gorenje group h1 2017 results -...

www.gorenjegroup.com

Gorenje Group

H1 2017 Results

Mrs. Jožica Turk, Executive

vice President Corporate

Finance

Wednesday, September 13, 2017


Agenda

• General information about the Gorenje

Group

• Executive Summary of Gorenje Group

2017 Business Plan

• Interim Report January-June 2017

2


One of Leading European

Manufacturers of Products for Home

3

OWN

PRODUCTION

Slovenia

Serbia

Czech RepublicCONSOLIDATED

REVENUE

EUR 1.258 billion

NUMBER OF

EMPLOYEES

11,000

GLOBAL

PRESENCE

90 Countries

Worldwide,

mostly in Europe (91%),

also in USA, Australia,

Near and Far East

CORE BUSINESS

Products and

services for home

(MDA, SDA)

Gorenje

Group

EXPORT

95%

of sales

R&D COMPETENCE

CENTRES

Slovenia

Czech Republic

Sweden

Netherlands

MDA (major domestic appliances)

SDA (small domestic appliances)


1950

Founded in the

village Gorenje

More than 65 Years of Tradition

4

1960

Production in

Velenje begins

1961-1970

Production of

washing machines

and refrigerators

1964

Production in Velenje,

New plant for

cooking appliances

1971

First sales subsidiary

abroad (Munich)

1991

Slovenia becomes

independent, loss of

the former domestic

market

1958

Manufacturing

of stoves

1961

First export

(to Western

Germany)

1961-1970

Acquisitions of

companies bringing

synergies to the core

Business “Everything

for Home“

Setting-up own

distribution network

in Western Europe

1991-1996

Strong expansion

abroad


1998

Gorenje, d.d.,

becomes a

public company, listed

on the

Ljubljana Stock

Exchange

Fast Development in the Last Decade

5

2006

New refrigerator

& freezer plant

in Valjevo,

Serbia

2010

Acquisition of the

company ASKO,

Sweden

2013

Strategic

Alliance with

Panasonic

Listing on WSE

2005

Acquisition of

the Czech cooking

appliances

manufacturer Mora Moravia

2010

IFC, a member of

the World Bank,

enters the ownership

structure

(…)

2008

Acquisition of the

company ATAG,

the Netherlands

2014

Positive effects of

restructuring2012

Restructuring

of production

facilities and sales

organization begins,

disposal of furniture

manufacturing

business

2015

The first year of new

2016-2020 Strategy

execution: key

objectives

accomplished

2015-2016


Ownership Structure

More than 60% of foreign shareholders

6

Kapitalska družba, d. d.

16.37%

IFC 11.80%

Panasonic10.74%

KDPW -Fiduciary account7.74%

Other financial investors 38.81%

Individuals11.59%

Employees2.45%

Treasury shares0.50%

Ten major shareholdersNo. of shares

(30 Jun 2017)Share in %

KAPITALSKA DRUŽBA, D.D. 3,998,653 16.37%

INTERNATIONAL FINANCE CORPORATION 2,881,896 11.80%

PANASONIC CORPORATION 2,623,664 10.74%

KDPW – Fiduciary account 1,889,632 7.74%

HOME PRODUCTS EUROPE B,V. 1,221,231 5.00%

RAIFFEISEN BANK AUSTRIA D.D. - Fiduciary

account1,125,573 4.61%

BNP PARIBAS SECURITIES SERVICES S.C.A 900,000 3.68%

ZAGREBAČKA BANKA D.D. - Fiduciary account 896,064 3.67%

AUERBACH GRAYSON & COMPANY LLC 647,165 2.65%

Alpen.SI, mixed flexible sub-fund 588,587 2.41%

Total major shareholders 16,772,465 68.67%

Treasury shares 121,311 0.50%

Other shareholders 7,530,837 30.83%

Total 24,424,613 100%

Ownership structure as at 30 June 2017

www.gorenjegroup.com7

Business Activities

~82% ~18%

Revenue H1 2017

CORE BUSINESS

Domestic Appliances:

MDA

•SDA

Ecology•

Tool making•

Engineering•

Hotel and catering•

Trade•

HVACBAK

OTHER BUSINESS

MDA / Major Domestic AppliancesSDA / Small Domestic AppliancesHVACBAK / Heating, Ventilation, AirConditioning, Bathroom and Kitchen


Implementing a multi-brand strategy with attention on the upper-mid and premium

price segment.

