Transcript of Postage Velenje, Slovenia, 20 December 2017...
paid
Published by: Gorenje d. d. / editor-in-chief: Uršula Menih Dokl /
content development: Mateja Celin, Anja Rejc, Bojana Rojc / design:
Marko Marinšek / print: Eurograf
“Innovative and prestigious appliances are our future – today, they
already account for almost a third of our sales”
LETTER FROM THE PRESIDENT AND CEO FRANJO BOBINAC
Dear shareholders,
In the first year of our pursuit of the 2016–2020 Strategic Plan,
Gorenje Group attained and exceeded its plans for both revenue and
profit. This year, we were again off to a good start and at the
half-year mark we were, compared to the last year’s results, ahead
in all key categories of the annual plan. However, the third
quarter fell well short of our expectations and we issued a warning
in November that it would not be possible to fully attain all of
our key goals for 2017.
While we continued to grow in Eastern Europe and in non-European
markets, our sales were down significantly in Germany, our largest
market, where we changed our business model. We are looking to sell
more built-in and premium appliances, and to sell through
specialized retail chains that are better suited for sales of
innovative appliances. This resulted in major fluctuation of sales
in Germany in the transitory period, which had an immediate impact
on our performance.
Global prices of steel sheet metal and plastic granulate, key raw
materials for our manufacturing processes, which had been
relatively low for several years, increased steeply with this
year’s economic growth. Costs of material account for the largest
share of the cost of our products, and if these prices only
increase by a few percent, the resulting negative effect can wash
way our entire profit.
Moreover, labour costs increased, especially on account of higher
number of employees during the
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period of high orders, as well as due to the elimination of salary
disproportions.
We responded swiftly. We are focused on sales promotion in key
markets; we are improving our cost efficiency and process
productivity in all areas; and we are looking to improve working
capital turnover with intensified supply chain financing. We are
also decreasing our inventories and complexity of our
operations.
New generations of appliances are the foundation for solid
sales
In the second half of the year, we launched mass production of new
generations of free-standing cookers and premium dishwashers,
washing machines and dryers. This is an exceptional technological
step for Gorenje. Introduction of new technologies and solutions
that are important for the future of the company caused some short
delivery delays, but these were resolved and partly made up for by
the end of the year. Thus, we are completing a few-year cycle of
higher investments that exceeded depreciation and
amortization.
Updated cookers, dishwashers, washing machines and dryers for all
Gorenje Group brands are our future. Only advanced appliances will
allow us to boost sales of innovative products and premium brands
that are more profitable and mostly marketed beyond Europe, which
decreases our reliance on the mature European markets.
Takeovers, relocations, premium products and global growth
Execution of strategic policies was particularly important after
the onset of the global financial and economic crisis. If we had
not completed major structural changes then, we would have been
obliterated to the ash heap of history by now. Italian Merloni,
Spanish Fagor and the French Thomson-Brandt, once our competitors
due to comparable size, have all failed. One of the most important
moves we made following the acquisition of the Czech company Mora,
Dutch company Atag, and Swedish company Asko, was shifting the
manufacturing operations form Scandinavia to Slovenia and the Czech
Republic, and from Slovenia to Serbia. Our annual savings on
account of this move amount to 20 million euros.
Another strategically important decision was to boost sales of
innovative products and premium brands that
today account for nearly a third of total Gorenje Group sales, and
bring in considerably more earnings.
The third step was focusing on markets beyond Europe. This is where
our growth was the steepest in this year. Today, we sell over 12
percent of our products in Australia, USA, China and the Middle
East.
We wish to ensure Gorenje Group’s long-term development
Globalization and consolidation that have been the hallmarks of
the
white goods industry in recent years have compelled us to actively
seek opportunities for strategic business combination. Gorenje
remains one of the few companies in the industry, which is not a
part of a major multinational corporation. Our products have found
their way to the homes of end users across the globe while
competing with giants like Samsung, LG and Electrolux. Gorenje
could remain independent for some time, but we believe that laying
the foundations of Gorenje’s long-term future and competitive edge
is the responsible thing to do. Especially for our further
development and hiring.
Why do we need a strategic partner? The main goal is to increase
the scale of our
operations. Economies of scale are highly important for cost
management and the resulting long-term competitiveness in our
industry. If we make more appliances, we can negotiate much better
prices and payment terms with our suppliers on account of greater
volume. Similar logic applies to development that today focuses on
digitalization and connectible appliances as a part of a smart
home. In addition to acceleration of product innovations, a
suitable strategic partnership would also afford access to new
markets, and we could work with a partner to reinforce the power of
our brands.
We have a solid foundation for sales growth Operations are highly
challenging in this year. We
still have a lot to do to improve our position, but we have proven
that we can do it. In the last ten years, we have completed
important acquisitions and relocations that have enabled growth and
development.
