ATLANTIC GRUPA
ANNUAL REPORT
2016
BEVERAGES
COFFEE
SNACKS
PHARMA AND
PERSONAL CARE
SPORTS AND
FUNCTIONAL FOOD
SAVOURY SPREADS
GOURMET
BABY FOOD
5
SUMMARY OF KEY FINANCIAL INDICATORS
6
LETTER OF PRESIDENT OF THE MANAGEMENT BOARD TO SHAREHOLDERS
8
CORPORATE PROFILE OF ATLANTIC GRUPA
8
ABOUT THE COMPANY
9
COMPANY HISTORY
13
ORGANISATIONAL STRUCTURE
15
PERFORMANCE ON THE CROATIAN CAPITAL MARKET IN 2016
18
CORPORATE MANAGEMENT OF ATLANTIC GRUPA
18
STATEMENT OF THE GROUP VICE PRESIDENT FOR CORPORATE ACTIVITIES
20
THE STATEMENT OF APPLICATION OF THE CODE OF CORPORATE GOVERNANCE
21
ORGANISATION OF CORPORATE MANAGEMENT IN ATLANTIC GRUPA
21
GENERAL ASSEMBLY
21
SUPERVISORY BOARD OF ATLANTIC GRUPA
25
SUPERVISORY BOARD COMMITTEES
26
MANAGEMENT BOARD OF ATLANTIC GRUPA
28
REMUNERATION POLICY FOR MANAGEMENT BOARD MEMBERS
29
STRATEGIC MANAGEMENT COUNCIL
29
BUSINESS COMMITTEES
29
INTERNAL AUDIT IN 2016
31
SPONSORSHIPS AND DONATIONS (SOCIALLY RESPONSIBLE BUSINESS)
37
SUSTAINABLE DEVELOPMENT AND ENVIRONMENTAL PROTECTION IN 2016
39
INTEGRATED PROCESS MANAGEMENT SYSTEM IN 2016
43
HUMAN RESOURCES IN 2016
49
INFORMATION SYSTEMS IN 2016
50
BUSINESS OPERATIONS OF ATLANTIC GRUPA
51
STRATEGIC BUSINESS UNITS AND BUSINESS UNITS
53
STRATEGIC BUSINESS UNIT BEVERAGES
57
STRATEGIC BUSINESS UNIT COFFEE
61
STRATEGIC BUSINESS UNIT SNACKS
65
STRATEGIC BUSINESS UNIT SAVOURY SPREADS
69
STRATEGIC BUSINESS UNIT PHARMA AND PERSONAL CARE
75
STRATEGIC BUSINESS UNIT SPORTS AND FUNCTIONAL FOOD
79
BUSINESS UNIT GOURMET
83
BUSINESS UNIT BABY FOOD
86
STRATEGIC DISTRIBUTION UNITS AND DISTRIBUTION UNITS
87
STRATEGIC DISTRIBUTION UNIT CROATIA
88
STRATEGIC DISTRIBUTION UNIT SERBIA
88
DISTRIBUTION UNIT SLOVENIA
90
DISTRIBUTION UNIT MACEDONIA
90
STRATEGIC DISTRIBUTION REGION HORECA
92
STRATEGIC DISTRIBUTION REGION CIS & BALTIC
92
STRATEGIC DISTRIBUTION REGION ZONE WEST
97
QUALITY CONTROL
100 FINANCIAL OPERATIONS OF ATLANTIC GRUPA
102 SALES DYNAMICS IN 2016
108 PROFITABILITY DYNAMICS IN 2016
111 FINANCIAL INDICATORS IN 2016
113 OUTLOOK FOR 2017
114 RISKS OF ATLANTIC GRUPA
114 BUSINESS ENVIRONMENT RISK
115
INDUSTRY AND COMPETITION RISKS
117 COMPETITION RISK
118 BUSINESS RISK
118 FINANCIAL RISKS
119 ABBREVIATIONS
121 AUDITOR’S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
at l a n t i c g r u p a
annual report 2016
contents
3
SUMMARY OF KEY
F I N A N C I A L I N D I C AT O R S
(in HRK millions)
2016
2015
2016/2015
reven u es
5,1 74 .5
5, 4 51 .0
-5. 1%
s ales
5,1 0 6 .3
5, 4 05.3
-5. 5%
474.4
567.3
-1 6. 4%
9.3 %
1 0.5%
-1 1. 5%
307.8
4 04 .0
-23. 8%
e b it marg in
6.0 %
7.5%
-1 9. 3%
n et p ro fit
1 63.2
24 2.5
-32. 7%
n et p ro fit ma r g i n
3.2 %
4 .5%
-28. 8%
1 ,5 0 2 .0
1 , 678.1
-1 0. 5%
3.2
3.0
7. 0 %
c as h f low f ro m o pe r ati n g a c ti v i ti e s
267.9
4 70.7
-43. 1%
cap ital ex p en d i tur e
1 1 6.0
1 1 5.5
0. 4%
mark et cap ita l i z ati o n a s at 3 1 d e c
2,9 4 0 .9
2, 777.1
5. 9%
ev
4,4 4 5 .9
4 , 4 57.7
-0. 3%
48.8
72.7
-32. 8%
882.0
832.9
5. 9%
1 3.5
1 2.0
1 2. 5%
eb it d a
eb it d a marg in
e b it
n et d eb t
n et d eb t / eb it d a
e p s ( in h rk )
p p s as at 31 d e c ( i n h r k)
d p s ( in h rk )
at l a n t i c g r u p a
annual report 2016
summary of key financial indicator s
5
LETTER OF PRESIDENT OF THE
MANAGEMENT BOARD TO SHAREHOLDERS
EMIL TEDESCHI
president of the management
board of atlantic grupa
ATLANTIC GRUPA in 2016 continued its announced strategy of intensive internationalisation of operations, investing in
