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Supervisors Back Gorenje Management in War of Words with Minority Owner

Ljubljana, 23 November (STA) - The supervisory board of household appliance group Gorenje has thrown its support behind the management board after its war of words with a minority shareholder.

In a statement issued after Tuesday's session, the supervisory board expressed its full support for the management board led by Franjo Bobinac.

The company's results are testament to the fact that the development strategy is the right one, the supervisors said after reviewing nine-month results of the Velenje-based group.

While welcoming all comments about the strategy, the supervisors said these should be constructive and help the group attain added value.

The public debate opened by Philip Sluiter, who owns nearly 7% of Gorenje and used to sit on the board of Gorenje, through a letter published in one of Slovenia's newspapers is not in line with the principles of corporate governance, Gorenje added in its press release.

The supervisory board highlighted in its response to Sluiter that the audit commission chaired by Keith Miles is one of the most important bodies of the supervisory board.

"This auditing body is doing its work well and does not see a reason to suspect any wrongdoing at the company... Any such claims must either be made more specific or withdrawn, as they damage the company's image."

The supervisory board added that the company was on track to achieving plans for 2010 despite the failed second round of capital raising.

The group generated EUR 966m in revenues through the first nine months of the year, an increase of 11.6% over the same period last year and 99% of the planned revenues for the entire year.

The net profit for the nine months stood at EUR 16.8m, beating planned earnings for the whole year by 67%.

The increase in revenues and profit was brought about by increased sales and the effects of the acquisition of Swedish household appliance company Asko earlier this year.

Moreover, the group managed to cut prices of raw materials and other equipment as well as increase labour efficiency, the press release reads.

The management therefore expects the group to achieve or beat key goals set in the business plan for this year.

Of total sales, the household appliance division generated EUR 700m in revenues, a rise of 9.3% on the same period last year.

The quickest growth was meanwhile achieved in the environmental, energy and services division, where revenues were up 23% to EUR 44m.

Sluiter, who entered Gorenje when he sold his specialised home appliance company ATAG to Gorenje in 2007, made news last week when he offered to buy EUR 20m of Gorenje shares to save a EUR 25m capital raising effort which had secured only EUR 5m ahead of its Tuesday deadline.

But the offer was made conditional on an independent consultancy drawing up a strategy for Gorenje, which the management board took offence to because the capital raising was carried out on the basis of its strategy.

Gorenje chairman Franjo Bobinac suggested in a reaction that the real reason behind Sluiter's offer was a wish to carry out a takeover of Gorenje and then sell it.

Sluiter responded for daily Finance on Friday by saying that he was not interested in taking over Gorenje. He accused Bobinac of being scared of a due diligence of the company. He said Bobinac was trying to smear him to make him look irrelevant.

Sluiter added that financial institutions had reservations about providing money to Gorenje as part of capital raising because of its strategy and management as well as high debt.

Yet this was rebuffed by Bobinac, who pointed out that the International Financial Corporation (IFC) had injected EUR 25m in Gorenje in May as part of the first phase of capital raising.

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