Management board comment on Gorenje Group 2016 performance
At yesterday's session, the Supervisory Board of Gorenje d.d. was presented the Gorenje Group's unaudited financial statements for the year 2016. The Group maintained the positive performance trend that started in the last quarter of 2015, and improved upon it throughout the year. The Group's revenue was EUR 1.258 billion, EBITDA at EUR 87.2 million. With EUR 8.4 million profit, which is higher than budgeted and tops the estimate released in January, we considerably – by EUR 16.4 million – improved our profitability. Other goals laid down in the Strategic Plan for last year successfully pursued as well.
In the last quarter, revenue reached EUR 357.2 million, exceeding the budget by 5.3 percent, while profit amounted to EUR 4.3 million (EUR 1.4 million in the same period of 2015). Both the core activity Home and Non-core activities wrapped up the year with profit. Significant revenue growth was recorded both at the Group level and in the core activity of home appliances. Revenue growth relative to the last quarter of 2015 was the highest in markets outside Europe, while our sales also rose in the markets of Benelux and Eastern Europe, including Russia and Ukraine.
In 2016, Gorenje Group generated EUR 8.4 million of profit to exceed the budgeted figure
Revenue in 2016 reached EUR 1.258 billion, which is 2.7 percent more than in 2015. Breaking down the revenue structure, we see that the core business Home accounted for 86.8 percent of total Group revenue, which is a result of faster growth in this segment. Group EBITDA in 2016 amounted to EUR 87.2 million, which is 8.9 percent more than in 2015, while operating profit (EBIT) at EUR 40.2 million topped the last year's figure by 16.7 percent. With a profit of EUR 8.4 million, we surpassed the budgeted figure and considerably – by EUR 16.4 million – improved our profitability.
In 2016, the Group's relative debt decreased as the net financial debt to EBITDA ratio dropped from 4.1 to 3.9. We also cut our finance expenses and improved our financial stability.
Sales revenue up in all geographical segments and all brands in 2016
Our sales grew in all of the Group's geographical segments. The growth rates were the highest in Eastern Europe, Russia (7 percent) and Ukraine where our sales were up 40 percent and we consolidated our market position, and in Benelux where we drove up our market shares. Beyond Europe, we saw moderate growth in Australia, North America, the Caucasus region, and Asia. Overall, our sales revenue in the core activity Home increased by 3.4 percent; adjusting for the effect of currency translation differences, organic revenue growth would have reached 4.7 percent.
We stepped up the sales of our products under all of our brands, with the premium brand Asko seeing the highest growth at 9 percent.
We are increasing the share of premium appliances with higher value added
Consistently with the Gorenje Group Strategic plan, we promoted the sales of premium appliances (4.3-percent volume growth) which already account for 27.3 percent of our total revenue. Moreover, we increased the sales of innovative appliances by 14.5 percent. We also upped our sales of cooking appliances and dishwashing appliances, while our revenue from sales of small domestic appliances rose by remarkable 32.4 percent.
By optimizing the use of material in direct manufacturing, we successfully adjusted the cost of raw and processed materials and labour cost to the larger sales volume. We found additional savings in supply chain optimization and we successfully reduced product complexity. In addition, profitability of Non-core activities improved as well.
We continue to invest into development to boost our long-term competitive edge
In 2016, we increased our investment into product development to EUR 32.3 million (2.6 percent of total Group revenue). Key new developments include the updated built-in under-counter fridge freezers, washing machines with 10-kg capacity for a strategic partner, Asko Craft line of premium built-in ovens, and a new line of Gorenje brand dishwashers. Moreover, higher investment into marketing, for which EUR 26.4 million was earmarked last year, supported the higher and more structurally favourable sales.
In 2017, we continue our pursuit of the Strategic Plan
After a successful first year of Gorenje Group 2016–2020 strategy implementation, we continue our activities to reach the ambitious goals in 2017. We have thus transformed the Gorenje Group organizational structure from standard functional to business organization that puts brands and product programs to the fore, placing more emphasis on responsibility and entrepreneurial spirit throughout the Group in order to advance our performance.
The upward trend in business activity and profitability, seen in the last five quarters, has continued into 2017.
Gorenje Group annual report for 2016 will be released on April 24, 2017.