brands that were, according to their potential, defined as the
forerunners in this strategy (Bakina Tajna (Granny’s Secret),
Argeta, Donat Mg, Multipower, Cedevita) as well as investing
in the development of own distribution capacities and strengthening distribution partnerships, primarily in West and East European countries. In the domicile region of South-East Europe,
we have continued the intensive and successful development
of our own portfolio and expansion of distribution activities
through organic growth and new distribution partnerships.
Among key business developments in 2016, we should point
out the establishment of our own distribution companies in
Germany and Austria, expansion of the distribution portfolio
in the wider regional market and continuation of restructuring
the business unit Sports and Functional Food. Despite many
challenges in the business environment, particularly in Eastern
markets where we operate, we are continuously successful in
generating progress. In addition to the strong support of our
own distribution system and cooperation with renowned distribution partners in the markets where we do not have own
companies, smooth implementation of internationalisation as
the dominant strategic direction is also facilitated by highly efficient production capacity allocation.
As a responsible company, we have realised the announced
results for 36 successive quarters, on the basis of which the
capital market as well as our shareholders recognise us as a
transparent, responsible and perspective company. In addition
to constantly working on building and developing quality working conditions and distinguishable corporate culture, we have
placed additional focus on strengthening our management
team and developing capacities. At the same time, the company is continually dedicated to risk management, liquidity maintenance and debt management. Therefore, the awards that the
company received in the last year are not surprising: In 2016,
Atlantic won the award for the best corporate governance in
Croatia as well as the award for transparent relations with investors not only by the Zagreb Stock Exchange on which the company’s share is listed, but also by the neighbouring Belgrade
Stock Exchange. We were also recognised as the best employer
in Slovenia in the category of large enterprises which, together
with special awards the company received in the last three years
as an employer, signifies the quality of integration processes after the acquisition of Droga Kolinska in 2010. Finally, we should
mention that last year we have celebrated 25 years since the
company’s formation, so I will use this opportunity to thank
everyone whose contribution has left a permanent mark on the
development of Atlantic Grupa.
6
letter of president of the management board to shareholder s
at l a n t i c g r u p a
annual report 2016
C O R P O R AT E P R O F I L E
O F AT L A N T I C G R U P A
ABOUT THE COMPANY
ATLANTIC GRUPA is a vertically integrated multinational
company whose business activities incorporate R&D, production and distribution of fast moving consumer goods in
South-East Europe, the West European markets, Russia and the
Commonwealth of Independent States (CIS). Since the company’s inception in early 1990’s, Atlantic Grupa pursued a growth
strategy based on combination of organic growth and M&A activities that culminated with the company’s largest acquisition
ever – acquisition of Droga Kolinska in 2010.
