Gorenje Reports Loss for 2018

By , 26 Mar 2019, 12:47 PM Business
Gorenje is now owned by Hisense Gorenje is now owned by Hisense

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STA, 25 March 2019 - Household appliance maker Gorenje, which was taken over by China's Hisense last year, reported EUR 1.184bn in group sales revenue for 2018, a 1.7% decrease. After ending 2017 in the black, Gorenje recorded a EUR 37.3m net loss in 2018, or EUR 111.2m when factoring in one-off and extraordinary events.

Earnings before interest, taxes, depreciation and amortization (EBITDA) fell by 53.5% to EUR 29.6m. Earnings before interest and taxes (EBIT) were EUR 28.2m in the negative after a EUR 12.1m plus had still been recorded in 2017.

"In the first half of the year, performance was consistent with the budgeted dynamics; in the second half, however, it was adversely affected by uncertainty among our partners with regard to the outcome of the strategic process, and it worsened as a result," Gorenje wrote, referring to the sale to Hisense.

The largest decline was seen in industrial (OEM) deals, "as customers trod very warily when doing business with Gorenje, for reasons referred to above".

Without the decline of OEM deals, revenue in Gorenje's core activity would have grown relative to the year before, said the company which employs slightly over 11,000 people.

As to the different net loss figures, Gorenje pointed out that assumptions and methodologies of accounting estimates changed considerably, with the "adjustment upon integration into Hisense having had many one-off and extraordinary effects on Gorenje results".

Gorenje generated 91% of its revenue in its core activity of domestic appliances. It primarily grew in eastern Europe, in particular in Hungary, Ukraine, Bulgaria, and the Czech Republic where it is marketing products under the Asko brand.

Revenue on the other hand decreased in western Europe, where the company felt the effect of strong competition and labour cost pressures.

"As sales decreased, results from operations were negatively impacted by the unchanged amount of fixed costs that were impossible to adjust to the lower-than-planned sales in such a short period of time," Gorenje wrote.

The company said it continued to invest in development, earmarking 2.5% of total revenue or EUR 30m for this purpose. The same amount was invested last year into marketing.

The core company increased sales revenue by 2.2% to EUR 819.3m but recorded a EUR 126.8m net loss after being EUR 470,000 in the black in 2017.

All our stories on Gorenje can be found here

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