Mercator group’s net loss at EUR 69m in first nine months

Ljubljana – The retail group Mercator saw its sales revenue rise by 2.1% to EUR 1.6 billion in the first nine months compared to the same period last year, but the group operated with a net loss, which climbed to EUR 69m, shows a report released on Thursday.

It says that revaluation of the group’s real estate on the one hand resulted in an increase of equity, while on the other it had a negative effect on operating profit.

Group revenue in the core activity of retail increased by 3.9% to reach EUR 1.3 billion, while earnings before interest, taxes, depreciation and amortisation (EBITDA) remained flat at EUR 126.3 million.

The ratio between net financial debt and EBITDA, which was at 6 in the first nine months of 2019, has improved to 5.3.

While posting a net profit of EUR 6.2 million in the same period last year, Mercator recorded a net loss of EUR 69 million in the January-September period this year as a result of the revaluation of the group’s real estate carried out at the end of June.

In the January-September period, the revaluation of Mercator group’s real estate on the one hand caused an increase of equity due to a property value increase of EUR 23.3 million, while on the other it had a negative effect on operating profit.

The net effect of revaluation was a real estate value decrease of EUR 45.7 million, which accounts for 4.6% of total value of land, buildings, and investment property. After the revaluation, their total value amounted to EUR 1 billion on June 30.

CEO Tomislav Čizmić said that “with responsible and timely preparation for the corona crisis … Mercator Group succeeded in ensuring revenue growth and thus consolidate the foundations for further development”.

Slovenia remains Mercator’s largest market, where the core company Poslovni Sistem Mercator recorded a growth in sales revenue of 2.9% and a 5.2% increase in retail revenue. Net profit was down by over 30% to EUR 10.85 million.

The biggest rise in revenue was recorded in Bosnia and Herzegovina, and Serbia (+3.7% each), while Montenegro and Croatia saw a 14% and 4.8% drop, respectively, due to a drop in tourist activity. In Croatia, Mercator is active only in real estate, which however was also affected by the Covid-19 epidemic.

Despite the crisis, the Mercator group continues with the construction of a new logistics and distribution centre in Ljubljana, the report adds.

In the first nine months, the group invested EUR 22.9 million in fixed assets and divested EUR 5.6 million in real estate, devices and equipment.

The group obtained 16 new retail units in all its markets or more than 7,000 square metres of gross new surfaces, along with a 4,000-square-metre logistics centre and warehouse in Novi Banovci, Serbia.

At the end of September, the group employed 20,381 people or 2.8% more than in the same period last year, which means Mercator remains the largest employer in Slovenia and one of the largest in the region.

In September, the European Commission approved the transfer of the Slovenian retailer from insolvent Croatian Agrokor to its successor Fortenova. Now, only the Serbian anti-trust watchdog’s approval is still pending.

Meractor expects the transfer to be carried out by the end of the year.