Gorenje Group Brand Portfolio


Most Important Markets:

Germany, Russia and the Netherlands

9

GERMANYRUSSIA THE NETHERLANDS

SCANDINAVIASERBIACZECH REPUBLICCROATIASLOVENIA

AUSTRALIJAUSA

BIH

HUNGARY

AUSTRIA

POLAND

BELGIUM

RUMANIA

SLOVAKIA

BULGARIA

GREAT BRITAIN

FRANCE

MONTENEGRO

UKRAINE


Cooperation with international

institutions, knowledge and

excellence centres.

R&D Competence Centres

Firm Foundations for

Future Development of

the Gorenje Group

Mariánské údolí


Production Facilities for DA in 3

Countries

11

Slovenia, Velenje

High value-added products – cooking

appliances, dishwashers, and

advanced washing machines and

dryers and niche refrigerators

Czech Republic, Mariánské údolí

Freestanding cookers

Serbia, Valjevo, Zaječar

Refrigerators and freezers, and lower

segment washing machines and

dryers

23%

64%

13%


Gorenje Group Macro-organization and

Locations

Thoughtfully constructed sales network,

which will be expanding outside Europe.

CURRENT MACRO ORGANIZATION (DA)*

PARENT COMPANY Gorenje, d.d.

HOLDING COMPANIES 2

SALES BUSINESS UNITS 40 (incl.representative offices)

PRODUCTION COMPANIES 5


Executive Summary

of Gorenje Group

2017 Business Plan


Business Plan 2017

• Key categories (EBITDA, EBIT, profit) are consistent with the

strategic goals of the 2nd year of the 2016–2020 Strategic Plan.

• Further growth of sales revenue planned for:

• Gorenje Group (+4.5%)

• Home segment (+5.0%)

• Improvement of Gorenje Group profitability:

• EBITDA: EUR 97.1 million (+11.3%)

• EBIT: EUR 39.7 million (-1.2%)

• Profit: EUR 13.1 million (+54.9%)

• Managing procurement price risk and currency risk, and the

improvement projects at all levels of business.

• Further working capital optimization and positive cash flow.

• Further relative deleveraging at the Group level (net financial debt to

EBITDA ratio of 3.5).


EUR million 2016 Plan

2017Index

Consolidated revenue 1,258.1 1,315.3 104.5

EBITDA 87.2 97.1 111.3

EBITDA Margin (%) 6.9% 7.4% /

EBIT 40.2 39.7 98.8

EBIT Margin (%) 3.2% 3.0% /

Profit before taxes 13.2 19.5 147.0

Profit or loss for the period 8.4 13.1 154.9

ROS (%) 0.7% 1.0% /

Net debt / EBITDA 3.9 3.5 /

Business Plan 2017


• Revenue growth and profitability shall be based on:

• Improved geographical structure of sales: further growth in the markets

of Benelux, Eastern Europe, and CIS;

• improved sales structure by brands: increase of sales under the Asko

and Atag brands

• Improved sales structure in terms of products: growth of sales for

products with higher value added

As a result:

• further growth of share of innovative and premium products

• higher average sales prices

• improved utilization of production capacities

• To support the growth of sales in the premium and innovative segment,

we are stepping up our investment into marketing and

development.

Business Plan 2017

Solid sales structure by territories and

products


Business Plan 2017

Own brand portfolio for all market segments

Gorenje Mora Asko Etna Pelgrim Atag Upo Körting Sidex

MDA structure: Own brands

(2017 plan; value terms)

MDA structure: Own brands

(2017 plan; volume terms)

75.1%

6.8%

5.4%

4.4%

3.0%

2.5%2.2%

0.7%

0.1%

68.3%3.8%

12.6%

3.5%

4.2%

5.4% 1.8% 0.4%0.1%


Interim Report

January-June 2017

19

CONTENTS:

1. HIGHLIGHTS

2. BUSINESS REPORT

2.1. GROUP PERFORMANCE

2.2. PERFORMANCE OUTLOOK

3. FINANCIAL REPORT

3.1. FINANCIAL MANAGEMENT

3.2. GROUP FINANCIAL STATEMENTS

4. EXECUTIVE SUMMARY AND KEY MANAGERIAL ACTIVITIES

Q2 2017 HIGHLIGHTS

Gorenje Group sales revenue: EUR 318.2m

+7.6% more than in Q2 2016

Revenue from Domestic appliances sales: EUR 260.9m

+3.1% more than in Q2 2016

Premium products accounted for 28.7 % in Q2 2017 (+0.9 p.p.)

Innovative products accounted for 20.8 % in Q2, 2017 (+1.8 p.p.)

