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Following a successful meeting of Agrokor creditors in Zadar, a new meeting announced for next week

Agrokor Monthly Report February 2018

The eleventh monthly report of Agrokor’s Extraordinary Administration on the economic position and the activities in the Extraordinary Administration procedure at Agrokor d.d. for the period from 11 February to 10 March 2018 was published. The report covers business results of Agrokor d.d. and 17 vital operational companies in the reporting period and the key activities of the Extraordinary Administration.

The majority of the operating companies and business segments have continued with the positive trends from the previous periods and recorded optimistic business results and good performance indicators.

The recent positive trends in 2017 retail and wholesale operations have continued into January 2018. All companies within this sector were able to generate operating results in line with the viability plans.

While there were some minor deviations in relation to forecast revenues, there were no significant variations in EBITDA. Profitability is as planned as a result of work on the cost side and successful continued cooperation with suppliers.

Konzum, as the largest representative of the retail and wholesale business segment, has continued to improve its operations and is approaching the revenue levels achieved in previous years. Sales revenues in retail are at -4.86% in a year on year like for like comparison which is the best result since commencement of the Extraordinary Administration and also above plan. January, along with February and November, are generally the months with the lowest revenues, and given the large fixed cost end to be the least profitable. Given the significant difference of revenues in revenues in these months as compared to the summer it is clear that they generate negative EBITDA.

The food sector has continued to generate positive results in January. Despite the slight drop, sales revenues amounted HRK 426 millon, operating profits (EBITDA) in the amount of HRK 21 million were significantly higher than planned HRK 11.8 million. Continued efforts have also resulted in the introduction of certain products into new foreign markets. The companies are actively preparing for the Easter holidays and also the beginning of the season.

As a result of the significant drop in the prices of pork, oil, crops, fruit and vegetables and semi-hard cheese there was a shortfall in revenues realization which was HRK 137 million. The reduced EBITDA realized in the amount of HRK 10.2 million is mainly accounted for by the drop in pork prices - approximately HRK 11 million. In future months pork prices are expected to rise and thus improve the EBITDA realized.

The reporting period was marked by the change in Extraordinary Commissioner. On February 27, 2018 Ante Ramljak informed the Commercial Court in Zagreb on his resignation. On February 28, 2018 the Commercial Court in Zagreb, upon proposal of the Government of the Republic of Croatia, relieved Ante Ramljak of duty as Extraordinary Commissioner in the company Agrokor d.d. and appointed Fabris Peruško as new Extraordinary Commissioner of the company Agrokor d.d. The Commercial Court has also, upon proposal of the Croatian Government, appointed Irena Weber as Deputy Extraordinary Commissioner.

At its session held on 21 February 2018, the Temporary Creditors' Council (TCC) unanimously adopted the Disclosure policy that provides the framework for sharing the information between Agrokor, the Interim Creditors’ Council and the creditors. Following the adoption of the policy, representatives of Agrokor creditors, for the first time had the opportunity to analyze certain important financial information that will help them in reaching a viable settlement plan. In consultation with the ICC, the group will make the relevant information which was shared with the ICC members publicly available on 14 March.

For the purpose of reaching the settlement within the set deadlines, an offsite meeting was held from 6 to 8 March 2018 in Zadar between the members of the ICC of Agrokor and observers with Fabris Peruško, Extraordinary Commissioner and his Deputy Irena Weber, supported by the wider Group team and its advisors. Representatives of different creditor groups had a chance to discuss and negotiate on open issues in the meeting and significant progress was made in aligning key provision of the settlement plan. During the meeting, many topics were addressed including the recently announced updates to the viability plan, key legal milestones, PCC formation timeline, details on the settlement structure and crucially, the treatment of outstanding border debt. The discussion on the outstanding border debt, which was identified by the suppliers’ representatives as one of the critical points, resulted in the proposal of a potential solution that in principle is acceptable to the financial creditors and the suppliers. All parties agreed to progress the proposal quickly to ensure broad creditor support for the settlement plan. A small number of key open issues were identified. It was agreed that the same group would reconvene to resolve these remaining issues during the week commencing March 19.