In Central and Eastern Europe, and the countries of the former
Soviet Union, Gorenje Group is an esteemed and reputed company. Our
factories in Slovenia, Serbia and the Czech Republic are
strategically positioned. Development at our competence centres in
Slovenia, Sweden, the Netherlands, and the Czech Republic keep
abreast of the global trends and sometimes even set them. The range
of all major and small domestic appliances of all brands is
competitive. Highly skilled and experienced employees bind all this
into Gorenje Group’s story of success.
Gorenje is the only brand from the Western Balkans, which not only
survived, but consolidated its position.
2017
Today, we are present in households in four continents and 90
countries around the world. We are one of the largest manufacturing
companies in Slovenia and we are aware of our social
responsibility. Therefore, our efforts are always dedicated to
preservation of productive jobs, both within the company and at our
many suppliers.
We are successfully developing the status of a niche manufacturer
of premium and innovative appliances and designer lines that set
the trends in the industry. On the other hand, economies of scale
are highly important for cost management and the resulting
long-term competitiveness.
Deleveraging a key task for better profitability At its core,
Gorenje is a domestic appliance
manufacturer. Therefore, we shall continue to gradually divest some
of our non-core businesses and thus continue to cut our debt, and
we shall restructure any companies failing to deliver adequate
returns. Constant decrease of working capital, and of course
increase in profitability, remain the other important way of
cutting our debt – and a key goal for us in the future. Further
increase in sales of innovative appliances and appliances under
premium brands Asko and Atag will improve our sales structure, and
we expect the improvement of geographical structure of sales to
result in even steeper growth in the markets outside Europe. By
increasing our market shares, we shall considerably increase the
utilization of our production capacity. Moreover, we shall
improve our supply chain management, as well as labour cost
management as we intend to cut the number of employees in support
services. After the completion of a major investment cycle,
investments in the coming years will be at the level of
depreciation and amortization, or approximately 20 million euros
lower than in recent years.
Dear shareholders, Creating value for the shareholders, employees,
business partners, and the environment remains at the heart of our
mission. Rapid development of digitalization, volatile environment,
and shifting consumer behaviour are the motors of changes that lead
us in the creation of sustainable innovative products and services
that make everyday easier and improve the quality of our lives.
Successful transformation into a global and sustainably competitive
domestic appliance manufacturer will be of key importance for
Gorenje Group’s further development. I believe that we are together
on the right path.
On behalf of Gorenje d. d. Management Board,
Franjo Bobinac, President and CEO
Following a request by the shareholders Home Products Europe B.V.,
Netherlands, Raiffeisenbank Austria d.d., Zagreb, Croatia, Splitska
banka d.d., Split, Croatia, and Unicredit Bank Hungary ZRT,
Budapest, for the convocation of Shareholders Assembly of the
company Gorenje d. d., Gorenje Management Board convened the 25th
Shareholders Assembly of the company Gorenje d.d. to be held on
Tuesday, January 9, 2018, starting at 10.00 a.m., in the conference
hall of the Paka Hotel in Velenje, Rudarska ul. 1, Slovenia.
The shareholders will vote on discharge of two members of the
Supervisory Board, representatives of shareholders, Marko Volj and
Uroš Slavinec and on elections of two new members of the
Supervisory Board: Philip Alexander Sluiter and Robert Lien.
Detailed explanations relating to the Shareholders Assembly are
published on the corporate website for investors:
http://www.gorenjegroup.com/en/investors/
annual-general-meetings.
On November 21, 2017, the Supervisory Board publicly presented its
position regarding the request for convocation of extraordinary
general meeting. It is the Supervisory Board’s mission to always
work in the best interest of the company, while keeping in mind
Gorenje’s importance for a variety of stakeholders. Every
shareholder has the right to propose changes in the Supervisory
Board if she or he is unhappy with the Supervisory Board’s
work.
Gorenje prides in its very solid corporate governance. It is
understandable that respective Supervisory Board members’ views on
a variety of issues pertaining to Gorenje’s challenges may deviate;
however, such views have always been exchanged in a sharp, yet
respectable dialogue. To date, this has virtually always led to
unanimous conclusions and decisions. The Supervisory Board stressed
unity in their work, and rejected all allegations of differences
between respective members.
Gorenje Group is entering a very turbulent period and therefore,
stable management is in the best interest of the company and its
stakeholders, including its shareholders. In order to ensure
stability and to reach the best possible business results, the
Supervisory Board continues to support the Management Board.
JANUARY 9, STARTING AT 10.00 A.M. HOTEL PAKA, VELENJE
Extraordinary Shareholders Assembly
Cooking Appliances 41.5%
Cooling Appliances 25.5%
Laundry Appliances 16.5%
Dishwashing Appliances 12.2%
13% Czech Republic Mariánské údolí
64% Slovenia Velenje
Netherlands Duiven Sweden Lidköping
PRODUCTION FACILITIES FOR DOMESTIC APPLIANCES
Design driven innovators. Gorenje Group. The Gorenje Group is one
of the leading European manufacturers of household appliances
CORE BUSINESS Major and small domestic appliances
IN 90 COUNTRIES WORLDWIDE
95% of sales
GLOBAL PRESENCE in 90 countries worldwide, mostly in Europe (91%),
also in USA, Australia, Middle and Far East
REVENUE (2016)
2017
BOOSTING SALES OF PREMIUM BRANDS THAT AFFORD CONSIDERABLY HIGHER
PROFITS
SALES UNDER THE PREMIUM ASKO BRAND INCREASED BY A THIRD
Asko appliances represent in the period January-September 2017 4%
of our appliances produced. However, because of higher pricing Asko
appliances represent 12.2% in our revenues.
