Business plan for the year 2008

Key Objectives of the Gorenje Group in 2008

  • Achieving quality growth of sales and profitability while ensuring a balanced utilisation of all production capacities and maximising profit margin as the key criteria of economic performance;
  • Continued development of new products and services, which will increase our market competitiveness, enable high - end product placement and higher value added, and consequently lead to improved business performance in the future, while simultaneously seeking engineering - technological solutions to lower the cost of production and the cost of distribution of existing products;
  • Continued optimisation of the supply chain and seeking alternative and/or new sources of supply in Asia, on other US dollar supply markets and in the countries of East Europe and SE Europe so as to ensure the price competitiveness of our products;
  • Ensuring manufacturing productivity and efficiency of operation in manufacturing by (as far as possible) even utilization of production capacities throughout the financial year with a view of maximising production economy and cost efficiency;
  • Selective implementation of new investment projects and ensuring that they stay within the planned volume; priority will be given to investments in new products and markets;
  • Improving the management of current assets, in particular of receivables and inventories, due to their considerable impact on the level of debt and consequently the cost of financing of the Gorenje Group;
  • Ensuring the effective management of all types of risk, which the company is exposed to due to the highly changeable business environment in which we operate, with the focus on credit (payment) risks, in particular in the high - risk markets and the markets characterised by lower liquidity.

Summary of key data on the planned operation of the Gorenje Group in the year 2008

  2006 2007 Plan 2008 2007/2006 Plan 2008/2007
Consolidated Revenue (in EUR thousand)  1,111,035 1,293,438 1,300,352 116.4 100.5
EBITDA (in EUR thousand)  80,404 89,444 98,078 111.2 109.7
Operating profit - EBIT (in EUR thousand)  30,822 36,233 42,502 117.6 117.3
Profit before tax - PBT (in EUR thousand)  27,843 29,400 31,503 105.6 107.2
Income tax expense (in EUR thousand)  5,527 5,736 5,000 103.8 87.2
Net profit (in EUR thousand)  22,316 23,664 26,503 106.0 112.0
Average Number of Employees  10,556 11,456 11,522 108.5 100.6
Equity (in EUR thousand)  254,433 350,664 371,151 137.8 105.8
Financial liabilities (in EUR thousand)  314,683 311,442 317,571 99.0 102.0

The year 2007 was marked by consolidation of different production locations, and beside this also very good accomplished capital increase, what gives us a good groundwork also for growth and development of the business system for the future.

Sound performance in 2007, which was right on target or even above plan in all major categories, was the starting point for the development of our plans for 2008. Once again we are planning double - digit net profit growth, in line with the ambitious medium - term strategy adopted by Gorenje.

We will continue with the growth of business activities within the household appliances division, which is and will be Gorenje Group core business. The growth volume of division will be very selective, with the main stress on the improvement of the sales structure - appliances with higher margins – considering also the structure of production programs, as well as sales structure by countries.

Key importance of the supply chain will be the optimisation of the supply chain and seeking low-priced alternative and/or new sources of supply in Asia, on other US dollar supply markets and in the countries of East Europe and SE Europe. In relation to the former we are planning on increasing the volume of production as well as sales, where even utilization of production capacities throughout the year will be vital to maximising productivity and economy of production.

The investment activities within the household appliances division will be focused on the development of new products (modernization of the cooking appliances program) and on the development of sales activities (developing and strengthening the position on the strong developing existing and new markets). Potential M&A are not included in the investment plan 2008, in this respect all shareholders, investors and other financial community, will be informed in the proper way.

We will continue to develop wide range of products – all for Home, in particular those with the potential for growth - complementary, supplementary and heating program.

Home interior division will continue with the internal consolidation, particularly in the optimizing of the international production capacities. We will also continue with the synergy utilization with the core business – household appliances division, on the supply and sales side.

The trade and services division will speed up further development of the new – fast growing activities, especially ecology, waste management and energy, and they will economically justify the larger extend of investments.

In all three divisions will be in the year 2008 attention focused on the working capital controlling, above all on inventories, trade receivables and trade payables, what will be for the balanced and long term performance of the Gorenje Group, of key importance.

In spite of very difficult business environment, we by Gorenje are prepared and we are looking forward to accept new challenges, which the year 2008 is bringing. We believe in further sound performance of the Group in line with the planned strategic goals and activities.

pdf gorenje_business_plan_2008.pdf
Gorenje Group and Gorenje, d.d., Business Plan for 2008
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