Business News

Writedowns Turn Sava Profit into EUR 40.6M Loss

Kranj, 27 August (STA) - Conglomerate Sava incurred a loss of EUR 40.6m in the first half of the year after reporting EUR 3.1m in profit in the same period last year. The company said the main reason for the loss is writedowns, in particular claims to Merfin, the majority owner of hardware retailer Merkur.

Without the impairments, Sava would have made a profit of EUR 3.9m, while the core company would have made EUR 5.8m in profit instead of EUR 20.8m in loss.

Sava, whose core businesses include rubber production, tourism and real estate, also reported today that it turned its claims in Merfin into a 9.16% stake in Merkur, increasing its stake in the retailer to 19.7%.

In a press release posted on the website of the Ljubljana Stock Exchange, Sava said that writedowns related to Merfin amounted to EUR 33.8m in view of the difficult financial situation of Merkur.

Due to low prices of securities on the stock market, Sava made a further writedowns amounting to EUR 9.8m.

Companies in the group generated EUR 82.5m in sales revenues in the first half of the year, which is 4% down year-on-year. The reason for the drop is lower revenues in the tourism division and a delay in the sale of real estate.

The rubber manufacturing division contributed 63% to the overall sales revenues, tourism 32%, real estate 2%, while the remaining 3% were generated in energy sales and other activities.

The rubber division increased sales revenues by 21% to EUR 53.5m, while tourism companies' revenues fell by 3% to EUR 26.9m despite a 2% increase in overnight stays in the first half of the year on the same period in 2009.

The results and the deal with Merfin were discussed by Sava's supervisory board on Thursday. The supervisors also discussed depreciation of the Sava share on the Ljubljana Stock Exchange.

Arguing that the share was greatly undervalued, the management launched a buy back programme in the past week, the company said without stating how much it intended to buy, but explaining that the move was already reflecting on the share price.

The deal with Merfin, the company of Merkur managers, comes after Merfin's failure to implement an option agreement for the stake in the aftermath of the crisis that hit Merkur hard.

Sava acquired a 20% stake in Merkur in 2006, when Merkur paid half of the purchase price for Sava Trade in its shares.

When the Merkur management made a public bid to buy out Merkur a year later, Sava opted against selling the shares, but signed an option agreement with Merfin under which the latter would buy a fifth of Merkur.

As Merfin was unable to honour its commitments, the companies agreed in 2009 that Sava would realise the option for 10% of Merkur, while the option for the remaining 10% was extended.

Merfin was to pay EUR 58m for the 10% stake, but only managed EUR 5m, so Sava approved settlement over three years. Sava chairman Janez Bohoric has recently told the STA that Merfin would have to pay EUR 23m this year.

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