Gorenje Group has a carefully developed portfolio of brands
spanning all price segments. We are focused in particular on the
upper-mid (Gorenje) and the premium segment (Asko and Atag). Global
brands Gorenje and Asko are supplemented by European regional
brands.
Asko is a premium brand under which we offer a comprehensive range
of home appliances in select markets across the globe. Its
recognition is based on specialization on premium dishwashers,
washing machines and dryers. Over the years, however, we expanded
the assortment to cooking and cooling appliances. Asko is
reinforcing and increasing its market share in the premium segment,
and stepping up its sales and profitability every year. The graph
presents sales in millions of euros and sales growth in percent.
Overall, sales have grown by 33.67 percent in the period from 2013
to 2017.
In 2017, we continued to gradually developing and adding new
product platforms in all key major appliance product categories.
The strategic goal that we will increase the share of premium
appliances in the sales structure to 30% of the total Group’s
overall revenue by the year 2020, was achieved already this
year.
MDA structure: Own brands (January – September 2017, volume
terms)
MDA structure: Own brands (January – September 2017, value
terms)
DOMESTIC APPLIANCES REVENUE FROM PREMIUM AND INNOVATIVE
PRODUCTS
0%
10%
20%
30%
122,000
+ 33.67%
Innovative on the global level
Asko no. 1 in Australia Asko dishwashers received the best review
by the biggest independent Australian review company Choice. Model
Asko D5436 was the No. 1 rated dishwasher in Australia and three
more of our premium-brand Asko models were ranked in the top
14.
Gorenje on the roads of the Asian capital In January, Gorenje Asia
organized a 10- day roadshow campaign to promote the brand. The
first campaign ‘on wheels’ was successful and noticed on the
streets of Hanoi as well as on social media with significant
increase of new followers.
From digital transformation to smart factories At Gorenje Group, we
are very much aware of the need for digitalisation and digital
transformation of work processes and product development, which is
why we also invest in automatization of production and robotization
of the factories of the future, the smart factories.
Gold for Gorenje’s innovation Innovators from Gorenje won the
Golden Slovenian Chamber of Commerce and Industry (CCIS) Innovation
Award for the new generation of Gorenje SmartFlex dishwashers,
which were developed in Sweden, at one of Gorenje Group’s four
development-competence centres. The CCIS award for the best
innovations in Slovenia is considered the highest commendation for
innovative achievements of Slovenian companies, and an important
vehicle of promotion for innovation in Slovenia.
2017
Passion for design
Users impressed by our hairdryers Brand Gorenje launched the first
Gorenje Beauty line. The new Gorenje hairdryer was already named
‘the Beauty Gadget of the Year’ as the readers of the popular
women’s lifestyle publication Cosmopolitan Croatia selected it as
the most wanted gift they’d like to see under the Christmas
tree.
Designing with technologies of the future Gorenje Group is
introducing the Microsoft HoloLens technology in R&D and IT,
which enables a more advanced and more efficient product
development in augmented reality. Development in AR also shortens
time, necessary to develop a new product, and reduces costs of
making real samples.
Meet Anna! Gorenje launched Anna, the Gorenje virtual shopping
assistant, available to users on Facebook. One of the aims of
introducing the advanced digital service for users is to simplify
the product research process and to provide a simple, convenient
help in choosing/getting informed about new Gorenje products.
Awards for our superior design In 2017, Gorenje Group received 4
Red Dot Awards: 2 for Gorenje brand products, and 2 prestigious
Best of the Best Red Dot Awards for the ASKO brand products. This
marks the 18th consecutive year for Gorenje Group to be awarded
with the Red Dot award – the internationally sought-after seal of
quality, which this year alone received more than 5,500 entries
from 54 countries.
Postage stamp – a special recognition of our achievements The
Slovenian postal service issued a special-edition postage stamp
from the Slovenian Industrial Design series, depicting the Gorenje
Simple & Logical washing machine. The revolutionary product
from 1996 was considered an innovation on global level as it was
the very first touch-controlled home appliance and the first to
introduce a truly simplified user experience.
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OFFICIAL SPONSOR
Gorenje, one of the leading European home appliance manufacturers
and a proud sponsor of the upcoming EHF European Handball
Championship, commits to fair cheering under the hashtag
#simplyfans. Become a part of Gorenje’s #simplyfans movement that
brings together handball fans of all nationalities.
Nikola Karabati