Today 69.57 per cent of shares of Poslovni sistem Mercator have been transferred from Agrokor d.d. to Fortenova Group, whereby Mercator has become an integral part of the Retail Division of Fortenova Group, which now owns 88.1 per cent of Mercator shares. The transfer of Mercator shares was simultaneous with the refinancing by Fortenova Group of the debt that Mercator had with 55 banks, in the total amount of EUR 385 million. In cooperation with its creditors, HPS Partners and VTB, Fortenova Group has secured the required funds to entirely replace Mercator’s aforementioned debt and thus ensured seamless transfer of ownership of Mercator from a bankrupt to a stable company with a consolidated ownership and creditor structure. As of today, Fortenova Group’s retail network consists of around two and a half thousand Mercator and Konzum points of sale with a total of 39 thousand employees working on five markets in the region, with a population of almost 20 million people.
Agrokor had acquired Mercator shares in 2014, but until today Mercator was not operationally integrated into the business of its owner. “As of today Fortenova Group is proud owner of Mercator, decided in the intention to be the best owner that Mercator has ever had. This is a new beginning that opens up a number of new possibilities for all of us. Fortenova Group’s new, optimized capital structure provides for stability and the ability for strong investments in our companies going forward to drive their future growth. With Mercator within Fortenova Group we are consolidating the region’s largest retail network, increasing the stability of the supply chain, jobs and tax revenues of the countries in which we operate as well as opening new opportunities and continuing to support the growth of local suppliers” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors. Peruško pointed out that following the integration of Mercator and the divestment of the Frozen Food Business, with over 50 thousand employees Fortenova Group will be the region’s largest employer, generating approximately EUR 5 billion in revenue, operating profits of more than EUR 270 million and planning for this year, in spite of the continued pandemic, to realize more than EUR 125 million of capital expenditures.
“Today’s closing of the additional financing to enable the Mercator transfer is fully in line with our strategic financial plans. We have made great progress over the last few weeks in delivering on our plans not only with this refinance arrangement but also with the Frozen divestment, other non-core sales and with a very strong Q1 business performance. At the heart of this has been a multinational, multi-location team that has been completing a really large amount of work and they deserve huge credit for all that has been achieved” – commented James Pearson, Fortenova Group’s Chief Financial Officer.
Siegfried Ganshorn, Fortenova Group’s Executive Director of Retail, called the transfer of Mercator to Fortenova Group “one of the most important days in the history of Mercator, Konzum and Fortenova Group”. “To be where we are today would not have been possible without our people, the professional management, the support and help of our suppliers and all other partners and stakeholders that we trust. Our joint efforts will enable us to utilize our full potential to the benefit of our customers” – Ganshorn said. As the crucial parts of Fortenova Group’s retail development strategy he singled out the operational excellence, the clear differentiation against competitors, the continuous improvement of the business’s position and increase in market share, the flexibility of microlocations and the true multichannel experience. “The foundation and the key factor that will enable us to realize that is the developed digital transformation strategy, due to which our significant investments will be into digital development and e-commerce, intended to drive growth in all countries” – Ganshorn concluded.
“Mercator today is not only a retailer, but much more. It is a platform connecting employees, customers and suppliers, that has successfully developed numerous new sales concepts. The employees’ knowledge, efforts, experience, abilities and sense of belonging are the creators of Mercator’s success. Being a company that cooperates with over three thousand suppliers and realizes purchases worth EUR 1.2 billion a year from local and regional partners, this merger provides a great business opportunity for the long-term development of their brands” – said Tomislav Čizmić, President of the Management Board of Mercator. In his words, along with the continued accelerated digitalization and the development of digital multichannel platforms, Mercator’s priorities in consolidating Fortenova Group’s retail are the strengthening of the store network and the development of a modern logistics infrastructure.
“Over the last two years since the Settlement Plan implementation and the successful financial restructuring of the overleveraged Agrokor, Fortenova Group was able to achieve a high operational performance, as reflected in increased operating profits by around EUR 100 million in the period from 2017 to 2019, as well as in a cash flow improvement of almost EUR 100 million during 2020, in spite of the negative effects of the COVID-19 pandemic on the operations. Fortenova Group has also strengthened its capital structure and improved its financial position, with the leverage ratio reduced from seven to around four times, as expected to be achieved by the end of this year. Hence, after a long period of uncertainty, today Fortenova Group is a financially stable company that is beyond any doubt capable of growth and that will, with its development strategy and by realizing its priorities, also preserve existing and open new jobs. I therefore wish all our colleagues from Mercator a warm welcome to the large community of Fortenova Group’s hard working and talented employees. I also look forward to continuing the cooperation with our key partners, small and large, local and global suppliers and to our common further growth” – concluded Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors.