Today, Atlantic Grupa is a company with: (i) HRK 5.1 billion in
sales revenues, (ii) modern production network (in Croatia, Slovenia, Germany, Serbia, Bosnia and Herzegovina and Macedonia), (iii) regional distribution infrastructure and (iv) 11 brands
with sales above HRK 120 million, high market shares and
consumer recognisability. Atlantic Grupa has a well-balanced
presence in South-East Europe accounting for 83.3% of total
sales, while 16.7% refers to the company’s presence in West
Europe, CIS countries and other countries. Since 2014, the
Group’s business operations are organised through the system
of business units that monitor the operations related to specific
product groups from the company’s production portfolio and
distribution units allocated to two main zones: Zone East and
Zone West. Such an organisation model was further adjusted
in 2015 and 2016, and today it allows the company to efficiently
manage its sales and distribution operations on all its markets.
Atlantic Grupa stands out today as one of the leading food
and beverage manufacturers in South-East Europe with prominent coffee brands Grand Kafa and Barcaffè, range of beverage brands Cockta, Donat Mg, Cedevita, Kala and Kalnička,
portfolio of sweet and salted snacks brands Smoki, Chipsos,
Najlepše Želje and Bananica, brands Argeta in the segment
of savoury spreads and Bakina Tajna (Granny’s Secret) in the
gourmet segment. Additionally, Atlantic Grupa has a wide personal care product portfolio, owns the leading Croatian producer of vitamins, minerals, supplements and OTC drugs as well
as the leading pharmacy chain in Croatia under Farmacia brand.
Furthermore, Atlantic Grupa manufactures and distributes the
leading European brand in the sports nutrition – Multipower
and has a strong foothold on the Russian and CIS markets with
its baby food portfolio under the Bebi brand. With its own distribution network in Croatia, Slovenia, Serbia, Macedonia, Austria
and Germany, the company also distributes a range of products
from external partners.
8
corpor ate profile of atlantic grupa
at l a n t i c g r u p a
annual report 2016
C O R P O R AT E P R O F I L E
O F AT L A N T I C G R U P A
COMPANY HISTORY
The beginning of Atlantic Grupa goes back to 1991 and the incorporation of the company Atlantic
Trade d.o.o. for distribution of consumer goods. In the following years, the company grew into
a strong national distributor with distribution centres in Zagreb, Split, Rijeka and Osijek and a
respectable distribution portfolio from principals such as Wrigley, Procter & Gamble, Johnson &
Johnson, etc.
By opening the representative office in Bosnia & Herzegovina in 2001, the company became a regional company, which was in later years followed by establishing own distribution companies in
Serbia, Macedonia and Slovenia. In addition to being a distribution company, with the acquisition
of Cedevita d.o.o. in 2001 Atlantic Grupa also became a production company.
Breaking out of the region followed in 2005 with the acquisition of a German producer of sports
food with the well-known Multipower brand, with which Atlantic Grupa entered the West European market and became an international company. In 2006, the company was transformed into a
joint stock company and next year, after successful implementation of the initial public offer of
shares, Atlantic Grupa quoted its shares on the official market of the Zagreb Stock Exchange. In
2008, the company started to acquire pharmacy institutions and form its own pharmacy chain.
Based on the company’s business development, by mid-2010 Atlantic Grupa grew into one of
the leading European producers of sports food, the regional leader in the production of vitamin
drinks and food supplements, a prominent regional producer of cosmetics and personal care
products, the leading consumer goods distributor in South-East Europe as well as the owner of
one of the leading private pharmacy chains joined under the name Farmacia.
A turning point in the company’s operations was its largest acquisition in the Group’s history –
acquisition of the company with a developed brand portfolio from its own production programme
and leading positions in regional markets – Droga Kolinska d.d. By finalising the acquisition in
2010, Atlantic Grupa became one of the leading regional food companies.
The company’s operations in the post-acquisition period were marked by the processes of comprehensive integration, the most noticeable of which was certainly the process related to distribution and logistics. The executed process of merging the distribution operations of the two
companies into single distribution entities in each regional market resulted in the creation of a
strong regional distribution network. In the production segment, focus was placed on integrating individual production activities and transferring outsourced production activities into own
activities for the purpose of a more cost-efficient use of the existing production capacities. The
supply segment saw the implementation of a centralised system with the introduction of a key
client concept for basic raw materials. In 2012 and 2013, IT consolidation at the Group’s level was
successfully completed by redefinition of the model of user support, redesign of a portion of the
IT service and standardisation of the technological platform. The listed integration processes,
which were successfully completed by the end of 2013, transformed Atlantic Grupa into a strong
regional producer and distributor, thus creating a strong foundation for its further business development and expansion.
