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Fortenova Group generates growth of all KPIs over Q1-Q3 2019 – total core business’s unconsolidated revenues reach EUR 2,6bn and operating profit EUR 231,7m Business

29.11.2019.

Peruško: The excellent results we have achieved reflect a number of activities aimed at raising overall operational efficiency

Growth of revenues, operating profit and operating margin as well as significant cost control due to operational optimization measures and improved efficiency are the most important features of Fortenova Group’s operations over the period Q1-Q3/2019.

The Group’s core business (retail and wholesale, food and agriculture) realized EUR 2.6bn of unconsolidated revenues or 3.5 per cent more compared to the same period last year.

At the same time, total unconsolidated operating profit of the core business (net of Mercator) reached EUR 231.7m. The major part of EBITDA growth was accounted for by the retail and wholesale segment with 19 per cent and the agriculture segment with a growth of 28 per cent. Thus operating profit of retail and wholesale for Q1-Q3/2019 amounted to EUR 62.1m and of agriculture to EUR 27m. Operating profit of the food segment was EUR 142.7m, or at the same level as in the corresponding period last year, due to the impact of bad weather on beverages and ice – cream businesses in the first part of the tourist season.

In a year-on-year comparison, pro forma consolidated revenues of Fortenova Group grew by seven per cent and amount to EUR 2.5 bn for the period Q1-Q3/2019 (net of Mercator).and consolidated operating profit reached EUR 200.3 m.

Konzum was the strongest generator of both revenue and operating profit growth in the retail and wholesale segment and along with the revenue increase of almost 4.8 per cent, the nation’s largest retail chain recorded a growth of all key performance indicators.

„Everything we have been able to realize over these nine months, and particularly over the two years since I have been with the company, provides lots of reasons for satisfaction. The excellent results we have achieved reflect a number of activities aimed at raising overall operational efficiency“, Fabris Peruško, CEO of Fortenova Group said when presenting the results to DR Holders, ie. the owners of the company and reminded them of several key events and developments which were crucial to the operations of Fortenova Group.

„Primarily, we have successfully prepared and implemented the creditors’ Settlement Plan, which was an extremely demanding task, without any significant negative effects on the businesses of our operating companies, our partners and suppliers. In parallel, we were negotiating the refinancing, which was by no means easy given that the company had practically only just emerged from bankruptcy. With the successful closing of the refinancing we realized the largest corporate debt issuance in Croatia and in the region. In addition, we have initiated numerous internal transformation activities and along with the ownership structure, through the settlement we have also redesigned the company’s organizational and governance structure, raised its corporate governance standards and strengthened the executive management with professionals who have international experience. Furthermore, we have initiated the divestment of four companies from our non-core business and of our real estate portfolio, featuring since recently, 143 properties. Most importantly, as our results clearly show, we have continuously raised operating profit and proved that we can accomplish the most important goals“ – Peruško highlighted.

As major challenges to the business in the forthcoming period Peruško mentioned the Mercator asset transfer processes in Slovenia and Serbia. Also, one of the challenges will be the Agricultural Land Act in Croatia which has negative impact on institutionalized agriculture as well as on Croatia’s GDP. In his opinion, the greatest challenge to the business in the long term, requiring a systemic solution, will be the negative trends in the region’s demography, not only in terms of reduced available workforce, but also in terms of a drop in the number of customers to purchase Fortenova Group’s operating companies’ products.

9M 2019 DR Holders update for publication

Fortenova Group donates food worth HRK 3.3m Business

15.10.2019.

Fortenova Group – Croatia’s leading food donor

Over the course of 2019 until the World Food Day, celebrated on 16 October, Fortenova Group has donated food worth HRK 3.3m in total, which makes it the leading food donor in Croatia. The largest donor within Fortenova Group is Konzum, having donated food worth HRK 2.8m, while the rest has been donated by companies from the Food and Agriculture business segments: Zvijezda, Jamnica, Ledo, Pik Vrbovec, Belje, PIK Vinkovci, VUPIK and Agrolaguna. Fortenova Group is also major strategic partner to various non-profit organizations in donating food in Croatia. Particularly worth noting are the cooperation of Fortenova Group with Mreža hrane (Food Network), the Red Cross and its social self-service stores, SOS Children’s Village, soup kitchens as well as a number of other national and local institutions and associations.

