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Business news in Slovenia

Retailer Mercator in the red in 2022

Ljubljana, 20 November (STA) - Slovenia's largest retailer Mercator reported on Monday a EUR 1.81 million loss for 2022 despite a 2.6% increase in revenue to EUR 1.26 billion. The company attributed the loss to rising costs and a limited translation of higher purchase prices and costs into retail prices.

Mercator, whose estimated 25% retail market share in Slovenia is set to rise to about 35% pending regulatory approval of the takeover of Tuš by the Croatian Fortenova group, saw its revenue from core retail activities increase by 1.3% to EUR 987 million last year. Adjusted EBITDA fell by 18.5% year-on-year to EUR 66.07 million.

The management said it had reduced net financial debt by 24% compared to 2021 to EUR 425.58 million. Both productivity and added value per employee in the retail business increased. "These indicators reflect our efforts to achieve our business goals despite the challenging conditions for the global economy," the report says.

The company plans to generate EUR 1.3 billion in revenue this year, up 8.5% on 2022. "The year 2023 will be important in determining the growth of labour costs and other costs, mainly due to the increase in the minimum wage and the increase in energy costs, so the company has planned a series of activities to control the growth of costs."

In Mercator's wholesale segment, revenue increased by 14.5% and EBITDA was 12.9% higher than the previous year. In the construction and home products programme, revenue increased by 1.6%. The system also includes catering and real estate, and the company owns buildings worth approximately EUR 402.57 million.

Mercator system sold 19 units of real estate last year. It signed contracts for three development projects that are still in the development stage. At the same time, it sold non-essential business assets at 18 locations and signed contracts for two development locations that are under construction.

The coverage of long-term assets with long-term sources in the Mercator business system amounted to 46.6% at the end of last year, which is 6 percentage points higher than at the end of 2021. The ratio of net financial debt to adjusted EBITDA was 6.4 at the end of 2022 and deteriorated by 6.8% compared to 2021, according to the report.

Mercator published its business report for last year two and a half months after the statutory deadline. Media reported that this was due to the coordination of the report with the auditor PwC regarding the value of real estate and risks in the Fortenova group.

Fortenova, the successor of the defunct Croatian Agrokor group that bought Mercator from the Slovenian state in 2014, has been the sole owner of the Mercator business system since April 2022.

Mercator said it had revalued its assets and that an independent valuer had completed a report on the valuation of tangible fixed assets, usage rights and investment properties, which confirmed significant differences in the book values that the company stated in its separate financial statements for 2020 and 2021.

Auditor PwC, however, warned that it had been unable to obtain sufficient and appropriate audit evidence for individual valuations of tangible fixed assets, assets held for sale, and usage rights to verify their adequacy.

Mercator is a guarantor for loans issued by its owner Fortenova, which still has sanctioned (Russian) participants in its ownership structure. Resolving this issue would allow the group, among other things, to support long-term refinancing after November 2024, Mercator wrote, and the auditor PwC warned this indicated a material uncertainty that may raise significant doubt in the company's ability to continue as a viable company.

Mercator had approximately 8,400 employees and nearly 670 stores at the end of 2022. Of these, 464 were shops, 13 were wholesale units, six were restaurants, 41 hardware stores, and 145 were franchise stores. It had more than 750,000 active loyalty cardholders, it said, adding it had purchased 300,000 tons of Slovenian products, offered over 20,000 Slovenian products, and collaborated with more than 5,000 farms.

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