In 2015, Atlantic Grupa acquired Foodland d.o.o. with a recognisable brand Bakina Tajna (Granny’s Secret) and a range of top-quality products; in the same year, a new factory of energy bars
from the product range of Sports and Functional Food in the Industrial Park Nova Gradiška
started its operations.
In 2016, distribution companies in Germany and Austria were established for the purpose of facilitating the marketing of a targeted group of Atlantic Grupa’s products in the newly established
distribution region Zone West.
at l a n t i c g r u p a
annual report 2016
corpor ate profile of atlantic grupa
9
C O R P O R AT E P R O F I L E
O F AT L A N T I C G R U P A
NATIONAL COMPANY
1991
EUROPEAN COMPANY
Incorporation of Atlantic Trade and the development
of consumer goods distribution
2005 Acquisition of a German sports food
producer Multipower
Establishing cooperation with the company Wrigley
2006 Establishing a representative office in Moscow
1992
Opening of the distribution centre Split
1994
Opening of distribution centres Osijek and Rijeka
1996
Cooperation with Procter & Gamble
1997
Investment in the Ataco distribution system in
Bosnia & Herzegovina
Transformation of Atlantic Grupa
into a joint-stock company
2007
Acquisition of Fidifarm d.o.o.
Acquisition of Multivita d.o.o.
1998
1999
Launch of Montana, the first Croatian ready-made
sandwich for broad distribution
Listing of Atlantic Grupa d.d. shares on the
official market of the Zagreb Stock Exchange
2008 Acquisition of pharmacies and forming of
the pharmacy chain Farmacia
Establishing cooperation with Johnson & Johnson
2010
Acquisition of Droga Kolinska d.d.
Acquisition of Kalničke Vode Bio Natura d.d.
2001
REGIONAL COMPANY
2013
Establishing cooperation with Unilever
Establishing a representative office
in Bosnia & Herzegovina
2015
Acquisition of Foodland d.o.o. and construction of
the factory of Atlantic Multipower Croatia in Nova
Gradiška
2016
Establishing distribution companies in Austria
and Germany
Start up of a distribution company
Atlantic Trade d.o.o. Serbia
Acquisition of Cedevita d.o.o.
Establishing cooperation with Ferrero
2002 Incorporation of Atlantic Grupa d.o.o.
2003 Acquisition of Neva d.o.o.
Start up of a distribution company
Atlantic Trade Skopje d.o.o.
2004 Start up of a distribution company
Atlantic Trade d.o.o. Ljubljana
Acquisition of the brand Melem
10
corpor ate profile of atlantic grupa
at l a n t i c g r u p a
annual report 2016
C O R P O R AT E P R O F I L E
O F AT L A N T I C G R U P A
R E P R E S E N TAT I V E
OFFICES AND
COMPANIES IN
12
COUNTRIES
at l a n t i c g r u p a
annual report 2016
OFFICE + FACTORY
—
Croatia
Bosnia & Herzegovina
Germany
Macedonia
Serbia
Slovenia
OFFICE
—
Austria
Great Britain
Italy
Montenegro
Russia
Spain
corpor ate profile of atlantic grupa
11
O R G A N I S AT I O N A L
STRUCTURE
The business organisation of Atlantic Grupa comprises two
basic segments:
• Business Operations and
• Corporate Support Functions.
Business operations of Atlantic Grupa in 2016 may be followed
through business activities of special business units related to
individual product type, and special sales units which cover all
major markets as well as strategic sales channels, namely:
• six Strategic Business Units (SBUs) – Coffee, Snacks,
Beverages, Savoury Spreads, Pharma and Personal Care, and
Sports and Functional Food;
• two Business Units (BUs) – Baby Food and Gourmet;
In line with Atlantic Grupa’s strategic focus on the internationalisation of operations, in 2016 the Group’s business operations
were, with the aim to manage particular distribution markets
and business segments as effectively as possible, organised in
two main distribution zones: Zone East and Zone West, where
the Zone East covers South-East Europe, the CIS & Baltic, and
the Zone West covers Central and South-West Europe, the Nordic countries and all overseas markets.