The World Food Day is an opportunity to additionally highlight the two key global challenges related to food according to SDG2 (Sustainable Development Goals): the hunger challenge on the one hand and healthy, balanced and long-term sustainable nutrition on the other. Worldwide more than 820 million people suffer from hunger and an even greater number struggle with overweight. Research shows that more than 53 million Europeans cannot afford a quality meal every other day, while in Croatia more than a quarter of the population cannot afford a quality meal every day. At the same time the European Union produces 88 million tons of food a year which goes to waste, whereof Croatia accounts for 400,000 tons of discarded food or more than a thousand tons of food gone to waste every day.

The reasons thereto are many, from farmers who cannot sell their produce, to manufacturers who only use part of the raw material and the rest is discarded. The largest share of discarded food in the European Union, as much as 53 per cent, comes from households, as a result of poor planning and lack of education. Retail participates in food waste with around 5 per cent, as due to the complexity of donating procedures retailers usually opt for discarding the food, which is easier and cheaper for them. Nevertheless, this segment has seen significant changes, also in Croatia, with retail chains donating more and more food. They are headed by Croatia’s largest retail chain Konzum, which has been proclaimed Best Donor in Brussels in the food retailers category for the second year in a row, within the scope of the initiative of Croatian MEP Biljana Borzan and the coordinator of the Food Network platform Zoran Grozdanov.

„Within Fortenova Group, whose entire business is related to food, whether it be its production or retail, we have intensively been working on the challenges regarding food waste and the choice of health food. In pursuance thereof we have been recognized as Croatia’s greatest food donor. At the same time, through Konzum’s project of awarding customer loyalty such as Zdravoljupci (Health Lovers), we have in a fun way strived to make kids – from the earliest age on – and their families aware of the importance of daily fruit and vegetable consumption and a balanced and healthy diet. We have also placed a strong focus on the importance of encouraging local production and the consumption of domestic, local and seasonal products. We shall continue to pursue such approach going forward, through initiatives and projects intended to make an active contribution to making people aware of and educating them on these topics“ – explained Dubravka Jusić, Executive Director of Marketing at Fortenova Group.

Both this year and in the forthcoming period Fortenova Group and all its companies will continue to cooperate with local communities and associations across Croatia through the realisation of numerous food donations. The process of donating food at Fortenova Group involves a whole team of people who have exerted great efforts for food to be donated in a timely manner to those who need it most. At the same time, internal processes have continuously been improved and the procedures of ordering stocks optimized, primarily in order to reduce the total quantity of food with shelf life about to expire and also to donate it to the greatest possible extent. Besides the above, the Fortenova Group will continue to undertake numerous educational activities and projects intended to inform customers, employees, business partners and the entire public and make them aware of the importance of reducing food waste.

Agrolaguna and Agricultural Cooperative „Olive Growers of Istria“ sign cooperation agreement Business

04.10.2019.

On 3 October 2019 Agrolaguna and the Olive Growers of Istria Agricultural Cooperative signed a business cooperation agreement at the premises of the Craftsmen’s Center in Poreč.

The agreement with Agrolaguna provides olive growers within the Cooperative with processing capacities as well as a high level of quality and health safety of the processed oil as the basic assumptionS for branding their oil with the label of protected designation of origin, assigned to Istrian extra virgin olive oils at EU level. It is estimated that around 60,000 kg of olive fruit will be processed, resulting in around 7,000 l of oil, depending on the yield.

At the same time this cooperation has enabled Agrolaguna to increase production quantities, expand its network of olive growing contract farmers and indirectly invest in the further development of olive growing in Istria. Agrolaguna’s crushing plant has a capacity to process much greater quantities, which they hope to do in the years to come.

„I am very happy that we have started the cooperation with the Cooperative assembling such a great number of small olive growers, as this cooperation will be to our mutual benefit. I am glad that the Olive Growers’ Cooperative has recognized Agrolaguna as a quality partner, given that apart from the business interest, this agreement is also important to Agrolaguna as Istria’s largest agricultural company in view of the positive impact it has on the local community through the investment in the expansion and development of olive growing in Istria. Besides that, it also creates opportunities to work together on the development of products and the expansion of the market on which to place these products“ – said Mrs. Nerina Zec, Director of Finance, Accounting and Controlling at Agrolaguna.