The company Mercator-CG and the retail chain Franca signed a sale-purchase agreement today, whereby Mercator-CG acquired the Franca retail facilities in almost all municipalities in Montenegro.
This is Fortenova Group’s first acquisition in the region, whereby the company has accomplished one of its strategic goals – to secure the strengthening of its store network on the SEE markets and its availability to the customers not only through organic growth, but also through acquisitions of local retailers.
The transaction was previously approved by the Competition Protection Agency and with its realisation Mercator-CG, which operates under the brand IDEA, has improved its offer to consumers and availability, ensuring a footprint covering the entire country.
Namely, the retail chain owned by the Franca family has 67 stores, with most of them – 13 to be precise – located in Podgorica, eight in Budva and seven in Bijelo Polje. With the acquisition of the new stores the retail network of the IDEA brand grows to almost 200 stores and with the takeover of 900 Franca retail employees the significance of the company Mercator-CG as one of the country’s largest employers shall grow as well, because following this acquisition the IDEA brand will employ more than 2 500 people. As employer, Mercator-CG has also assumed all contractual obligations towards its new employees.
On behalf of Mercator-CG the Sale-Purchase Agreement was signed by Ivan Karadžić, Executive Director of Mercator-CG, Ivan Antonijević and Boško Vuković, both Deputy Executive Directors of Mercator-CG and on behalf of Franca by the co-owners of shares and members of the Franca family: Hilmija Franca, Hatema Franca, Halida Franca, Sead Franca, Safet Franca and Halid Franca.
The agreement signing ceremony that finalised the transaction was also attended by Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, who stated on that occasion:
„Fortenova Group has strongly supported this acquisition pursued by the company Mercator-CG because it bears witness to the fact that we are implementing our strategy of strengthening the regional presence in retail. We have a clear vision of what we want to achieve in this business in all the five countries of our operations, we want to provide high-quality offerings and service, affordable prices as well as a strong footprint and a wide choice for our consumers. We can already clearly see the effects of synergies in retail that have started with the integration of Mercator in 2021 – from improved implementation and management to excellent collaboration with local suppliers, which has due to the shorter supply chains proved to be our key competitive advantage in the two recent crises. Given that the Franca family is a producer of high-quality fresh and processed meat, I am certain that the good partnership collaboration will continue in this case, too” – Peruško said.
Viewed from the angle of Hilmija Franca, Franca company’s Executive Director, with this acquisition Franca will consolidate its leadership position on the Montenegrin fresh and processed meat market. Franca will continue to be present on the market under that name, as one of the largest and most recognisable local brands. “The most important thing for us is that all 900 employees will stay employed with the new company” – says he and continues:
“To become part of a regional network and join forces with one of Montenegro’s largest chains means a great deal to us. We are exceptionally proud that our products will be present in all IDEA stores and thus even closer to numerous consumers. At the same time, I am sure that this partnership will also open the gates to other markets for us as leaders in our country’s meat industry. The focus of the company Franca will be on development projects in the primary processing industry and on strengthening exports to countries of the EU and the region. Like before, agricultural producers will remain Franca’s priority through repurchases. I believe that this important business step will be the beginning of new, great successes for all of us” – Franca said.
Ivan Karadžić, Executive Director of the company Mercator-CG noted on the occasion of closing the transaction that there was no doubt that this acquisition would be yet another stride in meeting business goals.
„This is an important point in our operations. The merger of the Franca store chain is an important step in our strategic development as it positions us as leader on the Montenegrin market and with around 200 stores the only chain present in all municipalities of Montenegro. With this acquisition our company shall also become the country’s largest employer with over 2 500 employees and I would like to use this opportunity to wish the more than 900 employees of Franca Markets a sincere welcome to our team. I am happy that they will become part of our company and that we will continue to meet the goals set as one team. With this acquisition and the focus on fresh, local, private label, the Super Card and digital transformation we are changing the retail market in Montenegro, improving our customer service and implementing state-of-the-art trends by using the power of the Group we belong to” – said Karadžić.
