profitability. Operating profit (EBIT) at EUR 9.2 million is – in comparable terms, i.e. after eliminating the Istrabenz Gorenje revenue from the data for the first quarter of 2011 – 15% higher than last year; EBIT margin at 3.1 percent is higher by 0.6 percentage points. Before the adjustment for Istrabenz Gorenje, EBIT is comparable to the last year's result; however, EBIT margin is higher by 0.7 percentage point.  
Higher EBIT is a result of increased Group sales in Russia and some other markets of Eastern and Southeastern Europe where operating profitability is higher, as well as activities to control all types of costs. Results of the business segment Ecology which includes waste management operations, also had a positive effect.
Profit (net income) at EUR 2.1 million is 12.9 % higher than in the first quarter last year and nearly 62% higher than planned. In comparable terms, adjusting for Istrabenz Gorenje, the profit for this quarter is higher by EUR 1.8 million.
Gorenje President and CEO Mr. Franjo Bobinac commented on the results: "It is good to see the improvement in the profitability of operations despite the lower sales compared to last year's first quarter, and to have succeeded in not only exceeding the last year's profit but also the profit planned for this period. However, we have not reached our goal yet. A lot of work remains to be done for the broadest team of employees by the end of the year. It is of key importance to effectively conduct different activities, including development of new products, in order to step up our sales in as many markets as possible, particularly in Eastern, Southeastern, and Northern Europe, and in overseas countries."
Key activities carried out by the Gorenje Group in this year include optimization of manufacturing operations which is especially relevant from the aspect of cost management and improvement of competitiveness; improvement of financial stability, also in light of the aggravation of the European debt crisis; improvement of working capital management and intensified divestment; further restructuring in under-performing companies and markets; and development of organization and human resources which is defined as one of the foundations for attaining the goals laid down in the strategic plan.

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