The founding of the organization of olive and olive oil producers „Olive Growers of Istria“ was initiated by the olive growers themselves in cooperation with the Administrative Department for Agriculture of the County of Istria with a view to facilitating the common market placement of oil under one and the same label of protected designation of origin. The Cooperative comprises 55 olive growers.

„Securing processing capacities is an important assumption of the common market appearance and further branding of our oil, particularly when it comes to quality control in the process. Our goal is a high quality product of a higher price category and the cooperation with Agrolaguna makes it possible to meet these key assumptions in full“ – said Mrs. Katja Gašparini, Manager of the Olive Growers of Istria Cooperative.

Atlas and Kompas with their associated companies, Projektgradnja and Sojara are the first Companies in Fortenova Group’s Process of Divesting Non-Core Businesses Business

02.10.2019.

By distributing materials intended for potential investors Fortenova Group has initiated the previously announced process of divesting non-core businesses. The companies offered for sale are: Atlas, Kompas and their associated companies, a leading travel services provider in SE Europe; Projektgradnja, construction company from Slavonski Brod with a strong track record in public and private sectors; and Sojara, grain port terminal and storage facility located in Zadar.

In line with its strategy of focusing on the development of its core businesses – retail and wholesale, food and agriculture – and the planned exiting from non-core activities Fortenova Grupa undertook extensive preparations for the divestment of the aforementioned companies, including hiring advisors for steering this process.

Fortenova Group’s objective in respect of its non-core subsidiaries is to find strategic or finanical investors who will be capable of realising the great potential of each of these companies for the benefit of their employees, partners and other stakeholders. Fortenova Group’s exclusive advisors for the divestment of Atlas, Kompas and their associated companies are UMiUM and PKF.

Fortenova Group’s exclusive advisor for the divestment of Sojara Zadar and its assets as well as the divestment of the construction company Projektgradnja is Deloitte Croatia.

Atlas and Kompas – regional leaders

Atlas, Kompas Ljubljana, Kompas Poreč and the Kompas network are the regional leader holding more than 20 per cent of the market in Croatia and Slovenia and more than 15 per cent of the market in Montenegro. The company which has been attracting around 1.2 million inbound and outbound passengers a year is well-known for the full spectrum of services it offers (tour operator, travel agency and destination management company), high degree of recognition of its two strongest brands – Atlas and Kompas, and the long-standing presence on the market. The company has more than 3,500 business partners and over 600 employees.

In 2018 Atlas, Kompas and their associated companies generated EUR 219m of total revenues.

Projektgradnja – construction experts

Projektgradnja has been in charge of some of the largest and most demanding construction projects in Croatia and is capable of performing any type of construction work. Its key market advantages are good client diversification resulting in completed public sector, commercial and residential projects, as well as a highly qualified team consisting of over 200 construction experts, including 30 engineers. The total value of the 69 projects completed by Projektgradnja over the past four and a half years amounts to EUR 173.7m. Considering the forecasted 5 per cent growth in the Croatian construction sector over the period of 2019-2021, the acquisition of Projektgradnja may prove to be a lucrative investment for potential buyers.

Zadar-based Sojara is located in the city’s port terminal in the industrial zone. The factory features soya processing capacities and more than 150 thousand cubic meters of storage area. Its traffic connections are excellent.

Fortenova Group Successfully Closes New Financing Business

06.09.2019.

The Extraordinary Administration Proceedings against 22 companies of Agrokor Group has been terminated and these companies continue their business operations within the Fortenova Group Business

22.08.2019.

Agrokor Restructuring Wins Prestigious International Award Business

01.08.2019.

The financial restructuring of Agrokor during the course of the Extraordinary Administration Procedure, resulting in a settlement between the creditors and its successful implementation, was assessed in the USA as the most significant international company transaction of its kind worldwide. The team in charge of the process headed by the Extraordinary Commissioner Fabris Peruško won the prestigious 2019 TMA Turnaround and Transaction Award in the category International Company Transaction of the Year. Fabris Peruško, who will be presented with the award in September at the TMA Annual Conference in Cleveland, Ohio, said on this account: „The global recognition of the success of the Extraordinary Administration procedure goes not only to the closest team that worked on the procedure, but also to our numerous partners, creditors and new owners and most of all to the tens of thousands of our hardworking and diligent employees who have over these two extremely turbulent years given their best and preserved the companies they work in. The successful restructuring of Agrokor would not have happened without them.“

More than 100 international projects were nominated in twelve categories for this year’s award, and in the words of Scott Y. Stuart, TMA Global Chief Executive Officer, „the award winners have made a significant economic impact on the global economy by helping struggling businesses preserve their value and save jobs“.

