Restructuring in the last two years has brought about positive effects
The restructuring program carried out by the Gorenje Group in the last two years, which included relocating manufacturing operations and restructuring the sales network, has brought about material positive results. Owing to restructuring efforts, higher revenue, and improved structure of sales the Group brought the first quarter of the year to a close with net profit of EUR 1 million. Compared to the equivalent period of last year when the Group saw a loss of EUR 4.2 million, the result is better by EUR 5.2 million. EBITDA amounted to EUR 20.8 million, which is 29% above the figure for the first quarter of 2013. The Supervisory Board addressed the first quarter performance of the Group and its parent company at the session held on April 24.
Revenue growth despite challenging conditions
Gorenje Group's revenue in the first quarter of the year stood at EUR 290.7 million, which is 0.5% more than in the corresponding period of the year before. The growth of Group revenue was generated by the core activity as the sales of home products improved compared to the first quarter of 2013. Although the market conditions remain harsh for the white goods industry in Europe, the Group generated revenue of EUR 242.4 million in its core activity in the first quarter of the year, which is 1.1 percent more than in the same period of last year. Adjusting for the currency translation differences, the Group's organic growth of core activity revenue would even have amounted to 5 percent.
Relative to last year's first quarter, sales rose in Russia, Germany, Austria, Slovenia, Romania, Bosnia and Herzegovina, Great Britain, Czech Republic, Slovakia, Hungary, and Croatia. Moreover, revenue beyond Europe increased by 13%; adjusting for currency translation differences, the growth would have been 20%. Revenue growth in non-European markets is mostly a result of the Group's solid performance in the USA and Australia.
The Group's revenue was lower than in the first quarter of 2013 in Scandinavia where demand for home appliances is in decline, and especially in Ukraine where political turmoil has been shattering consumer confidence since the beginning of this year. Drop of Gorenje sales in this market is thus a result of uncertainty; however, despite the lower sales, the Group succeeded in maintaining its market share. Gorenje Group is closely monitoring the development of events in Ukraine. Business activities have been adapted to the new conditions, which has included a reduction in operating costs and more strict collection of receivables.
In the business segment Portfolio Investments, the Group's revenue in the first quarter of the year amounted to EUR 48.3 million, which is 2.7% less than in the first quarter of 2013.
Higher operating profitability
Cost savings resulting especially from relocations of manufacturing operations, and partly by restructuring of the sales network, amounted to EUR 5.4 million in the first quarter of the year. Along with the improvement in the structure of sales, they have contributed to a considerable improvement in the Group's operating profitability in the first quarter of the year. EBITDA rose by 29% relative to last year's first quarter, to EUR 20.8 million; EBIT rose by 78% to EUR 10.2 million. Profit for the first quarter stands at EUR 1 million. Thus, the bottom line is EUR 5.2 million better than in the equivalent period of last year when the Group saw a net loss of EUR 4.2 million at the end of the quarter.
Gorenje President and CEO Franjo Bobinac commented on the first quarter operations and performance: "Having successfully completed the strategic shifts of manufacturing operations last year, which were very challenging in terms of financing and process management, restructured the sales network, consolidated our market position, forged a strategic partnership with the Panasonic Corporation, raised nearly EUR 27 million of fresh capital through equity offerings, deleveraged and had Gorenje stock admitted to cross listing on the Warsaw Stock Exchange, we entered the year 2014 in a better business form. The said activities have laid solid foundations for successful development of the Gorenje Group in the future. First quarter results already point to a positive turnaround in our operations and they are consistent with our plans."
As at the end of the first quarter, the Group's gross debt is EUR 55 million lower than it was a year earlier. Net debt was lower by EUR 59.3 million. With higher EBITDA and lower debt, the net financial debt to EBITDA ratio at the end of the first quarter was 4.7, which is 0.6 better than in the corresponding period of the year before. In order to cut the net financial debt to EBITDA ratio to 3.6 by the end of the year, the deleveraging activities at the Group are being pursued further.
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