At today's session, the Supervisory Board of Gorenje, d.d., was presented the unaudited consolidated financial statements of the Gorenje Group and its parent company for last year.
2012 was a highly challenging year for the Gorenje Group. The Group launched the most extensive project of manufacturing operations re-location in its corporate history and further pursued deleveraging activities. Both processes are instrumental to the attainment of the key goals laid down in the corporate strategy for the period 2012-2015. Making the year even more arduous were the economic conditions in Europe where nearly 92% of the Group's revenue is generated. After weak sales in the first nine months of the year, Gorenje succeeded in reversing the trend in the last quarter, particularly within its core activity. The Group generated revenue that topped the average for the first three quarters and the figure for the last quarter of 2011 by 6.9%. Strong sales in this quarter had a positive effect on EBIT (results from operating activities) which was 2.9% higher than in the year before at EUR 44.9 million. 2013 is a highly challenging year for Gorenje due to the manufacturing re-locations that. Positive effects of the re-locations are expected at the end of 2013, full effects in 2014.
Gorenje Group's total revenue last year amounted to EUR 1.26 billion, which is 1.5% less than in the year before, but it increased revenues in its core activity by 1.7%. The Group succeeded in bouncing back after feeble sales in the first nine months of the year to see solid sales in the last quarter, especially in its core activity. Sales were increased both in the last quarter and in the entire year in some key markets such as Russia, Ukraine, Germany, and Scandinavia, and in some non-European markets were revenue was up 5.5 percent over 2011. The same increase was seen in sales beyond Europe in the last quarter of the year relative to the fourth quarter of 2011. In non-European markets, Gorenje's sales growth was steepest in China, USA, and Australia which is one of the most promising overseas markets for the company.
Profitability improved by strong sales in the last quarter
A 6.9-percent increase in revenue from the core activity in the last quarter bore a positive impact on EBIT; standing at EUR 44.9 million, it topped the last year's figure by 2.9%. Conversely, EBIT was negatively affected by higher cost of transport and logistics services which soared by 16% for the year, and labour costs which grew by 2.7% over 2011. In the last half of the year, Gorenje temporarily increased the number of shop floor employees in Slovenia and Sweden to manufacture safety inventory of appliances for the time of relocation of production equipment. Also negatively affecting the labour costs is the December's strike in Velenje, Slovenia.
Profit for the year at EUR 0.3 million is consistent with the estimate announced in December 2012.
Gross debt cut by EUR 51.4 million
Last year, Gorenje Group successfully divested a part of its non-core and underperforming assets and managed its working capital, which resulted in an improvement of free cash flow. Standing at EUR 43.7 million, it rose by 22% or EUR 12.5 million relative to the year before and topped the planned figure by EUR 15.1 million. This year, Gorenje is further pursuing its divestment activities. Free cash flow will also be positively affected by divestment of manufacturing companies of the furniture segment, which ran a loss in recent years and presented a heavy burden for the entire Group's performance.
Gorenje's gross debt as at the end of the year is lower by EUR 51.4 million compared to the year before.
Wrapping up the year with the best structure of debt by maturity to date
In the last quarter, the Group started to draw the EUR 50-million long-term loan obtained from Sberbank Europe. This considerably improved the composition of debt by maturity. At the end of the year, long-term loans amounted to 64% of total debt, which means that the composition of overall debt by maturity is the best since the onset of the economic and financial crisis.
Upon announcement of the unaudited consolidated financial statements for 2012, Gorenje President and CEO Mr. Franjo Bobinac commented: “Considering the harsh market environment and the negative effect on our profitability brought about by the production restructuring activities that are currently in full swing, we find the results of the last year satisfactory. Although we did not attain all of our goals and sales lagged behind the desirable levels in the first three quarters, extensive efforts to boost our revenue resulted in a notable increase in our core activity in the last quarter. This year, we are carrying on the activities specified in our strategy: deleveraging, boosting sales in non-European markets, development and introduction of new products to the markets, and optimization of manufacturing operations. By September this year, we are yet to tackle the most challenging and extensive part of this process: moving the production of washing machines, dryers, and dishwashers from Sweden to Slovenia. These activities will put significant pressure on our performance, particularly in the first half of 2013, which was also accounted for in development of this year's business plan."
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