Zoran Mitreski, Executive Director of Fortenova Group for Retail and President of the Management Board of Konzum also highlighted the importance of the realised acquisition, particularly in the light of expanding the store network.
„We have strong investment dynamics within the system. Last year we opened more than 150 points of sale across the region, whereof 60 new and 90 refurbished ones. The formal takeover and integration of Franca will follow in autumn, as well as further investments and the continued exploration of further merger and acquisition opportunities in retail”, Mitreski announced.
On a different note, the Franca retail chain was established as part of the company founded by the Franca family in 1990, having started from the former meat industry “Meso-promet”. Over the last 30+ years they have developed one of the most significant production and retail companies on the territory of Montenegro, with a total of 1 500 employees. Franca has based its recognition on the market largely on local fresh and processed meat from their own farms, with their products present not only on the Montenegrin market, but also in the region and in some EU countries.
The realised acquisition will also mean the combining of expertise, technologies, brands and other resources of both companies and provide for a stronger market position, meeting different customer needs as well as assortment extension, primarily by offering premium local products.
As many as 13 Fortenova Group companies received the Certiﬁcate Employer Partner (CEP) for the year 2022, which is awarded for excellence in human resources management.
Out of the total number, five companies – Konzum, Pik Vrbovec, Jamnica, mStart and Fortenova grupa d.d. – successfully completed the recertification process, while eight companies participated in the certification process for the first time – Mercator-Serbia, Mg Mivela, Roto dinamic, Zvijezda, Dijamant, Belje, Pik Vinkovci and Vupik.
The Certificate Employer Partner is an unbiased acknowledgement by experts from the European HR community verifying the highest quality of management in seven key areas of human resources. Thereby the practices in Croatia are compared to global trends, thus improving the standards in human resources management and promoting examples of excellence in HR. The certification process assesses and awards points to topics such as selection, competence development, leadership, work performance, involvement and satisfaction, career and succession, rewarding etc. at all organisational levels.
“When so many different companies from one Group receive an external professional acknowledgement that the standards they apply in their operations are at the highest level, regardless of their respective area of operations, this is a legitimate reason to be proud and a proof that our internal bonds are getting ever stronger. However, due to the situation on the labour market that employers on all markets have been faced with since several years, this certification has a particular weight as it brings a great positive reverberation and recognition. Having satisfied and motivated employees and encouraging work environments, as well as creating and maintaining those partnership relations is what constitutes one of the key competitive advantages for employers today. This also means having a positive impact on a number of processes in our regional environment, which is the fundamental prerequisite for long-term sustainability” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors on the occasion of the Certificate Employer Partner presentation ceremony.
“This is a truly valuable acknowledgement for all our initiatives taken so far in the area of human resources development at Fortenova Group companies and to all teams working on it with great commitment. Besides showing that the companies’ operations are on the right track and that the employees’ impact on the organisations’ growth is continuously being strengthened, those acknowledgements are also a significant motivation for us to continue being a good practice example for other companies in the region by placing employees in the focus of our operations” – said Gordana Fabris, Director of Human Resources at Fortenova Group.
“It has been a pleasure to follow Fortenova Group over the last three years since the first company from the Group got involved in the quality assessment of human resources management according to the regionally recognised Employer Partner methodology. We are particularly pleased to see that the number of companies from Fortenova Group that hold the Certificate Employer Partner has significantly grown. The thirteen Certificate holders have a headcount of more than 26 500 employees and thereby not only have an impact on the Croatian and the region’s economies, but also affect the quality of many work environments. We know from our consulting experience how challenging it is for companies of that size and diversification to introduce new HR processes and implement changes. Fortenova Group companies particularly stand out in terms of the quality of their recruitment processes, onboarding for new employees and employee development through internal academies with impressive tradition. We look forward to future successes of Fortenova Group companies which will certainly not fail to happen given the great investments in people, which are their main value” – said Lara Šubić Šuše, Employer Partner Project Manager.
The Fortenova Group is launching an international process for examining interest by potential investors for purchase of Fortenova Group MidCo B.V., a Dutch holding company that fully owns Fortenova grupa d.d. International investment bank Lazard has been hired to support this process. The collection of expressions of interest has just begun and the end of the process is not expected before the end of September 2023.