Sales revenue in Other businesses: EUR 57.3m

+33.7% more than in Q2, 2016

We generated net profit of EUR 2.3m

EUR 0.9 million more than in Q2 2016 (+56.3%)

I. HIGHLIGHTS

20

H1 2017 HIGHLIGHTS

Gorenje Group sales revenue: EUR 623.9m

+7.3% more than in H1 2016

Revenue from Domestic appliances sales: EUR 508.2m


Stable market share (2.6% in value and 3.0% in units)

Price index increased (+2.0 p.p) reached 88 in 28 EU Countries

Premium products accounted for 29.2% in H1 2017 (+2.1 p.p.)

Innovative products accounted for 21.6% in H1 2017 (+2.1 p.p.)

Sales revenue in Other businesses: EUR 115.7m


We generated net profit of EUR 4.4m.

EUR 2.3 million more than in H1 2016 (+111.8%)

I. HIGHLIGHTS

21

22

II. BUSINESS REPORT

FOR H1 2017

23


KEY BUSINESS ACTIVITIES

Focus to sales growth supported by:

launch of several new products platforms (Gorenje dishwashers,

ASKO laundry program, freestanding cooling, freestanding cookers in

Mora...)

selective investments into marketing (digital marketing, marketing

campaigns and fairs…) and R&D (connected appliances, activities for

in-house development of electronics…);

Cost management activities, neutralizing the negative effects in the raw

and processed material markets (Q2) and labour cost pressures;

We have secured the required refinancing for our financial liabilities

due in 2017, and cut interest costs by 16.3%;

The Group carried out the reorganization process:

new organisational structure that provides organisation by business

segments and replaces the organisation by business functions has

been implemented

economic model has been aligned to the new organisational

structure and new transfer price model has been adopted.

23

REVENUES BY QUARTERS


24

7.3% increase in comparison to H1 2016

Growth mainly in the markets outside Europe and Eastern Europe

Growth with premium brands ASKO and ATAG

Disproportional growth of sales revenues in Other Businesses (+30.9% more

than in H1 201624

Period Q2

PYRP ACTP PYRQ ACTQ

581.3 623.9 295.8 318.2

7.3% 7.6%


25

Q12016

Q12017

Q22016

Q22017

H12016

H12017

Domestic Appliances (DA) 84.0% 80.9% 85.5% 82.0% 84.8% 81.5%

Other business (OB) 16.0% 19.1% 14.5% 18.0% 15.2% 18.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

REVENUE STRUCTURE BY BUSINESS

Budgeted share of DA for H1 2017 was 84.8%, and the achieved share was

actually lower due to disproportional growth of sales revenues in Other

Businesses.

25


26

3.1% increase in comparison to H1 2016

Growth mainly in the markets outside Europe, Eastern Europe and Benelux and

with premium brands ASKO and ATAG

In Q2 considerable growth also with Gorenje brand (+3.1%)

DOMESTIC APPLIANCES REVENUES BY QUARTERS

26

Q1 Q2 Q3 Q4

PYRPP ACTP PYRP ACTP PYRP ACTP PYRP ACTP

240 247 253 261 279 306

3.1% 3.1%


27

DOMESTIC APPLIANCES REVENUE STRUCTURE

BY BRANDS

Growth of share of premium brands ASKO (1.2 p.p.) and ATAG (0.4 p.p.)

27


28

Favourable product structure of DA sales with growing sales in dishwashers

(+20.7%), cooking appliances (+0.4%) and SDA (+27.8%).

Growth of share of dishwashing programme (1.8 p.p.) and SDA (0.8 p.p.)

DOMESTIC APPLIANCES REVENUE STRUCTURE

BY PROGRAMS

28

29

DOMESTIC APPLIANCES REVENUE FROM PREMIUM

PRODUCTS

Share of premium products in revenue in H1 2017 was 29.2% compared to

27.1% in H1 2016 .

Premium appliances: Asko and Atag branded products, appliances from the

Gorenje design lines.


29

30

DOMESTIC APPLIANCES REVENUE FROM INNOVATIVE

PRODUCTS

Share of Innovative products in revenue in H1 2017 was 21.6% compared to

19.5% in H1 2016.

Innovative appliances: appliances within individual group of products with the so-

called »innovative functionalities« are more energy efficient (efficient storage, lower

energy and water consumption) based on the Gfk methodology.


30

COMPARABLE ADDED VALUE


31

Realised value added was for 6,8% higher then the comparable value added in 1 H

2016.

