April 26 (SeeNews) - Slovenian retailer Mercator [LJE:MELR] said on Wednesday it turned to a consolidated net loss of 72.7 million euro ($79.3 million) in 2016, from a net profit of 20.2 million euro a year earlier.
In 2016, Mercator's revenue totalled 2.5 billion euro, down by an annual 4.5%, due mainly on the execution of its strategy of focusing on its core activity which included the disposal of Modiana and Intersport, the group said in a filing with the Ljubljana bourse.
In Slovenia alone, revenue suffered a 4% drop due to the divestment of several brands, including Modiana and Intersport, and the sale of other non-core operations or non-operating assets. The effect of divestment spread beyond Slovenia, causing revenue to drop in Serbia by 6.5%, in Croatia by 9.3% and by 3.7% in Bosnia and Herzegovina.
Montenegro was Mercator's only market to grow last year, by 6.8% compared to 2015, following the launch of new neighbourhood stores.
The Group results also reflect major investments, especially into refurbishments and updates of the retail network, and capital expenditures that increased by as much as 16.9% in 2016 relative to 2015.
Additionally, events and developments relating to the owner of Mercator, ailing Croatian food and retail concern Agrokor, affected Mercator's business performance considerably. As a result of a law adopted by Croatia, and especially due to compliance with the International Accounting Standards, Mercator Group had to recognize additional impairments for its receivables from the companies within the owner's system, which had a material negative effect on its key performance indicators.
"In view of Mercator's results in 2016 and the owner's problems, it is particularly important that Mercator Group is independent in all its key business decisions. Immediately upon commencing its term of office, the new Management Board made it a key priority to reach an agreement with its creditor banks, approaching the negotiations in a highly proactive manner", the president of Mercator's management board, Tomislav Cizmic, said in the filing. "In a matter of days, we succeeded in restoring the confidence and striking an agreement, according to which Mercator's liabilities, despite the outstanding maturing liabilities of Agrokor as the owner, shall not fall due for immediate repayment".
Cizmic explained that Mercator's operations are stable and not directly connected to the owner, who at the beginning of this year found itself in deep financial troubles.
"In the future, Mercator operations will remain stable and independent", he added.
Mercator employed 20,354 at the end of 2016, down from 21,459 a year earlier.
In March, Agrokor raised its stake in Mercator from 59.47% to 69.57% under a deal with the Netherlands-based financial holding company Agrokor Investment B.V.
According to available data, Agrokor Investment B.V. was set up by Agrokor owner Ivica Todoric with the purpose of acquiring Mercator. The financial holding company acquired the remaining shares of Mercator in 2015, after Agrokor became the owner of just over 50% of the Slovenian retailer in 2014.
The purchase of Mercator is now seen as one of the triggers that set Agrokor on a course towards financial trouble, which only became apparent earlier this year when Moody's downgraded the corporate family rating (CFR) on Agrokor to B3 from B2. The company then pulled out of a syndicated loan deal it had struck with several international lenders, which sent the price of its bonds on international markets into a downward spiral.
($=0.916207 euro)