Friday, 19th December 2008, Velenje, Slovenia

Last quarter abolish otherwise successful results. Business plan for the year 2009 is adaptable

Gorenje Supervisory Board has considering uncertain circumstances in the household appliances industry yesterday estimated the Gorenje business plan for the year 2009 as adequate and at the same time easily adapted to various possible scenarios, what is in these turbulent times of great importance and enables quick response on the changed business conditions. The Supervisory Board is supporting the implementation of all the measures, accepted by the Management Board to soften the consequences of the unplanned negative business factors. The Supervisory Board has estimated, that the business performance of Gorenje in the year 2008 was, regarding to the unforeseen financial crisis and the recession on the global markets, good and the Management Board response on the signals of the economy growth lessening marked as quick and adequate.

Gorenje has before than one week warning about the cut out or reduction of the major number of orders in November and in December regards to the planned volume that caused, that the estimation of the net profit was changing daily, and because of these the net profit for the year 2008 deviates from the planned goals. The nine months results of the listed peer companies, have already shown the signs of worsening of the business performance, while Gorenje Group has concluded the performance for the first three quarters of 2008 successful and in the line with the planed goals. In the last weeks of the year 2008 has been the circumstances of the crisis and of the recession fully transferred also in some, for Gorenje very important, East European markets (Ukraine, Croatia, partly Russia, Czech Republic, …). Additional has the crisis caused the cancellations of consumer financing from the banks side.  These was also the cause of limitation of financing of the major retailer partners, and they consecutive started with the optimizing of the inventories and liabilities, what has been reflected and still will be reflected by the orders called offs. The effects of the global financial crisis also reflected on the worsening of the business conditions in the Home interior and Trade and services division. On the business area of the ecology the orders for the disposal of the steel waste from the steel plant, ironworks and smelting-plant almost stopped. In the same way also the steel prices on the metal exchange changed very much, and these was also additional impact on the worsening of the estimated results till the end of the year 2008.

In such a turbulent business conditions, Gorenje prepared the various scenarios for the next year and also different activities, to enable us to be enough flexible. We publicly present the one of the scenarios, which includes the certain decrease of the business activities volume and the fulfilment of some measures. The companies of the Gorenje Group are planning to generate, in the circumstances of the global financial crisis, in the year 2008 by the sales of products and services EUR 1.337 billion  consolidated revenue. This is app. the level of estimated revenue for the year 2008. The planned revenue of the Gorenje Group is without taking into consideration acquired company ATAG Europe B.V., lower by 4.7 %. The sales of household appliances from the own production is planned to be by 9.1 percentage lower regarding to the estimation 2008, that means in volume 2.4 million units produced in Velenje, Slovenia, 0.39 million units in Valjevo, Serbia and 0.38 million units in Mora Moravia, Czech Republic, or total 3.2 million units.

In order to succeed and to assured the normal result by the lower sales in times of difficult conditions in the financial markets, we will carrying out several activities and measures. The activities are containing several parts and they are relating to the Cost management of raw materials, which will be able to reach only with the favourable term purchase of raw materials and also by the further and faster development of the supply sources from Asia, from the other dollar based supply markets and from the SE European countries; Services, referring to the activities linked to the service management: costs of logistics, will be in the major parts dependent on oil prices, Costs of marketing,  and all general costs. The third part are the labour costs, where by better organization of work  in the frame of 36 hours of the working week (at the moment we are counselling with the union), we will be able to reach higher productivity and flexibility, which will enable us within the frame of social agreement better adaptation of the labour costs regarding to the level of orders.

Gorenje has in the past years invested into development a lot, and that's why the investment policy will be in the year 2009 extra selective and focused exclusively  in to the development of the new products and sales activities or just to those investments which are for the further development of the company the most need it.

The main goal of all measurements is the positive cash flow, which will be due to the very sharp liquidity situation in the financial markets, very important criteria for the estimation by the business decision making and the impact to the cash flow and possibility of improvement. 

Within the Gorenje Group at the same time with the costs optimization is also running several projects, which will enable faster introduction of changes, process optimization, decrease of the working capital and complexity. Outcomes of projects will be reflected in the planned decrease of the working capital (inventories, receivables), what will contribute to the improvement of the free cash flow at least at the level of the planned net profit and consecutive to the decrease of the financial liabilities level of the Gorenje Group.

Regards to the perpetual changing of the conditions, will Gorenje revised business plan quarterly. We are convinced, that the costs adaption to the production volume and to the sales, is of the key importance for achieving the planned profitability. In spite of the presented business circumstances, Gorenje is performing better as the competitors and is increasing the market shares, and we believe to turn to advantage for us and to manage the risks better than the competitors.