Varteks d.d.
Zagrebačka 94
42000 Varaždin
Varaždin, May 18, 2010
STATEMENT BY PERSONS RESPONSIBLE FOR
THE MAKING OF THE REPORT FOR 2009
With this statement, in congruence with the Capital Market Act, we state that to our
best knowledge,
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the set of financial reports of Varteks d.d. for 2009 (hereafter: Company) that
was made according to International Financial Reporting Standards and in
accordance with the Croatian Accounting Act gives a comprehensive and
truthful account of the assets and liabilities, losses and profits, the financial
position and business activities of the Company.
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The management report contains the truthful account of the development of
the business and the position of the Company along with a description of the
most significant risks and uncertainties the Company is exposed to.
RESPONSIBLE PERSON:
Nenad Davidović
Board member responsible for finances
Contact person:
Marina Bradarić
Tel. 042 / 377-230
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Varaždin, May 18, 2010
Varteks d.d.
Zagrebačka 94
42000 Varaždin
Congruously with the stipulations of the Capital Market Act, the Management Board of
Varteks d.d. with headquarters in Varaždin submits this:
INTERIM BUSINESS REPORT
for the time period from January 1 to December 31, 2009
(unrevised)
Significant events that took place during the business year's reporting period and
the effects of these events on the abridged set of financial reports:
Varteks d.d. operated in 2009 with a loss of HRK 98.9 million, while it had realized a profit of
HRK 2.4 million in 2008.
In 2009, the company operated in crisis conditions that began back in the second half of
2008. Problems in the financing of corporate subjects and households appeared on the
market, which led to more expensive and less available capital, as well as higher interest
rates.
Customers became more careful with incuring more debt, which led to a drastic drop in the
sale of durable and semi-durable goods, including the sale of clothing, which was amongst
the first to be affected.
The burden increased additionally through the introduction of the crisis tax and a higher VAT
rate during the year. In exchange rate fluctuations of the HRK against the EUR fewer
oscillations were marked in 2009 than in 2008, and in the second half of the year, the HRK
marked growth against the EUR.
Retail marked a real drop of as much as 15.3 percent in 2009, in comparison to sales
realized in 2008 (source: Croatian Statistics Institute DZS). According to a Gfk survey from
September 2008, more than 50 percent of households save on clothing, while surveys from
October 2009 show that 52 percent of households are doing worse financially than a year
before. The crisis has forced many to change their habits when buying goods for day-to-day
use, while some have completely renounced purchasing certain products (as much as 70
percent of respondents).
With such negative conditions around it, the Company had negative results, primarily on the
grounds of a drop in revenues considering market developments and one-time restructuring
costs, and in addition to this on the grounds of a drop in the value of receivables and loans
granted to affiliated companies, a drop in the value of claims towards customers, a drop in
the value of reserves and provisions for future expenses, totalling HRK 47.3 million.
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The drop in spending had a big impact on the drop in revenues and the drop in the overall
gross margin in relation to 2008. In 2009, the Company realized total revenues of HRK 401.2
million, which is 16.7 percent less than the revenues realized in 2008. The total gross margin
amounted to 19.7 percent, which is 6.6 percentage points less in comparison to the margin
realized in 2008.
In the fist half of 2009 Varteks realized a 10.4 percent drop in revenues in comparison to the
same time period in 2008, while a 21.5 percent drop in revenues was marked in the second
half of the year. This is a time period in which the full scope of the effects of the introduction
of the crisis tax, the increase in VAT, as well as the caution and fear of consumers towards
spending were felt, which indicates that the drop in spending was partially related to a real
drop in household revenues, and that it is also a result of the psychological situation on the
market.
In retail, Varteks realized a total of HRK 144.1 million in revenues, which constitutes 36
percent of the Company’s overall revenues.
Within the framework of its restructuring and the adaptation of the retail network, Varteks
closed a total of 8 sales points in 2009, it opened 6 new ones, while the content and
assortment were changed at a large number of sales points.
A total of HRK 132.3 million was realized from exports, which constitutes 33% of the
Company’s total revenues. The biggest export was realized in countries in the European
Union, worth a total of HRK 108.8 million.
Analyzing costs it becomes evident that the biggest drop was marked in payroll costs, which
were lowered by 5.2 percent, i.e. by HRK 9 million, as a result of the restructuring process
(without severance pays the drop amounts to HRK 14 million, i.e. 9.1 percent), while the full
effect of the restructuring will become visible in 2010.
In 2009, the more difficult business conditions as well as the drop in revenues from the sale
of products and goods led to difficulties in the Company’s regular settling of obligations. With
the aim to improve liquidity and to restructure total debt and credit obligations, the
Company’s own resources were activated through the sale of part of the Company’s assets.
After the crisis year 2009, Varteks expects the crisis to weaken gradually in the second half
of the year, and thus also more positive business conditions in most export markets, and in
2011 on the domestic market as well. In case the tax burden on the economy is eased and
in case interest rates on the capital market drop, a quicker recovery can be expected.
Varteks will continue its restructuring in 2010 as well. Changes in the retail segment and
increasing efficiency through a higher turnover per m² and employee will continue, as well
as through the further closing of unprofitable parts of the system and the opening of new
sales points in accordance with new market needs.
For 2010, the consolidation of the procurement of raw materials and production materials is
planned, the procurement and delivery of products and commercial goods, and in
accordance with this, the stabilization of the supply and offer on the market.
Varteks d.d. Board Chairman
Zoran Košćec