Comparability adjustment in 1H 2016 data relates to transfer of trade receivables

impairment from financial to operating part of P&L (EUR 4.0 mn).

31

Period Q2

PYRP ACTP PYRQ ACTQ

151.3 161.5 78.0 81.7

6.8% 4.7%

COMPARABLE EBITDA


32

Realised EBITDA was for 12.1% higher then comparable EBITDA in 2016.

Comparability adjustment in 1H2016 data relates to transfer of trade receivables

impairment from financial to operating part of P&L (EUR 4.0 mn).

32

16.7 19.6 19.7 24.4

20.6 20.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Q1 Q2 Q3 Q4

EU

Rm

PYRQ 16 ACTQ 17

Period Q2

PYRP ACTP PYRQ ACTQ

36.2 40.6 19.6 20.0

12.1% 2.1%

COMPARABLE EBIT


33

Realised EBIT was for 14.5% higher then comparable EBIT in 2016.

Comparability adjustment in 1H 2016 adjustment in data relates to transfer of trade

receivables impairment from financial to operating part of P&L (EUR 4.0 mn).

33

5.0 7.8 7.8 12.6

7.96.7

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Q1 Q2 Q3 Q4

EU

Rm

PYRQ 16 ACTQ 17

Period Q2

PYRP ACTP PYRQ ACTQ

12.7 14.6 7.8 6.7

14.5% -13.6%

NET PROFIT


34

111.8% increase in net profit compared to H1 2016.

33.6% of the 2017 annual budget.

34

0.6 1.5 2.1 4.3

2.1 2.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Q1 Q2 Q3 Q4

EU

Rm

PYRQ 16 ACTQ 17

Period Q2

PYRP ACTP PYRQ ACTQ

2.1 4.4 1.5 2.4

111.8% 56.3%

35

KEY PERFORMANCE FACTORS IN H2

Consistently with the dynamics of the 2017 business plan, we expect

the revenue from DA to be approximately EUR 100 million higher

than in the first half.

Additional revenue and improved sales structure will result in

improved integral net margin.

Effective manufacturing cost management, considering the higher

production volume planned for the second half of the year.

Higher marketing investments than in H1 2017, yet adjusted due to

the pressure from the raw and processed material markets and labour

costs.

Adjustment of the production volume and supplementary program

purchases to the required decrease in finished product and

merchandise inventories.

Effective cost management measures to partly neutralize the

effects of labour cost increase due to agreements reached with social

partners.


35

36

KEY RISKS

Accomplishing the planned sales volume, especially in the

highly competitive markets of Western Europe.

Delivering cost efficiency, especially on account of:

rising costs of key raw materials and components; and

labour cost pressures in Slovenia, Serbia, and the Czech

Republic (signed agreements with social partners in

Slovenia and Serbia).

Improvement of our working capital management,

especially inventory, to support our deleveraging efforts until

the end of the fiscal year.


36

37

III. FINANCIAL REPORT

38


We have revised the Gorenje Group's economic model and

thus enabled performance monitoring by respective organizational

areas consistently with the new Gorenje Group organization

We have revised the transfer pricing model between

companies within the Gorenje Group to establish a uniform sales

policy at the Gorenje Group, to improve the efficiency of material

and cash flow management at the Group, and to optimize costs. As

of June 1, 2017, sale of most products made by the

manufacturing companies are effected through the parent

company Gorenje d.d.

New planning process has been launched, enabling more

interactive and live planning process; first insight into budget 2018

has been already discussed on the Management board.


38

39


We have secured the required financing for our borrowings due

in 2017, and cut interest payment by 16.3%.

We conduct permanent non-recourse factoring of our receivables

and have provided the conditions for supply chain factoring

(reverse factoring).

We are conducting activities for a tender for the renewal of the

Gorenje Group insurance program.

We have prepared a range of measures and activities to ensure

the planned decrease in Gorenje Group debt.

New International accounting standards (IAS) which will be

effective from 2018 and 2019 on were carefully reviewed, including

the impact on Gorenje Group‘s performance.

We have started the activities with external auditors to accelerate

auditing process for business year 2017.


39

40

FINANCE INCOME AND EXPENSES


Average weighted interest rate for drawn financial liabilities as at June 30, 2017, was

2.71% (3.27% as at June 30, 2016)

Other finance income/expenses in 2016 included revaluation adjustments in the

amount of EUR 4.0m.

Net revaluation adjustments in H1 2017 worsened compared to H1 2016, due to very

favourable currency translation differences in H1 2016.