TMA is a leading global restructuring industry association assembling restructuring and turnaround professionals from all over the world and the TMA Award is one of the most important recognitions in the industry worldwide. The award is presented by the awards committee that consists of thirteen members representing a cross section of TMA professionals – from legal to accounting and finance professionals and the winners are selected in a rigorous peer-review process of vetting the procedures nominated for the award in several rounds of analysing and valuating the data of the transactions.

The award for the restructuring in the Extraordinary Administration Procedure of Agrokor comes at a time when Fortenova Group, the company incorporated in Agrokor’s settlement implementation, is about to successfully complete the refinancing of a loan facility in the amount of EUR 1.2bn and the key operating companies have recorded growth of all KPI’s, particularly operating profits, thus confirming the success of Agrokor’s restructuring.

Over 80 percent of DR Holders voted in favor of the new senior financing led by HPS Investment Partners Business

26.07.2019.

Fortenova Group Starts Disposing of Real Estates not used for business function Business

22.07.2019.

Fortenova Group To Refinance Its Debt With Up To € 1.2 Billion Bond, Subject To Final DR Holders Approval Business

22.07.2019.

The Board of Directors of Fortenova Group d.d. has resolved to give approval and instructions to the Executive Directors of the Company to propose to the General Assembly and ultimately to the Depositary Receipts Holders (the “DR Holders”) of Fortenova Group to approve refinancing of Fortenova Group’s Super-Priority Facility Agreement dated 8 June 2017 (the “SPFA”) led by HPS Investment Partners, with participation of VTB Bank.

Subject to the final credit approvals, the 4-year bond in the amount of up to 1.2 billion euro will be issued by the company at 7.3% interest rate plus EURIBOR, with 1% floor.

The Executive Directors have called for the General Assembly of the Company and STAK Management called for the meeting of the DR holders to vote on the approval to Fortenova Group to enter the refinancing arrangement. The electronic voting of the DR Holders closes on Thursday, July 25th and the General Assembly will take place on July 26th, 2019. A 2/3 vote of the DR holders is needed for the approval.

“I am particularly proud that we have negotiated up to 1.2 billion financing in the open market, which will be available from a respectable financial institution that has no prior links with our company. The fact that we did not have to go to our owners or present-day creditors for SPFA refinancing proves that our business is viable and has good prospects, recognized by HPS Investment Partners. Also, participation of VTB Bank, one of our owners and present-day creditors, in this arrangement that is subject to their credit approval, clearly shows that those who know our business well also believe in our future and I would like to thank them for that”, said Fabris Peruško, CEO of Fortenova Group d.d. “I believe that majority of our DR holders will recognize that this financing secures our mid-term financial stability under acceptable conditions, that can also be improved over time, and I invite our DR holders to vote for its approval”, added Peruško.

In terms of half-year results of Fortenova Group d.d., it has been reported at the Board of Directors meeting that estimated H1 2019 revenues of the key operating companies of the Group have reached an amount of 1.53 billion euro or 11.3 billion kuna, surpassing the last year H1 revenues by more than 2%. At the same time estimated EBITDA of the key operating companies is more than 101 million euro or more than 750 million kuna, that is 5% above the last year results.

Fortenova Group cooperates with University of Cambridge Business

19.06.2019.

Fortenova Group’s values include leadership in the implementation of new technology and cooperation with the top educational institutions worldwide. As part of that orientation the team of MBA consultants from the University of Cambridge presented to operating companies management teams selected Artificial Intelligence and automation solutions and companies with high potential to partner with Fortenova Group.

Today AI and automation are used in 40 percent of large retail and consumer good companies and their share is expected to grow to 80 percent by 2021. As these solutions have significant impact both on the revenue and cost side of the businesses, their application is inevitable for every company that aims to be competitive and market leader. Hence, Fortenova Group management team started collaboration with the University of Cambridge to identify the most high-potential AI and Automation solutions.