In the material distributed to the potential investors the Fortenova Group lists its unaudited, forecasted financial indicators for the year 2022 that show the stability of the operational business of the company, as follows:
Net revenues: Over EUR 5.2 billion
EBITDA IFRS-16: Over EUR 470 million
Adjusted EBITDA: Over EUR 300 million
Net debt: EUR 1.1 billion
Net debt / adjusted EBITDA ratio: 3.5x
Liquidity: Over EUR 280 million
The same material reminds potential investors that the market position of the Fortenova Group in the five countries of the region where the Group operates remains without comparison. The Fortenova Group is the largest retail chain and food producer in the sectors of beverages, oil production, meat production and processing and agricultural production, and tens of millions of customers know the company through a portfolio of more than 100 strong brands. The Fortenova Group is also by far the largest regional private employer, with over 45 thousand employees and around 30 thousand partners and suppliers, the vast majority of whom are local producers of the region’s market.
Sanctioned equity holders (Sberbank and VTBE) hold 49.9 percent of the equity in the Fortenova Group, and although the Fortenova Group itself is not subject to sanctions, the sanctioned co-ownership significantly complicates business operations and negatively affects the value of the company for all stakeholders. Primarily, it makes it impossible to reach a sustainable and efficient capital structure. Furthermore, following Sberbank’s failed attempts to dispose of its own equity in the Group, certain applicable licensing grounds to obtain a sanctions licence to implement the exit of the sanctioned DR holders have expired. Therefore, there are currently no viable options available to dispose of the equity held by SBK Art or Sberbank.
The refinancing of EUR 1.05 billion notes issued by Fortenova Grupa d.d. will be solved in the short term, most likely through the extension of the current notes for a period not longer than the end of 2024, with conditions similar to the current ones, but also with a significant additional one-time cost. Fortenova Grupa d.d. has received a non-binding offer for such an arrangement, which will likely be accepted in order to bridge the time period that is needed to resolve the issue with sanctioned and other non-eligible equity holders, such resolution to be in accordance with applicable sanction rules. If Fortenova Group’s equity structure remains unchanged at that time, it is likely that any subsequent refinancing under such terms will only diminish the company’s value for all stakeholders, including the equity holders and especially the non-sanctioned equity holders.
In the case of the potential sale of Fortenova Group MidCo B.V., the intention is to pay the Contingent Payment Rights – CPRs of Fortenova Group TopCo B.V. before any other payment from the collected funds, which in the amount of about EUR 78 million refer to the so-called “granični dug / border debt”, i.e. suppliers’ claims which were agreed in the settlement of Agrokor’s creditors in 2018/19 and were reinstated at Fortenova Group TopCo B.V. level.
Through this process the Fortenova Group intends to maximise value for all stakeholders including all equity holders, whether sanctioned or not. The equity holders of the Fortenova Group have been informed of the process and have been called to propose potential alternative solutions, should they have such suggestions.
At the end of the proposed process the Fortenova Group would no longer have sanctioned participants in its capital structure, that were mostly inherited from the settlement process of Agrokor’s creditors. This would solve the key obstacle in securing a favourable, long-term, sustainable new capital structure of the Fortenova Group and it would allow renewed international investment potential for the whole group.
By decision of Fortenova Group’s Board of Directors Tomislav Kramarić, Member of the Management Board of Mercator, has assumed the position of President of the Board of Mercator d.o.o. Ljubljana effective today, replacing in that position Tomislav Čizmić, who leaves the company by mutual agreement.
Having managed Mercator’s retail operations since December last year as Member of the Management Board, Tomislav Kramarić has now assumed responsibility for the entire company and its full transformation towards a cost-effective and profitable part of Fortenova Group’s regional retail business. This is particularly important with regard to the market circumstances and dynamic changes and challenges faced by retail companies on all markets due to inflation and other instabilities. Given the results that he achieved in running Konzum’s retail operations, particularly during the operational consolidation period over the course of the Extraordinary Administration as well as through the challenges of the pandemic and global crisis, the Board of Directors considers Kramarić to be the best choice when it comes to managing the entire transformation process at Mercator.
“It has been a full two years since the transfer of Mercator to Fortenova Group’s ownership. In the meantime we have realized a number of activities focused on consolidation and taking over the 100 percent ownership, as well as the additional stabilization of the company’s operations. Tomislav Čizmić headed Mercator in the most sensitive period for the company and made a great contribution to stabilizing its operations as well as running and closing the process of Mercator’s transitioning to Fortenova Group and we sincerely thank him for that. We are currently in the process of integrating all parts of our retail business into a compact network and given the dynamics in the environment, we continuously keep looking for models to improve our regional operations in order for them to be to the benefit of all stakeholders, on all markets. Part of this are also changes related to key responsibilities within the system. Hence this change is also part of those activities that will, we are sure, lead to strengthening our market positions and to competitiveness in the long term for Mercator, and consequently for the entire retail business, too” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, on the occasion of introducing the change at the helm of Mercator.