EUR thousand 1H 2016 1H 2017 %

Interest income 313 21 334 6.7%

Revaluation adjustment income 2,101 -171 1,930 -8.1%

Other finance income 1,220 -957 263 -78.4%

Total finance income 3,634 -1,107 2,527 -30.5%

Interest and similar expense 7,750 -1,262 6,488 -16.3%

Revaluation adjustment expense 750 1,138 1,888 151.7%

Other finance expenses 7,092 -5,257 1,835 -74.1%

Total finance expenses 15,592 -5,381 10,211 -34.5%

Net interest -7,437 1,283 -6,154 -17.3%

Net revaluation adjustment 1,351 -1,309 42 -96.9%

Net other finance income/expenses -5,872 4,300 -1,572 -73.2%

Financing activities balance -11,958 4,274 -7,684 -35.7%

40

NET WORKING CAPITAL MANAGEMENT AND TRADE

FINANCING


280.0 254.3 233.9 233.2 225.2

22.1%20.2% 19.4% 18.7%

17.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0

50.0

100.0

150.0

200.0

250.0

300.0

30.6.2013 30.06.2014 30.06.2015 30.06.2016 30.06.2017

Net current assets (EURm) Share of Net current assets in revenue (%)

41

Movement of net working capital in the 2013-2017 period (EURm)

41

EURm 30 Jun2013

30 Jun2014

30 Jun2015

30 Jun2016

30 Dec2016

30 Jun2017

1H2017 –

1H2016

+ Inventories 267.5 256.0 248.8 245.7 225.9 264.4 18.7

+ Trade receivables 228.2 229.1 203.9 192.8 165.8 208.4 15.6

+ Other current assets 58.1 45.6 45.7 55.7 58.8 51.2 -4.5

- Trade payables -183.3 -189.7 -177.6 -171.2 -223.7 -193.1 -21.9

- Other current liabilities --90.5 -86.7 -86.9 -89.8 -81.9 -105.7 -15.9

= Net working capital 280.0 254.3 233.9 233.2 144.9 225.2 -8.0

42

INVESTMENTS

EUR 30.7m of investments in

H1, 2017 comparable to H1

2016.

EUR 27.6m pertains to DA, EUR

3.1m to Other businesses.

42

EURm H1 2017

Investments in new products 12.0

R&D investments 8.7

Improvement of competitiveness 5.8

Investment into network sales

activities1.1

Investment in Other businesses 3.1

TOTAL INVESTMENT 30.7

PYRP ACTP-PYRP ACTP ACTP-BUDF BUDF

EURk abs % %

GORENJE GROUP 30.121 593 +2,0 30.714 +38,2 80.402

DOMESTIC APPLIANCES 26.415 1.200 +4,5 27.615 +38,3 72.121

OTHER BUSINESS 3.706 -607 -16,4 3.099 +37,4 8.281


43

FINANCIAL DEBT

Total and net financial liabilities in the years 2013–2017, in EUR million; net

financial liabilities (debt) to EBITDA ratio; and changes in the maturity profile of

financial liabilities

As at June 30, 2017, net financial liabilities amounted to EUR 413.1m, which is 0.4%

higher than at the end of H1 2016.

In H1 2017, we maintained the net financial debt to EBITDA ratio at the end-of-H1

2017 level, at 4.7.

We have improved the maturity profile of our financial liabilities by 1.0 p.p.

Long-term liabilities now account for 66.0%.


43

44

DEBT MANAGEMENT AND LIQUIDITY


In H1 2017, we repaid EUR 40.1m of the current/maturing portions of long-term

financial liabilities. In H2 2017, further EUR 55.0m of maturing liabilities are due

for repayment.

In H1 2017, we drew EUR 54.9m of long-term sources, thus improving the

maturity profile of our debt.

Liquidity reserve as at June 30, 2016: EUR 92.0m:

Available non-drawn revolving facilities: EUR 58.9m

Cash and cash equivalents: EUR 33.1m

In July 2017, we negotiated a new long-term (3-year) revolving credit facility in

the amount of EUR 35m, and aligned financial covenants, including the

financial covenant, limiting dividend distribution (NFD/EBITDA<4).

We renew our short-term financing sources on a regular basis and we are

increasing our liquidity reserve.

With the replacement long-term sources and the planned free cash flow

that we will generate by the end of the year, we have secured the required

sources to repay the currently maturing portions of our long-term

liabilities by the end of 2017.44

45

KEY ACTIVITIES FOR SUSTAINABLE DELEVERAGING


1. Decreasing inventories to the budgeted level by aligning production

with planned sales in year 2017 and 2018.

