Agrokor Group in 2018: strong operating profit growth of 22 per cent
May 14, 2019
Operating profits amounted to HRK 2.4bn
The major driver of operating profit growth was the Retail and Wholesale segment, with operating profits exceeding those from the year before by as much as 133 per cent
The Extraordinary Administration of Agrokor published the audited consolidated results of the Agrokor Group for 2018. The scope of consolidation comprises 108 companies where Agrokor exercises control, out of which 53 are in Croatia, and the financial statements were prepared on a non-going concern basis.
In 2018 the Agrokor Group generated a strong growth of operating profits that amounted to around HRK 2.4bn at year end, which is 22 per cent or HRK 427m more than in the year before. Such operating profit growth is the direct result of the restructuring measures taken in all business segments of the Group, both on the revenue and on the cost side. The major driver of the Group's operating profit growth was the Retail and Wholesale segment, ie. the companies Konzum and Mercator. In particular, operating profits of the entire Retail and Wholesale segment grew compared to the year before by as much as HRK 681m – from HRK 513m to HRK 1.2bn, representing a growth of as much as 133 per cent.
In 2018 the Group generated a total of HRK 38.8bn in consolidated revenue, which is HRK 712m or 1.8 per cent less than in the year before. The Group's revenue decline was mostly accounted for by the Agriculture segment, due to the lower volume of commodity trading and reduced market prices of finishers and semi-hard cheese, as well as the Retail and Wholesale segment.
In total, the Retail and Wholesale segment generated HRK 29bn in sales revenues in 2018, which is 3.9 per cent less than the year before. The revenue decline was due to new competitor store openings in Serbia and Montenegro. The loss of revenue arising from the closing down of unprofitable Konzum stores was set off by a strong like-for-like revenue growth in the amount of 5.7 per cent.
The Food segment has contributed to consolidated revenue growth of the Agrokor Group, while the segment's operating profit was three per cent higher than in the year before and amounted to HRK 1.2bn. The highest operating profit growth was generated in the Ice Cream and Frozen Food subsegment.
The total revenue of the Food segment was HRK 106m lower than in 2017, as a consequence of the slight decline in the drinks segment revenue, mostly due to the reduced volume of distribution, and the drop in revenue at Dijamant due to the very low selling price of oil on the market of Serbia in 2018.
The Agriculture segment's operating revenue in 2018 amounted to HRK 2.34bn, or HRK 535m less than in the year before. Throughout the year Agrokor reported that the Agriculture segment was faced with an extreme drop in finisher and semi-hard cheese prices. At the same time, the revenue drop also resulted from the significant slow-down in commodity trading activities, conducted over the course of 2017 through the company Agrokor trgovina, which in 2018 operated within the scope of PIK Vinkovci.
This has also resulted in the operating profit drop of the entire Agriculture segment, which in 2018 amounted to HRK 113m. The negative effect was mitigated by systematic cost management and optimization as well as significant savings in the cost of raw materials and supplies.
In 2018 Agrokor's Extraordinary Administration achieved all the goals that were in its main focus. The settlement between the creditors was achieved and the preparations for the Settlement Plan implementation, which successfully took place in Q1 2019, had started. The Group's financing was stabilized by securing the SPFA loan extension and preparations for the refinancing. The Group's profitability has been improved, resulting in operating profit growth of 22 per cent compared to 2017 and the task of regaining the confidence of customers and partners was successfully accomplished.
The processes of SPFA refinancing, operational restructuring and further development of Fortenova Group's strategy, which are already under way, shall be the Company's priorities in 2019.