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Gorenje reports 2011 Growth Despite Lower Demand
Mar 13, 2012
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Slovenian appliance maker Gorenje reported growth last year even as it called 2011 "even more challenging than 2010," with feeble demand from consumers and high material prices further compromising profitability.

Gorenje Group reported 2011 revenue was EUR 1.4 billion, up 2.9% compared to 2010. Gorenje said that, among major players in the industry with publicly disclosed results, it was the only company to generate positive free cash flow, which was EUR 35.8 million and higher than the group had planned.

Operating profit (EBIT) in 2011 was EUR 36.5 million, down 35.3% from 2010, although the group said that in comparable terms 2011 matched 2010. Specifically, the group said, adjusting for the Asko acquisition and divestment of Istrabenz Gorenje yields an EBIT of EUR 41.1 million in 2011, which is almost identical to EUR 41.9 million in 2010.

Gorenje said higher raw and processed materials costs could not be counteracted by raising appliance retail prices. At the same time the financial crisis in the European Union depressed European consumer confidence and led to weak demand for appliances. The group reported weak sales particularly in Southeastern and Eastern Europe and in the Middle East.

Gorenje profits were also hurt by negative results from Asko Group, which was acquired from Antonio Merloni S.p.A. in 2010, and at Gorenje Home Interior (Gorenje Notranja oprema). Gorenje expects to achieve better efficiencies and cost-reductions from Asko, and earlier this month announced plans to close the Asko cooking appliances plant in Lahti, Finland and absorb the production at an existing plant in Mora Moravia in the Czech Republic. Restructuring activities at Gorenje Home Interior were launched this year.

Net profit after taxes were EUR 9.1 million, consistent with group estimates but short of the group plan. Profits after adjusting for the impact of Asko and Istrabenz Gorenje were EUR 11.3 million.

"Home appliance manufacturers have seen harsh operating conditions since the onset of the global economic and financial crisis in 2008; in 2011, these have grown even more challenging," said Gorenje President and CEO Franjo Bobinac. "Home appliance manufacturers can hardly expect to be afforded a breather in this year. Generating free cash flow, reducing the debt and restructuring of financial liabilities by maturity, in addition to cost optimization, restructuring of manufacturing sites, improvement of the volume and structure of sales, and thereby a boost in profitability of operations remain the our key goals as mapped out in the 2012 Business Plan. One important aspect of the attainment of these goals is successful completion of the Group reorganization and revision of corporate governance commenced last year."

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