Until joining the Management Board of Mercator in December 2022, Tomislav Kramarić built his career at Konzum over the course of fourteen years, having held a number of managerial positions. Among other things, he spent five years as Director of Retail, to assume responsibility for the retail business as Member of the Management Board of Konzum in 2020. He graduated from the Zagreb Faculty of Economics and completed MBA studies at the IEDC Bled School of Management.
Agrolaguna’s new Istrian cheese, olive oil and wine tasting room and store was opened today in Poreč at the address Mate Vlašića 34. With the new creative concept called Taste&Shop Festigia Agrolaguna intends to enhance the offer of Istria’s oenology and gastronomy tourism. Attending the opening were Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, Sotiris Yannopoulos, CEO of the Food Division at Fortenova Group, Nerina Zec, Chairwoman of the Management Board of Agrolaguna, Loris Peršurić, Mayor of the City of Poreč and Boris Miletić, Prefect of the County of Istria.
The newly opened store will offer its customers and visitors a wide range of premium Festigia and Vina Laguna wines, Ol Istria olive oils and Špin Istrian cheeses. The tasting room will be the venue for themed nights and educations about wine, oil and cheese and during the tasting events guests and customers will be introduced to the entire process and experience of creating Agrolaguna’s premium products. The intention is for this store and tasting room to also become the favourite gathering spot for all gourmets who appreciate indigenous Istrian products.
“The comprehensive renovation of this facility is an important part of Agrolaguna’s transformation into a modern wine, edible oil and cheese producer, a change supported by Fortenova Group both organisationally and investment-wise. The quality of our products has been acknowledged by numerous international awards, and having in mind the region’s tourism potential, with this new concept we have also made a step forward in terms of presentation because tourism is an equally important lever for the development of Agrolaguna as it is for the development of Istria. Our wish is for the tasting room, as well as for some other parts of the company like the vineyards or cellars, to become an indispensable point of the region’s tourist offer. The company has thus affirmed its responsibility towards its surrounding, contributing to the improvement of modern destination tourism, while also developing a partnership with the local community” – said Fabris Peruško, Member of the Board of Directors and Chief Executive Officer of Fortenova Group on the occasion of the new store and tasting room opening.
Nerina Zec, Chairwoman of the Board of Agrolaguna, pointed out: “This concept constitutes a great opportunity to show both our long-standing and our new customers how much knowledge, experience and expertise we have invested in the production of high-quality local Istrian products. Our new Festigia tasting room and store offers a unique shopping and tasting experience, making it possible for all customers and visitors to get even closer to the Istrian culture.”
“There are many associations tied to Istria, one of them certainly being the comprehensive oenology and gastronomy offering, which is also the second most important motive for guests to visit our part of the world. As region we are too small to compete with mass production and therefore we have opted for excellence in everything we do. The County of Istria is proud of all achievements of our farmers and entrepreneurs, who have with their work and enthusiasm contributed to the promotion of the Istrian brand, Agrolaguna being one of them. Congratulations on the opening of the new tasting room” – said Boris Miletić, Prefect of the County of Istria, while Loris Peršurić, Mayor of the City of Poreč, pointed out that any city would be proud to call such a large producer of outstanding quality its own. “I believe that this boutique store will soon become a favourite spot for everyone who wants to take the taste of Poreč and Istria home with them. I would like to congratulate the entire collective that creates this products and wish them a lot of success going forward” – he said.
Fortenova Group, Konzum, Zvijezda and PIK Vrbovec are among 33 signatories that have today signed the voluntary agreement on preventing and reducing food waste “Together Against Food Waste” with the Ministry of Agriculture.
The Agreement is intended to drive the food sector’s social responsibility, as well as collaboration, exchange of experience and defining of common goals and activities of the stakeholders involved, with the ultimate goal of preventing and reducing the generation of food waste in Croatia by 30 percent by the year 2028.
The Agreement is part of the Food Waste Prevention and Reduction Plan in the Republic of Croatia for the period between 2023 and 2028, as well as the reform measure “Food Donation System Improvement” from the National Recovery and Resilience Plan and is signed for a period of five years. Pursuant thereto, a working group will be established that will prepare a Common Annual Report, where the involved signatories are obligated to submit progress reports.
