Todorić, Economists React to Agrokor Audit Report

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Konzum is in danger, while other companies seem to be in better shape.

Agrokor’s extraordinary commissioner Ante Ramljak presented on Thursday the audit report for 2016 for the most important companies owned by Agrokor, which was prepared by PricewaterhouseCoopers (PwC). Agrokor’s owner Ivica Todorić reacted to the report on his blog. “Agrokor has presented the audited financial statements for 2016 for companies which belong to the Agrokor Group. They confirm the great value we have built in 30 years of continuous investment. The reports are being analysed by my financial experts, and I will be able to comment more in the coming days,” Todorić wrote, reports Jutarnji List on October 6, 2017.

Together with corrections for 2015, the audit showed that Agrokor’s total assets were lower by 13.4 billion kunas than previously claimed. According to the published data, the value of the adjustments in the assets of Agrokor retail division amounted to 10.5 billion kunas (of which 7.4 billion kunas relate to Konzum), 1.7 billion kunas in the agriculture division and 1.2 billion kunas in the food division. Auditors’ reports for the most significant Agrokor’s companies show that their total losses amounted to 3.2 billion kunas.

Ramljak emphasised at the press conference that the operational results of Agrokor’s companies in the first nine months of this year were a sound basis for negotiations with creditors in order to reach the final settlement with them. The government-appointed commissioner took over the management of the company in April this year, and he has 15 months to come to an agreement with the creditors.

“The data published show that Konzum is in the worst shape of all the Agrokor’s companies. It has evidently concealed the true information, and it now lacks in the capital. Consequently, the focus should now be put on the restructuring of Konzum,” said economic analysts Damir Novotny. He added that it was still needed to wait for the consolidated data at the group’s level and warned that auditors had applied rigorous international standards for auditing Agrokor’s business reports. It is not sure what would happen if such criteria were used to many other Croatian companies.

Still, some conclusions can be reached. First and foremost, it is evident that the auditor identified certain hidden costs and wrote them off. Furthermore, with the exception of Konzum, in other Agrokor companies, at least the most significant ones, the situation is not so dramatic. “These companies can survive, they have their own capital. Efforts in the forthcoming period must be focused on the restructuring of Konzum,” Novotny said, adding that PwC’s audit just confirmed the problems we knew about earlier.

“It is obvious that PwC, which is part of the ‘big four’ audit houses, has found significantly different results from the findings of the former, smaller auditor,” said analyst Ivica Krešić. He added that it should not have been allowed for the former auditor, Baker Tilly, to audit Agrokor for years, a company which was its main client in Croatia and which earned it the majority of its income. He thinks the banks which were lending money to Agrokor for years were also guilty. “They had to ask Agrokor to have its financial statements audited by one of the big four companies,” Krešić concluded.

Andrej Grubišić, the financial consultant, commented that the results were even somewhat better than expected. “This is less bad than I thought. The nature of all these write-offs is essential, and almost all of the write-offs relate to some form of inter-company relations within the Agrokor Group, and not to the third parties,” said Grubišić.

Translated from Jutarnji List.


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