Friday, 11th March 2011, Velenje, Slovenia

Gorenje wraps up the year 2010 with solid results

Despite persistently harsh economic conditions and mounting costs of raw and processed materials, Gorenje Group improved profitability and increased its markets shares last year. The Group generated a total of EUR 1.38 billion of sales revenues, an increase of 16.5 percent over 2009. Net profit amounted to EUR 20 million. Gorenje outpaced the average home appliance market growth by 2.8 percentage point and sold nearly 90 percent of products under own brands, the most thus far. The unaudited consolidated financial statement of the Group and the parent company was presented to the Supervisory Board at today's meeting.

Business environment in key markets of Gorenje's operations were marred by high unemployment and currency and credit risks last year. Gorenje's sales could no longer rely on two major customers that went bankrupt – German business system Quelle, effectively the largest account in recent years, and the Croatian company Pevec, the biggest account in the Western Balkans region. Moreover, Merkur, Slovenian largest appliance and electronics retailer reduced the scope of its operations notably due to receivership proceedings. Despite such hostile conditions, Gorenje Group grew faster than planned and upped its revenues by 16.5 percent relative to the year before, to a figure of EUR 1.38 billion. Eliminating for the effects of  Asko, a Scandinavian manufacturer of high-end home appliances that Gorenje acquired in July, sales revenues growth amounted to 11 percent.
Gorenje's rate of growth in 2010 was higher than the market average growth. The European home appliance market, the key market for Gorenje, grew by 2 percent while Gorenje's sales of home appliances, excluding the acquisition of Asko, rose by 4.8 percent. Accounting for the Asko acquisition, Gorenje's sales were 12.5 percent above the 2009 level. In Western Europe, the Netherlands and Germany and in Eastern Europe, Russia and Ukraine were the most successful markets; Serbia was the best performing market in the Western Balkans; in addition, Gorenje also managed to increase its sales in the Middle and Far East, and the USA.
Division of ecology, energy, and services was successful, increasing its sales revenues by 34 percent relative to 2009.
Home interior division, troubled by the stringent economic conditions and struggling major customers, saw a slump in sales, amounting to 15.6 percent. Cost efficiency of this division was notably improved, but the Division still fell short of reaching the break-even point. Therefore, company management has launched the preparations for a long-term solution for this division.
Gorenje Group saw an increase in profitability of its business activities, fuelled by expansion of operations, improvement in productivity, cost optimization, and improved composition of sales by products and markets. Operating profit (EBIT) reached EUR 56.44 million, which is good 364 percent more than the last year's figure. Eliminating for the effects of the Asko acquisition, last year's EBIT was 240 percent above the 2009 level. EBIT margin rose from 1 percent to 4.1 percent (comparable to 3.1 percent).
Net income amounted to EUR 20 million, which means that Gorenje's net profitability was improved by EUR 32.3 million. Eliminating for the effects of the Asko acquisition and revaluation adjustments related to Merkur, Gorenje's profit stood at EUR 10.77 million.
In the last quarter of 2010, the pressure of rising prices of raw and processed materials mounted. Annual results were not threatened by this aspect as Gorenje successfully procured the materials throughout the year, including sourcing from low-cost countries. The company managed to offset the increase in prices of raw and processed materials by cutting other costs and improving the composition of sales by products and markets. This year, Gorenje will attempt to partly neutralize rising material prices by increase in sales prices. However, the mounting prices of raw and processed materials remain the major threath of white goods industry in 2011. 
The Group's net cash flow amounted to EUR 72.26 million. Free cash flow in the amount of EUR 13.26 million was lower than in 2009 as a result of expansion in operations, higher investments, and changes in net working capital.
Consistently with the policy from recent years, Gorenje Group allocated its investments for development of home appliances, restructuring processes in manufacturing plants which included relocating the production of heating appliances from Ljubljana to Stara Pazova, and integration of the acquired company Asko.
Mr. Franjo Bobinac, Gorenje President and CEO: "Considering the persistently harsh conditions in the markets, Gorenje's results in 2010 are solid. This year, efforts of our team are focused on further improvement of profitability, ability to generate free cash flow, integration of Asko into Gorenje Group, development of manufacturing sites, restructuring of the Home interior Division, disposal of unviable and non-performing property, neutralizing the mounting prices of raw and processed materials, and development of home products and Group’s brands that will allow us to win new market shares."
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