s b u str ategic b usiness unit, b u b usiness unit, s d u
str ategic d istr ib ution unit, d u d istr ib ution unit, s d r
str ategic d istr ib ution region, p d r p artner d istr ib u t i o n
region, d r d istr ib ution region, d a c h germany, aust r i a ,
switzerland
ATLANTIC GRUPA
BUSINESS OPERATIONS
BUSINESS UNITS
DISTRIBUTION UNITS
sbu coffee
ZONE EAST
ZONE WEST
sdu croatia
sdr dach & benelux
sdu serbia
dr mediterranean & africa
du slovenia
dr northwest europe
& australia
sbu sports and functional food
sbu beverages
sbu snacks
sbu pharma and personal care
du macedonia
sbu savoury spreads
sdr horeca
pdr central europe
and overseas
bu gourmet
sdr cis & baltic
bu baby food
pdr kosovo, bulgaria,
romania
at l a n t i c g r u p a
annual report 2016
organisational structure
13
O R G A N I S AT I O N A L
STRUCTURE
Each business unit has its own internal organisational structure which is, depending on its activity and business volume,
composed of organisational areas: business units, organisational units and departments. Along with Strategic Business Units, Business Units, Strategic Distribution Units and
Distribution Units, the Business Operations segment of the
company also includes the functions of Central Purchasing,
Central Marketing and Corporate Quality Management,
established in order to take advantage of all synergies within
the system and to ensure efficient coordination of purchasing,
marketing and quality assurance tasks as well as to establish
uniform standards on the entire Group’s level.
Corporate support functions ensure the implementation of uniform corporate standards and more transparent and efficient
business operations at the company level. Corporate support
functions are centrally organised and, depending on their respective functional area, provide support to the development
and management of the entire Atlantic Grupa.
These corporate support functions are divided into:
• Corporate Activities; and
• Finances.
The strategic corporate function Corporate Activities includes
the following departments: Human Resources, Corporate
Communications, Legal Affairs, Investments and Asset
Management, and Corporate Security.
The strategic corporate function Finance includes the following
units: Corporate Reporting and Consolidation, Corporate
Controlling, Corporate Tax, Corporate Treasury and Investor Relations.
The organisational structure includes the Department for
Business Development, Strategy and Information Technology responsible for providing support to the Company’s
Management Board in the segment of identifying strategic
initiatives, implementing the long-term development strategy
and business development activities with a focus on M&A and
strategic partnerships, and for managing Information Communication Technology functions required for maintaining and improving Atlantic Grupa’s operations, level of service and competitiveness.
In addition to the above, the organisational structure also includes the support function of Internal Audit, which operates as
an independent function that reports to the Supervisory Board
of Atlantic Grupa.
14
organisational structure
at l a n t i c g r u p a
annual report 2016
P E R F O R M A N C E O N T H E C R O AT I A N
C A P I TA L M A R K E T I N 2 0 1 6
On the Zagreb Stock Exchange in 2016 the CROBEX stock index rose 18.1%, while the CROBEX10 rose 17.1%. The Atlantic Grupa’s
share recorded a growth of 7.8%.
STOCK MARKET PERFORMANCE
The average price of an Atlantic Grupa’s share in 2016 was HRK 832.5, while the average daily turnover amounted to HRK 717.8
thousand. With the average market capitalisation of HRK 3,783.0 million, Atlantic Grupa holds fourth place among the components of the CROBEX10 stock index. Also, according to the total turnover in 2016, the Atlantic Grupa’s share holds ninth place
compared to all the shares quoted on the Zagreb Stock Exchange.
atgr-r-a
crob ex
cr o be x10
80%
- 1 1 .5 %
- 2.9 %
40%
- 1 .1 %
0%
-4 0 %
7 .8 %
30.9%
34.0%
7.2%
1 8 .1 %
-2.7%
3.1%
0.0%
1 7 .1 %
1.2%
2.4%
-0.5%
-8 0 %
2015
2016
201 4
201 3
201 2
MOVEMENTS IN THE AVERAGE PRICE AND
VOLUME OF THE ATLANTIC GRUPA’S SHARE IN 2016
av e r ag e s t o c k pr i c e
hrk
v o l ume
u ni t s
1 ,0 0 0 .0
2, 5 0 0
2, 0 0 0
9 0 0 .0
1, 5 0 0
8 0 0 .0
1, 0 0 0
7 0 0 .0
50 0
6 0 0 .0
5/
1/1
0
16
5/
2/1
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3/1
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annual report 2016
5/
5/1
16
5/
6/1
16
5/
7/1
16
5/
8/1
16
5/
9/1
16
1
5/
0/1
16
1
5/
1/1
16
1
5/
2/1
16
performance on the croatian capital market in 2016
15
P E R F O R M A N C E O N T H E C R O AT I A N
C A P I TA L M A R K E T I N 2 0 1 6
OWNERSHIP STRUCTURE AS AT 31 DECEMBER 2016
Atlantic Grupa has a stable ownership structure: 50.2% of the company is owned by Emil Tedeschi and 5.8% by Lada Tedeschi Fiorio, while 30.3% of Atlantic Grupa is owned by pension funds. At the end of 2016, the free-float was 44.0% which put the Atlantic
Grupa’s share in ninth place according to the free float market capitalisation of HRK 1.294 million.
