Eighth monthly report on the economic state and implementation of measures by the Extraordinary administration in Agrokor d.d.

Agrokor Monthly Report November_2017

The eighth monthly report on the development of the economic and financial position and implementation of measures and activities in the Extraordinary Administration procedure at Agrokor d.d. was published today, pertaining to the period from November 11 to December 10, 2017. The said report includes detailed information on the operations of Agrokor Group companies and some news in the approach to reporting. The previous reports included 12 companies and as of this report a total of 17 key companies in Croatia and the region will be covered. The Extraordinary Administration will continue to apply this approach to reporting in the reports to follow.

The November report indicates an improvement in the overall economic and financial position of the Agrokor system resulting from the financial and operative restructuring of the companies which is under way. In line with the viability plans, the focus of each of the business segments has shifted from increasing revenues to generating operating profits.

The companies from the Food Sector have recorded an increase in sales revenues in October as against September. In the sales of oils an increase of 10% was recorded in comparison  to September. The operating profits (EBITDA) generated in October were in line with expectations. The business segments drinks and oils have continued to implement cost control programs, while the ice cream and frozen food as well as meat segments are focused on profitable growth through the product portfolio optimization. All companies in the Food Sector continue to intensify export activities, with PIK Vrbovec for example having generated a 33% export revenue growth in October vs. September.

The Retail and Wholesale Sector experienced challenges in October due to an increase in the share of promotions and lowering prices with a view to achieving competitive advantage. In October Konzum was able to stabilize the average number of customers which is the highest since the beginning of the year with a 2.1% like-for-like increase and an important drop in operating costs by 2.7% against plan. Retail at Tisak has realized significant favorable impacts on the gross margin in October due to successful negotiations with suppliers and the implementation of a targeted pricing strategy.

Over the course of the first ten months the companies from the Agriculture Sector have generated positive EBITDA with margins ranging from 2.3% to 20.8%. The margin in October was above average of the previous months in 2017, resulting from quality cost management, excellent natural indicators in the production of cattle, high yields of agricultural crops and the high profitability of dairy farms. October 2017 was the best month in terms of revenue realization this year for Belje, which together with Agrokor trgovina accounts for 75% of total sales revenues. In October PIK Vinkovci realized 118% higher sales in financial terms than in September.

Apart from the operating results of the companies, the Extraordinary Administration also reported on all other activities at Agrokor d.d. One of the key topics was the registration of claims, given that on November 9, 2017, in line with the legal procedure, all data on the examined creditor claims filed were published in the form of tables at the e-bulletin board of the Commercial Court in Zagreb. Creditors have filed a total of HRK 504bn of claims, out of which the major part of HRK 446.2 bn is related to claims of co-debtors (guarantees) and requests to secure funds, guarantees/co-debtorships and recourse rights for bills of exchange and assignments which are registered and bear no voting rights. Verified and contested claims amounted to a total of HRK 57.7bn. The value of verified claims is HRK 41.2bn. Out of the stated amount, voting rights are currently exercised by creditors holding HRK 29.6bn of claims, given that related parties subject to the Extraordinary Administration Procedure have no voting rights. During the course of processing and examining the claims filed, 1,102 of them were contested in full or in part, in the total value of HRK 16.5bn. After publication, certain creditors have requested for the tables to be amended or changed. So far 13 claim registrations have been received where the creditors have presented a certificate to have filed the claim in time, such claims having been subsequently examined and verified in the total amount of HRK 9,793,123.66 and corrections of claims were made for another 36 creditors. Also received were 15 submissions with creditors contesting other creditors' claims, relating to a total of 173 various claims.

The Interim Creditors' Council convened twice over the course of this period and granted approval to Agrokor to vote in favor of adopting the Restructuring Plan in the Pre-bankruptcy Proceedings of the company Zvečevo d.d., with Agrokor participating as creditor and also provided additional approvals for the payment of overdue pre-petition claims of small and other suppliers.

The Extraordinary Administration keeps taking all available legal activities with a view to protecting the assets of the Agrokor Group and all the companies belonging to it in Croatia and abroad. During the reporting period the regular, direct and formal communication with creditors, debtors, trade unions, employees, managements and representatives of government authorities and institutions in the countries where Agrokor operates has continued.

The discussions on concluding the settlement, to be decided on by the creditors, are under way. The focus is on proposals sustainable in the long run, on the development whereof it will be reported in the forthcoming months.