2. Trade payables policy and systematic use of supply chain financing

with the aim to prolong payment terms with suppliers. Main impact is

estimated for 2018, while activities are already in process also for

2017.

3. Systematic use of trade financing (factoring): additional potential

should be identified, securing further trade financing and deleveraging

in 2017 already.

4. Capex aligned with depreciation in year 2018 and in following years .

5. Divestment of non-core assets and businesses/activities; projects will

be evaluated in autumn 2017, potential effects expected in 2018.

6. Review of economics for under-performing businesses and

proposals for measures, projects will be evaluated in autumn 2017,

potential effects expected in 2018.

7. Adjusting the group lease policy to new accounting standards in

order to prevent negative impacts on Group‘s financial covenants. 45

46

CURRENCY RISK MANAGEMENT AND EXPOSURE


46

5 Highets FX exposures in EURm

Estimated NET

P&L FX

Exposure

Net ExposureEstimated BS FX

exposure

RUB 105.5 Sales 3.6

USD - 53.5 Procurement - 5.6

CZK - 42.5 Procurement - 8.9

HRK 33.5 Sales 12.9

AUD 25.2 Sales 7.0

According to planned monthly sales and purchases in individual currency, FX

cash flow hedging model for each company is executed on monthly rolling

basis.

According to general risk level each currency exposure has to be hedged in

targeted share (60%-80%).

47

INTEREST RATE RISK MANAGEMENT AND

EXPOSURE


EURm TOTAL

LOANS

LOANS WITH

VARIABLE I.R.LOANS

WITH FIX

I.R.

TOTAL

FIX

% OF

FIXED

Utilized

borrowings:

Floating Fixed

with IRS

June 30, 2017 443.2 111.2 161.6 170.4 332.0 74.9%

March 31, 2017 427.9 144.5 121.6 161.8 283.4 66.2%

Dec 31, 2016 371.2 128.1 118.3 124.8 243.1 65.5%

We have increased the % of fixed I.R. in H1 2017 with new loans with fixed

contractual I.R., and with additional hedging with Interest rate swaps (IRS)

Further activities are planned in order to secure low interest rate for a longer

period (~5 years)

47

48

CREDIT RISK MANAGEMENT AND EXPOSURE


Increasing the share of insured receivables (>70%)

Acceptable credit instruments are defined in the Group‘s credit management policy:

insurance with credit insurance companies, first class unconditional bank guaranty,

unconditional L/C and first class mortgage (based on the special confirmation).

Insurance with credit insurance companies represents more than 80% of insured

receivables, followed by bank guaranties (> 12%).

Centralized receivables control: Receivables of respective companies are

monitored from the aspect of maturity, any excess of security/insurance limits, and

acceptability of credit instruments

EURm 31 Dec 2015 31 Dec 2016 30 Jun 2017

Trade receivables (GROUP) 161.0 165.8 208.4

Trade receivables (DA) 137.7 139.7 170.5

% of insured receivables (GROUP) 62.9% 65.9% 70.6%

% of insured receivables (DA) 64.9% 70.8% 74.4%

48

INCOME STATEMENT (June 2017)

49


49

Income statement

of Gorenje Group (EURk)

PYRP

comp.% ACTP % BUDF %

ACTP/

PYRP

ACTP/

BUDF

Net Sales Revenues 581,284 95.0% 623,875 94.6% 1,315,257 98.9% 107.3 47.4

Change in inventories 20,511 3.4% 22,063 3.3% 3,623 0.3% 107.6 609.0

Other operating income 10,082 1.6% 13,793 2.1% 11,508 0.9% 136.8 119.9

Gross yield 611,877 100.0% 659,731 100.0% 1,330,388 100.0% 107.8 49.6

Cost of goods, materials and services -446,403 -73.0% -484,118 -73.4% -970,738 -73.0% 108.4 49.9

Cost of goods sold -121,579 -19.9% -134,571 -20.4% -241,665 -18.2% 110.7 55.7

Cost of materials -228,592 -37.4% -241,824 -36.7% -497,337 -37.4% 105.8 48.6

Cost of services -96,232 -15.7% -107,723 -16.3% -231,736 -17.4% 111.9 46.5

Other operating expenses -14,194 -2.3% -14,066 -2.1% -23,226 -1.7% 99.1 60.6

Added Value 151,280 24.7% 161,547 24.5% 336,424 25.3% 106.8 48.0

Labour Costs -115,063 -18.8% -120,966 -18.3% -239,333 -18.0% 105.1 50.5

EBITDA 36,217 5.9% 40,581 6.2% 97,091 7.3% 112.0 41.8

Amortisation and depreciation expense -23,495 -3.8% -26,018 -3.9% -57,400 -4.3% 110.7 45.3