On behalf of Fortenova Group and its companies the Agreement was signed by Marina Burazer, Director of Marketing at Fortenova grupa d.d., Uroš Kalinić, Member of the Management Board of Konzum, Tomislav Alagušić, President of the Management Board of Zvijezda and Slaven Ružić, President of the Management Board of PIK Vrbovec.
“Fortenova Group, with its companies engaging in agriculture, production and retail of food, is aware of the importance of preventing and reducing the generation of food waste. We have signed the Agreement in order to contribute to the reduction of food waste as well as to influence the raising of public awareness of this topic by way of concrete and measurable contributions. Each one of us, both personally and at company level, can contribute to a solution and I am pleased to say that our companies have since many years been systematically working in that direction – from efficient stock management, raising public awareness and promotional activities for customers to food donations. Konzum, for example, has for five consecutive years been holding the title of The Best Donor, having donated more than 1 300 tonnes of food. Such initiatives are good for the entire planet, as well as for individual states, companies and consumers – all in all, they are in the common interest of all of us and deserve to be approached with due care” – Marina Burazer stated on this occasion.
The Enterprise Chamber of the Amsterdam Court of Appeal today dismissed all claims made by SBK Art (“SBK, sanctioned entity controlled by Russian Sberbank and holder of 42.5 percent equity interest in Fortenova Group) thus confirming yesterday’s decisions approved at the DR holders’ assembly of Fortenova Group in the Netherlands.
The Dutch judiciary thus has also confirmed the positions taken in the decision of that same Amsterdam Court of Appeal in December 2022 and has prevented sanctioned parties from influencing the management and decision-making in Fortenova Group.
“This decision is a reaffirmation of Fortenova Group’s legal stances and its dedication to abiding by international sanctions while preserving the value of the company. We are pleased that the Dutch judiciary recognized and protected the majority of non-sanctioned equity holders of the Fortenova Group. The Fortenova Group will commence the implementation of the decisions of its non-sanctioned equity holders”, said Fabris Peruško, reappointed member of the Board of Directors and CEO of Fortenova Group for another 6-year term.
At the meeting of depositary receipt holders of Fortenova Group STAK Stichting, the ultimate owner of Fortenova grupa d.d., held today in Amsterdam, all proposed decisions were supported and adopted by the majority of more than 77 percent of present votes.
At two previous shareholders’ meetings where the same decisions were proposed, which were held on 18th August and 30th August 2022, the majority required to adopt the decisions was not present because the sanctioned shareholder SBK Art, under control of Sberbank of Russia, which holds 42,5 percent of voting rights, was not able to participate in the voting due to the sanctions. Pursuant to the STAK Articles of Association, the Assembly held today was the third in a row with the same agenda and the adoption of the decisions required the support of 75 percent of all present shareholders.
Thus the shareholders of Fortenova Group with voting rights adopted a number of decisions that will, to the benefit of the company and all non-sanctioned shareholders, facilitate the decision-making at future Assembly meetings, enable the further consolidation of Fortenova Group’s structure and operations and provide for the timely adoption of key business decisions. Thanks to the decisions of the Assembly it will now be possible to make new acquisitions or mergers or dispose of assets up to the maximum amount of EUR 500 million in 2023, subject to the prior decision of Fortenova Group’s Board of Directors, while they have also created the prerequisites for the refinancing of Fortenova Group’s existing debt and addressing various financial liabilities, also subject to the Board of Directors’ prior approval.
Besides the aforementioned decisions, today the shareholders with slightly more than 77 percent of votes cast by all present shareholders also voted in favour of extending the term of the members of Fortenova Group’s Board of Directors for another six years and appointed Fabris Peruško, Pavo Vujnovac, Damir Spudić, Maksim Poletaev and Vsevolod Rozanov for the next six-year period, providing with these decisions for the functioning of the BoD in the forthcoming period.
The Assembly was marked by an interest of shareholders that was higher than at previous meetings, as well as by the wide agreement of shareholders on the proposed decisions, as confirmed by the fact that out of the total 594 shareholders only 12 of them, or 2 percent of the total number of shareholders, voted against some of the decisions. The adopted decisions have thus, among other things, facilitated the company’s operations and extended the term of Fortenova Group’s BoD members which was about to expire.
