Gorenje Group performance in the first quarter of the year was consistent with the expectations, considering the challenging restructuring of manufacturing operations and the 2.6-percent drop in demand in Europe. Revenue of EUR 289.4 million was down 1.4% relative to first quarter of the year before, due to the drop in revenue from portfolio investments and waste management services. On the other hand, the Group's revenue from the core activity of home products and services rose by 0.5%, especially due to growth of sales in the Eastern Europe.
In the first quarter of the year, the European white goods markets saw a decrease relative to the equivalent period of last year. According to the European Committee of Domestic Equipment Manufacturers (CECED), sale of home appliances in Europe dropped by 2.6% in terms of volume. Decrease in sales was also seen by the Gorenje Group in some of its key markets (Benelux, Serbia, Czech Republic). On the other hand, sales rose in Ukraine, Russia, Slovenia, Bosnia and Herzegovina, Bulgaria, Romania, Croatia, and China. Gorenje's market share in Europe rose by 0.43 percentage point in the first quarter to reach 3.57%.
In the first quarter, Gorenje completed two challenging relocations of production: washing machine and dryer production was shifted from Sweden to Velenje, and production of free-standing refrigerator freezers was moved from Velenje to Serbia. Mass production of appliances at the new sites is already in progress. In the second half of the year, production of dishwashers will be transferred from Sweden to Velenje. Gorenje President and CEO Franjo Bobinac: »Successful completion of the relocations planned for 2012 and this year will provide a solid base in 2014 for attainment of permanent and profitable growth of operations. Until all transfers of manufacturing operations are completed, especially in the first half of the year, performance is under pressure precisely because of expenses related to these efforts. Indeed, this was taken into account in the business plan. We are planning to wrap up the year with profit.«
Operating profit (EBIT) of EUR 5.7 million is a good half below the last year’s figures due to lower other revenue, higher logistics costs, and higher labour costs considering the actual production output at Velenje. Honouring the social agreement according to which the company would not lay off employees in Slovenia as a result of manufacturing operations relocations, Gorenje had in Velenje an average excess of 300 employees in the first quarter, considering the actual workload, which resulted in EUR 1.8 million of extra labour costs. On the other hand, last year's transfer of cooking appliance production from Finland to the Czech Republic has already had a positive impact on the costs. Labour costs were thus lower by 1.5%.
EBIT was double than planned for the first quarter of this year. This is a result of improved regional and product composition of sales as more revenue was generated in Eastern Europe and sales of small home appliances and cooking appliances were increased, as well as lower prices of raw and processed material futures, and successful divestment.
Net profit for the period was negative at EUR –4.2 million which is better than anticipated in this year's business plan. As anticipated, cash flows were negative in the first quarter.
Gorenje President and CEO Franjo Bobinac: »This year remains very challenging for the Gorenje Group, both because of the market conditions and because of the processes of manufacturing optimization, deleveraging, and other activities geared towards the attainment of the goals specified in the strategic plan.«
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