The collaboration of Fortenova Group management team and the team of Cambridge MBA consultants resulted in systematic overview of international Artificial Intelligence and Automation ecosystem, short-list of potential solution and, after yesterday’s meeting with the management teams of operating companies, in identification of solutions with the highest potential to be implemented in Fortenova Group’s companies in the near future. The preferred solutions are in the area of image recognition driven shelf and SKU management, customer flow based in-store layout optimization, advanced customer analytics focused on personalized approach and micro segmentation, comprehensive market & consumer insights and optimization of inventory management. As the next step, the team will develop business cases for the selected solutions which will be followed by the pilot project.

Dragan Mrkajic, Director of Strategy in Fortenova Group has pointed out on that occasion: ”This cooperation builds on the Fortenova Group’s values of being the new technology implementation leader and on the extensive cooperation with the educational institutions in Croatia and all around the world. We are privileged, as the leaders in our business, to have the opportunity to cooperate with the Cambridge MBA students, as worldwide educational leaders. I found this cooperation to be extremely productive and beneficial for our company, since it will definitely bring additional value in the way we sell our products and service our customers, as well as in the supply chain.”

Ivan Babic, Director of the Turnaround stated his content with the selected solutions: “The quality of the finally selected solutions depended very much upon the comprehensive understanding of the Fortenova Group’s business by the Cambridge MBA students/consultants. This was critical for the project’s success, and it included organizational structure, business objectives and operations as well as product portfolio. This project brought important benefits to both sides in understanding key global trends, players and case studies where AI improved business performance in Retail and Food industry. “

Antonija Kožul, Senior Project Manager in Fortenova Group emphasized the following: “Gathering the best talents and most advanced technologies, together with the enthusiasm of the operating companies to adopt them, comprise the fundamental values of our Group. This project is exactly about that and therefore it is my privilege to be leading it.”

Chayanika Ranasinghe, Cambridge MBA consultant described the cooperation in the following statement: “I was keen to be a part of this unprecedented transformation embarked on by the Fortenova Group, working with a highly motivated and dynamic team. It is inspiring that the project carried out by the Cambridge MBA Consultants focusing on innovation and automation could have a real impact on improving Fortenova Group’s business operations in food and retail, as the group further leverages its brand and position in the CEE region.”

Shuntaro Horiuchi, Cambridge MBA consultant stated on the occasion: “The project by Fortenova Group is the effort to bring new value in established and sophisticated business based on cutting edge technologies. I am excited about participating in this ambitious project between Fortenova Group and Cambridge MBA, and expect this opportunity to be a catalyst for further value enhancement to customers provided by a player who has excellent presence in CEE region.”

Slaven Štekovic, Cambridge MBA consultant also emphasized the regional impact of the project: “Fortenova Group’s focus on introduction of state-of-the-art technologies to their operations in order to improve value provided to their customers was crucial for me to join this dynamic and intellectually motivating environment. With experience in roles in the center of some leading high-tech and innovation-focused projects, I recognize the enormous value in working with such an influential player in building a showcase for the whole CEE and SEE region.”

This project is just the beginning of the cooperation between Fortenova Group and University of Cambridge,that will continue in the future through the transmission of knowledge, experience and best business practices as well as through the internship and employment opportunities for the MBA students. In addition, this builds on Fortenova Group’s dedication to partnerships with all other educational institutions in Croatia and worldwide.

About University of Cambridge

Founded in 1209, the mission of the University of Cambridge is to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. To date, more than 100 affiliates of the University have won the Nobel Prize.

The University comprises 31 autonomous Colleges, which admit undergraduates and provide small-group tuition, and 150 Departments, Faculties and institutions. It is a global university: its 19,000 student body includes 3,700 international students from 120 countries. Cambridge researchers collaborate with colleagues worldwide, and the University has established larger-scale partnerships in Asia, Africa and America.

The University sits at the heart of one of the world’s largest technology clusters, one which has created 1,500 hi-tech companies, 14 of them valued at over US$1 billion and two at over US$10 billion. Cambridge promotes the interface between academia and business, and has a global reputation for innovation. For more detailed information, including a history of Cambridge University and how the University works, visit our About the University page.

Initial meeting of holders of depositary receipts of Fortenova Group was held Business

19.06.2019.

Business

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