“Fortenova Group’s management, with the support of its owners, remains focused on excellence in operational performance. When it comes to specific projects, priority shall certainly be given to the debt refinancing and further operational expansion, which we will now be able to realize regardless of the sanctioned shareholder without voting rights that will no longer be able to block the company’s normal operations with their inability to vote” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, upon completion of the DR Holders’ Meeting.
Sanctioned SBK Art cannot vote at Fortenova Group’s Shareholder Meetings
At its official website the Amsterdam Court of Appeal published its judgment according to which SBK Art, through which Sberbank of Russia holds 42.5 percent of votes at the Shareholders’ Meetings of Fortenova Group STAK Stichting, being a sanctioned company has no voting rights and cannot attend the meetings of Fortenova Group shareholders, i.e. Depositary Receipt holders.
This judgment is based on the construction of the way the sanctions imposed by the European Commission in November this year work, according to which the voting rights of shareholders under sanctions are explicitly considered to be an intangible economic resource and have to be frozen, i.e. their exercise must be prevented.
Today’s judgment has thus dismissed the judgment of another Dutch court from September this year, whereby SBK Art was allowed to partly exercise their voting rights in some matters. The Dutch Court of Appeal has fully applied the European Commission’s instruction from November, according to which the shareholders of sanctioned companies cannot exercise their direct or indirect voting rights under any circumstances nor for any purpose whatsoever, i.e. their voting rights have to be completely frozen.
The company SBK Art had appealed to the Dutch Court that they were not allowed to take part in Shareholders’ Meetings and exercise their voting rights. This judgment has dismissed all of SBK Art’s requests and confirmed beyond doubt that the sanctions rules prevented SBK Art from being accepted at the Shareholders’ Meetings and from voting at the Shareholders’ Meetings. SBK Art was also ordered to pay all court expenses related both to the dismissed and to today’s Dutch court judgments.
By way of reminder, with the Regulation of the EU Council No. 2022/2475 dated 16th December 2022, which constitutes part of the ninth package of sanctions against legal and natural persons related to Russia and the Russian aggression on Ukraine, the company SBK Art LLT, through which Sberbank of Russia holds 42.5 percent of ownership shares in Fortenova Group, has been included on the sanctions list. In the statement of reasons it is specified that the purported acquisition of SBK Art, and through it of the ownership share in Fortenova Group, was actually an attempt to breach the sanctions regime which is in effect in the European Union and the United Kingdom. The inclusion of SBK Art on the sanctions list has confirmed beyond doubt that everything related to that company is subject to the Council Regulation concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, and any breach of the sanctions entails criminal liability for all citizens of countries of the European Union and the United Kingdom who may have taken part therein.
With its Regulation No. 2022/2475 dated 16th December 2022, which forms part of the ninth package of sanctions against legal and natural persons related to Russia and the Russian aggression on Ukraine, the EU Council has upon proposal of the Republic of Croatia included the company SBK ART, through which Sberbank holds its 42.5 percent ownership share in Fortenova Group, on the sanctions list.
Along with its request Croatia has submitted evidence that the purported acquisition of SBK ART, and through it also of the ownership share in Fortenova Group, was actually an attempt to breach the sanctions regime in effect in the European Union and the United Kingdom. According to the evidence, behind that transaction there were Croatian citizens with widely spread businesses in Russia, who have realized a fictitious transaction for which no money whatsoever has been transferred from the United Arab Emirates.
With the acceptance of evidence that “Sberbank has retained effective control over SBK ART notwithstanding the purported transfer of its shares to a businessman from the United Arab Emirates” and with SBK ART now included on the sanctions list, everything related to that company is subject to the Council Regulation concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, and any breach of those sanctions entails criminal liability for any citizens of EU member states and the UK who may have taken part in it.
With the end of November Fortenova Group has completed the launch of a new educational cycle in all three programmes of the DRIVE Beyond Excellence project, designed to improve the knowledge and skills of its employees in the long term.
Only a fortnight after 98 students of the first generation successfully completed their education, another generation of Accelerate programme students have started their work today. It comprises 73 students from 17 operating companies and Fortenova grupa d.d. Their education focuses on acquiring a number of new competencies and knowledge in various operational areas, and the programme has been developed with Selectio Group, Croatia’s leading HR consultancy company.
Through nine modules the students will gain insight into knowledge from the areas of finance, supply chain management, sales, customer relations or comprehensive project management, with particular focus on strengthening team leadership skills, recognizing specific traits in team members and encouraging their creativity, agility and inclination to thinking outside the box.
