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EU debt crisis

|EU debt crisis influenced our performance through tightened conditions on financial market, weakend purchasing power of our end customes, and unpredictable movements in exchange rates of local currencies.

Since the announcement of the previous strategy in the beginning of 2010, market conditions have changed greatly in the industry of home appliances and have become strained due to an unstable economic environment. The previous strategic plan did not include key internal changes that have a significant impact on further development of the Gorenje Group, i.e. the acquisition of the Scandinavian Asko Group and the commencement of disinvestment activities. In terms of disinvestment activities, Gorenje's share in the energy enterprise Istrabenz Gorenje was also disposed of in the current year.

In designing our new strategy, we considered consumer megatrends such as demographic changes, growing environmental awareness of consumers, emphasis on healthy living, technological trends (smart devices), and shifts on the scale of expanding economies for the home appliance industry.

Just like other major competitors in the industry, the Gorenje Group faced extremely challenging business conditions in the current year due to the European debt crisis, the negative effects of the currency fluctuation in Serbia, Czech Republic, Poland, Russia and Scandinavia, the increased prices of raw materials and materials that could not be transferred in full to selling prices, a high unemployment rate, consumer restraint in spending, and payment indiscipline.

The above mentioned business conditions adversely affected the profitability of sales (change in geographic structure and product structure of sales). Weakened profitability is also due to the transitional negative effects of the restructuring of the Asko Group and the Home Interior Division.

Possible scenarios of the upcoming EU debt crisis movements are seen in association with a closer fiscal union, a gradual reduction in country debt, a recapitalisation of banks, debt write-offs that follow the Greece example, and maybe even a member country's withdrawal from the euro zone.

The impact of the EU debt crisis on the Gorenje Group's operations in the upcoming years is expected to occur in the changed conditions of refinancing loans and reducing indebtedness, in an impaired ability of end buyers and shop chains to finance purchases, and in the value of the euro in relation to national currencies, in particular in the area of South-East Europe.

Macroeconomic data by key markets of Gorenje
 EU 27EMUNetherlandsGermanyDenmarkSloveniaCroatiaSerbiaCzech RepublicRussia*
GDP growth rate 1,5% 1,4% 1,2% 3,0% 1,0% -0,2% 0,6% 1,9% 1,8% 4,3%
Unemployment rate 10,0% 10,6% 4,9% 5,7% 7,8% 8,7% 13,1% 23,7% 6,7% 7,3%
Inflation rate 3,1% 2,7% 2,5% 2,5% 2,7% 2,1% 2,2% 7,0% 2,1% 8,9%
Change in exchange rate of national currency - - - - 0,3% - -2,0% -3,6% -2,8% -2,3%
Sources: Eurostat, Banka Slovenije, lokalni statistični urad
Note: * Estimate of the International Monetary Fund