EBIT 12,722 2.1% 14,563 2.2% 39,691 3.0% 114.5 36.7

Net finance result -7,953 -1.3% -7,684 -1.2% -20,991 -1.6% 96.6 36.6

Net Foreign exchange result 1,351 0.2% 42 0.0% -6,310 -0.5% 3.1 /

Net other financial result -9,304 -1.5% -7,726 -1.2% -14,681 -1.1% 83.0 52.6

Share in profits or losses of associates -121 0.0% -274 0.0% 762 0.1% 226.4 /

Profit or loss before tax 4,648 0.8% 6,605 1.0% 19,462 1.5% 142.1 33.9

Income tax expense -2,559 -0.4% -2,180 -0.3% -6,402 -0.5% 85.2 34.1

Profit or loss for the period 2,089 0.3% 4,425 0.7% 13,060 1.0% 211.8 33.9

BALANCE SHEET

50


50

Gorenje Group

Balance Sheet (EURk)PYRP % ACTP % BUDF %

ACTP/

PYRP

ACTP/

BUDF

NET ASSETS 758,600 100.0% 777,547 100.0% 708,159 100.0% 102.5 109.8

Net non-current assets 525,429 69.3% 552,331 71.0% 571,012 80.6% 105.1 96.7

Tangible and Intangible Assets 572,120 75.4% 599,008 77.0% 619,745 87.5% 104.7 96.7

Non-current accounts receivables 2,979 0.4% 2,384 0.3% 1,846 0.3% 80.0 129.1

Deferred tax assets 23,937 3.2% 25,007 3.2% 25,375 3.6% 104.5 98.5

- Provisions -66,604 -8.8% -67,590 -8.7% -68,554 -9.7% 101.5 98.6

- Non-current operating liabilities -4,418 -0.6% -4,013 -0.5% -4,091 -0.6% 90.8 98.1

- Deferred tax liabilities -2,585 -0.3% -2,465 -0.3% -3,309 -0.5% 95.4 74.5

NWC 233,171 30.7% 225,216 29.0% 137,147 19.4% 96.6 164.2

WC 494,179 65.1% 524,025 67.4% 444,269 62.7% 106.0 118.0

Inventories 245,670 32.4% 264,442 34.0% 213,881 30.2% 107.6 123.6

Trade receivables 192,825 25.4% 208,409 26.8% 178,804 25.2% 108.1 116.6

Other current operational assets 55,684 7.3% 51,174 6.6% 51,584 7.3% 91.9 99.2

- Current operational liabilities -261,008 -34.4% -298,809 -38.4% -307,122 -43.4% 114.5 97.3

- Trade payables -171,172 -22.6% -193,080 -24.8% -228,205 -32.2% 112.8 84.6

- Other current operational liabilities -89,836 -11.8% -105,729 -13.6% -78,917 -11.1% 117.7 134.0

NET INVESTED CAPITAL 758,600 100.0% 777,547 100.0% 708,159 100.0% 102.5 109.8

Equity 368,411 48.6% 380,518 48.9% 386,951 54.6% 103.3 98.3

Net Debt 390,189 51.4% 397,029 51.1% 321,208 45.4% 101.8 123.6

- Financial investments -21,211 -2.8% -16,080 -2.1% -15,121 -2.1% 75.8 106.3

- Cash and cash equivalents -19,387 -2.6% -33,072 -4.3% -34,716 -4.9% 170.6 95.3

= Financial liabilities total 430,787 56.8% 446,181 57.4% 371,045 52.4% 103.6 120.2

Non-current financial liabilities 279,866 36.9% 294,446 37.9% 274,780 38.8% 105.2 107.2

Current financial liabilities 150,921 19.9% 151,735 19.5% 96,265 13.6% 100.5 157.6

CASH FLOW STATEMENT

51


51

in EURk PYRP ACTP BUDF

A. CASH FLOWS FROM OPERATING ACTIVITIES

Profit or loss for the period 2,089 4,425 13,060

Adjustments for:

-Depreciation of property, plant and equipment 19,048 20,774 44,962

-Amortisation of intangible assets 4,447 5,244 12,438

-Investment income -3,634 -2,527 -1,415

-Finance expenses 15,713 10,485 22,406

-Gain on sale of property, plant and equipment -71 -478 0

-Income tax expense 2,559 2,180 6,402

Cash flow from operating activities before changes in net

operating current assets and provisions40,151 40,103 97,853

Change in trade and other receivables -35,061 -33,093 -12,132

Change in inventories -19,770 -38,488 12,073

Change in provisions -857 -1,590 -626

Change in trade and other payables -30,402 -6,486 -4,448

Cash generated from operations -86,090 -79,657 -5,133

Interest paid -8,096 -6,884 -12,385

Income tax paid -1,987 -1,789 -6,402

Net cash from operating activities -56,022 -48,227 73,933

B. CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment 2,448 3,737 8,004

Interest received 313 334 528

Dividends received -121 -216 0

Acquisition of property, plant and equipment -19,681 -20,065 -55,842

Acquisition of an associated company -1,130 0 0

Other investments 397 1,954 3,208

Acquisition of intangible assets -10,440 -10,649 -24,560

Net cash used in investing activities -28,214 -24,905 -68,662

C. CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings/Repayment of borrowings 72,013 70,962 -5,797

Net cash used in financing activities 72,013 70,962 -5,797

Net change in cash and cash equivalents -12,223 -2,170 -526

Cash and cash equivalents at beginning of period 31,610 35,242 35,242

Cash and cash equivalents at end of period 19,387 33,072 34,716

52

IV. EXECUTIVE SUMMARY

AND KEY MANAGERIAL

ACTIVITIES

53

EXECUTIVE SUMMARY

Market growth, growth of material prices

Lower currencies volatility, stable low Interest rates

Revenue growth, market share stable

Price index growth, more premium products, lower

complexity

Growth outside Europe, East Europe, Benelux

Better profitability than in 2016, close to yearly dynamics

In Q2 pressure on material prices and wages

Sales dynamics according to budgeted (45/55 in H1/H2)

IV. EXEC. SUMMARY AND KEY MAN. ACTIVITIES

54

Specific measures to improve economics in H2 2017 already

started. Focus on:

Budgeted revenues and margins

Production, purchasing, service costs reduction

Productivity improvement by labour cost reduction

Marketing cost reduction

Net working capital management

Focused investment and new product development

Key activities for sustainable deleveraging

KEY MANAGERIAL ACTIVITIES

IV. EXEC. SUMMARY AND KEY MAN. ACTIVITIES

Thank you

for your attention!------------

Q & A


Forward-looking statements

This presentation includes forward-looking information and forecasts – i.e. statements regarding the future, rather

than the past, and regarding events within the framework and in relation to the currently effective legislation on

publicly traded companies and securities and pursuant to the Rules and Regulations of the Ljubljana and Warsaw

Stock Exchange. These statements can be identified by the words such as "expected", "anticipated", "forecast",

"intended", "planned or budgeted", "probable or likely", "strive/invest effort to", "estimated", "will", "projected", or

similar expressions. These statements include, among others, financial goals and targets of the parent company

Gorenje, d.d., and the Gorenje Group for the upcoming periods, planned or budgeted operations, and financial plans.

These statements are based on current expectations and forecasts and are subject to risk and uncertainty which may

affect the actual results which may in turn differ from the information stated herein for various reasons. Various

factors, many of which are beyond reasonable control by Gorenje, affect the operations, performance, business

strategy, and results of Gorenje. As a result of these factors, actual results, performance, or achievements of Gorenje

may differ materially from the expected results, performance, or achievements as stated in these forward-looking

statements. These factors include but are not necessarily limited to following: consumer demand and market

conditions in geographical segments or regions and in industries in which the Gorenje Group is conducting its

operating activities; effects of exchange rate fluctuations; competitive downward pressure on downstream prices;

major loss of business with a major account/customer; the possibility of late payment on the part of customers;

decrease in prices as a result of persistently harsh market conditions, in an extent much higher than currently

expected by Gorenje's Management Board; success of development of new products and their implementation in the

market; development of manufacturer's liability for the product; progress of attainment of operative and strategic goals

regarding efficiency; successful identification of opportunities for growth and mergers and acquisitions, and integration

of such opportunities into the existing operations; further volatility and aggravation of circumstances in capital

markets; progress in attainment of goals regarding structural reorganization and reorganization in purchasing. If one

or more risks or uncertainties are in fact materialized or if the said assumptions are proven wrong, actual results may

deviate materially from those stated as expected, hoped for, forecast, projected, planned, probable, estimated, or

anticipated in this announcement. Gorenje allows any update or revision of these forecasts in light of development

differing from the expected events.

gorenje group h1 2017 results -...

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