The education is intended to strengthen the students’ managerial skills, as well as to drive the transfer of acquired knowledge, thus strengthening the overall level of employee competence and efficiency and contributing to the atmosphere of togetherness, collaboration and sharing fostered by Fortenova Group in its working environments.
“I believe that we are all proud to end the year with new beginnings in our internal education programmes, featuring an impressive number of students in both generations. In the context of everything else that we have done at the company in parallel, we can truly be content with our overall achievements. Not only have we improved our financial strength, as confirmed by our operating results from quarter to quarter, but in parallel we have also developed internal processes and a systematic support to our key resource, which has brought us to the point that today we have a respectable talent pool and teams that can cope with even the most challenging tasks”, said Fabris Peruško, Fortenova Group’s CEO on the occasion of the Accelerate programme kick-off.
“Two generations of group programmes for the development of our employees’ skills as part of the DRIVE Beyond Excellence project have involved more than 450 employees from all our companies. The first generations have successfully completed their education, and the feedback from the students in all three programmes regarding the content quality and overall concept is truly excellent. This is why we are very happy with the development of the DRIVE Beyond Excellence project and the benefits that it has brought in strengthening the Group’s overall human potential and the work environment in general” – said Gordana Fabris, Fortenova Group’s Director of Human Resources.
Fortenova Group presented its detailed results for I-IX/2022 to the DR Holders, having confirmed the continuing excellent operating trends in all of its core businesses. As opposed to the preliminary results for the first three quarters that Fortenova Group had presented last week, this presentation featured the same key performance indicators in more detail, as shown in this presentation. The factors with the greatest positive impact on the growth of all of the Group’s performance indicators were the excellent tourist season, significant operational improvements, as well as inflation.
In I-IX/2022 Fortenova Group has thus generated total consolidated revenues from continuing operations of HRK 30.3billion or EUR 4 billion, which is an increase of 38 percent in a year-on-year comparison. Net of the effects of the Mercator integration, total revenues from continuing operations were 15 percent higher compared to the same period of 2021.
At the same time the consolidated adjusted EBITDA of the period has grown 22 percent against last year’s and amounted to HRK 2.1 billion or EUR 275 million. In spite of the high cost of debt and the increased costs of energy and labour, in the first nine months of 2022 Fortenova Group generated profits from continuing operations in the amount of HRK 534 million, which is an improvement of HRK 918 million against last year’s loss of HRK 384 million.
At the end of September Fortenova Group had a cash position of almost HRK 2 billion on its accounts. In parallel, it has continued to reduce its leverage and brought the net debt to adjusted EBITDA, according to the definition of its creditors, down to 3.58 times at the end of the period, thus having halved it from 7.2 times which was the leverage ratio at the point of Fortenova Group’s incorporation.
In comparison to the non-consolidated results at the end of Q3 2021, the 18 companies from the Group’s core businesses – Retail and Wholesale, Food and Agriculture – realized 12 percent more total revenue, while the non-consolidated EBITDA of the core businesses grew by 11 percent.
Retail and Wholesale thus realized 9 percent higher revenue and 9 percent more EBITDA. When it comes to revenue, that growth was supported by numerous activities of the company related to price optimisation and network expansion, and partly also the high inflation, while the focus on store optimisation, synergies and energy saving measures resulted in higher EBITDA. The wholesale segment owes its 18 percent better result primarily to the recovery of the HoReCa channel. Among Fortenova Group’s retail companies, the best results were generated by Konzum Croatia, Mercator B&H and Mercator Serbia, which recorded revenue increases of more than 10 percent. In general, inflation also had the largest adverse effect on the results in retail, having increased the prices of products and services as well as labour costs.
The Food Division companies, on the other hand, were under strong pressure of higher logistics costs through the growth of fuel and raw material prices. Nevertheless, Fortenova Group’s Food Division overall generated as much as 24 percent more revenue, driven by both higher sales and inflation, with all of the companies having recorded double-digit revenue growth compared to the same period last year. A higher growth of EBITDA was neutralized by the aforementioned higher raw material prices, input cost inflation and salary increases and amounted to 2 percent compared to 1‑9/2021.
Revenues in the Agriculture Division grew 7 percent, primarily accounted for by pig breeding, cattle breeding and milk production, while EBITDA grew by 60 percent, mostly due to the growth of agricultural commodity prices and the strong control of operating costs.