Business News

Gorenje Reports H1 Loss, Lower Revenue

Velenje, 30 August (STA) - The Velenje-based household appliance group Gorenje generated a net loss of EUR 7.8m in the first half of the year in what the company said was consistent with the planned dynamics. Revenue was down 2.7% year-on-year to EUR 590m.

In a press release posted on the website of the Ljubljana Stock Exchange, Gorenje cites four key factors that affected operations in the period: a 1.2% decline in the European home appliance market, adverse exchange rates; activities and investments related to strategic relocations of production and investment write-downs.

The fall in revenue is attributed to lower operating volume in the environmental division and portfolio investments, while the core home products division, which generates 85% of total revenue, posted a 0.9% growth as well as an increase in market shares.

Excluding the impact of exchange rates, organic growth in the home products division would have been 1.4%. The growth was fuelled mainly by sales in eastern Europe, which were up more than 7% on the first half of last year.

The company recorded growth in Russia, Ukraine, Slovenia, Croatia, as well as in Germany which besides Russia is one of its major markets. By boosting its sales, Gorenje increased its market share in Europe by 0.29 percentage points to 3.56%.

Meanwhile, sales were down in western Europe and outside Europe (-7.5%), mainly due to lower volume of original equipment manufacturer deals in the US and Australia, while operations in the latter were also affected by exchange rate fluctuations.

Higher sales in western Europe and an increase in high-end groups of products, coupled with divestment of non-core assets, had a positive effect on the EBIT which amounted to EUR 15.5m, down 27.3% y/y.

Had it not been for currency translation differences, EBIT would have been higher by EUR 2.4m, which would have improved the EBIT margin of 2.6% by 0.4 percentage point.

Gorenje chairman Franjo Bobinac is cited as saying that exchange rate fluctuations were a heavy burden on the company's performance, as were the strategic shifts of manufacturing operations which require buffer inventory and double employee teams until relocation processes are completed.

"Attainment of this year's plan will also be challenged by impairments pertaining to divestment of furniture manufacturing and some financial investments. The magnitude of such impairments cannot be accurately estimated will, however, be evident by the end of the year," Bobinac said.

The company is currently in the last phase of production location restructuring. Following relocation from Sweden, regular production of dish washers will be launched in Velenje for the first time ever in coming days.

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