50,2%
EMIL TEDESCHI
30,3%
10,6%
C R O AT I A N
PENSION FUNDS
OTHERS
5,8%
2,0%
1,2%
LADA TEDESCHI FIORIO
EBRD
MANAGEMENT
SHARE OF THE CROATIAN PENSION FUNDS
9,7%
8,6%
RAIFFEISEN OPF
AZ OPF
6,1%
2,9%
1,5%
1,5%
E R S T E P L AV I O P F
PBZ CO OPF
RAIFFEISEN VPF
OTHER PENSION
FUNDS
16
performance on the croatian capital market in 2016
at l a n t i c g r u p a
annual report 2016
P E R F O R M A N C E O N T H E C R O AT I A N
C A P I TA L M A R K E T I N 2 0 1 6
OVERVIEW OF TOP 10 SHAREHOLDERS OF ATLANTIC GRUPA D.D. ON 31 DEC 2016
SHAREHOLDER
NO. OF SHARES
emil tedeschi
% OWNERSHIP
1 , 673, 8 1 9
50.2%
raiffeisen obligatory pension fund, category b
322, 729
9.7%
az obligatory pension fund, category b
28 6, 372
8.6%
erste plavi obligatory pension fund, category b
202, 328
6.1%
lada tedeschi fiorio
1 93, 1 5 6
5.8%
pbz co obligatory pension fund, category b
98 , 1 4 6
2.9%
european bank for reconstruction and development - ebrd
66, 68 6
2.0%
raiffeisen voluntary pension fund
4 9, 5 4 9
1.5%
zagrebačka banka d.d./joint custodial account
for unicredit ba
34 , 225
1.0%
kapitalni fond d.d.
24 , 8 30
0.7%
According to the decision of the Company’s General Assembly held on 16 June 2016, the dividend distribution was approved in the
amount of HRK 13.5 per share, i.e. a total of HRK 45 million. The dividend was distributed in July 2016.
PERFORMANCE ON THE BOND MARKET
In June 2016, Atlantic Grupa successfully issued corporate bonds in the amount of HRK 200 million, denominated in HRK, at a
fixed annual interest rate of 3.125% with a semi-annual payment of interest and maturity as at 17 June 2021. The bonds were issued
on the domestic capital market and listed in the first quotation of the Zagreb Stock Exchange, whereby Atlantic Grupa continued
its practice of continuous improvement of own sources of financing, as well as fostering the development of the domestic capital
market.
INVESTOR RELATIONS IN 2016
In 2016, at the annual conference of the Zagreb Stock Exchange, Atlantic Grupa has for the fourth time in a row won the
first prize for best relations with investors, an award given by
Poslovni dnevnik as the investment community’s recognition
of companies who have fair and transparent relations with investors. The award has been given for seven years in a row now,
out of which Atlantic Grupa has six times been the winner of
one of the top three awards. At the conference of the Belgrade
Stock Exchange, Atlantic Grupa was awarded a silver plaque for
investor relations in a regional competition.
Moreover, in 2016 Atlantic Grupa participated in various investor conferences in Europe and the United States of America and
held numerous meetings with domestic and foreign investors.
at l a n t i c g r u p a
annual report 2016
performance on the croatian capital market in 2016
17
S TAT E M E N T O F T H E G R O U P V I C E P R E S I D E N T
F O R C O R P O R AT E A C T I V I T I E S
NEVEN VRANKOVIĆ
group vice president
for corporate activities
18
corpor ate management of atlantic grupa
ATLANTIC GRUPA is the leading regional distributor and one
of the leading producers of consumer goods in South-East Europe
and, together with its companies and brands, an equally successful
business system in both West and East Europe. Responsibility is an
integral part of the company’s business and development strategy
with an actual awareness about the need to exert its own influence
on improving the general conditions in the social environment.
Special attention is paid to building a unique and recognisable
corporate culture that respects individual diversity and fosters cooperation between the different business segments – production,
innovations, marketing and sales and corporate support functions.
Atlantic offers an ocean of growth and development opportunities
to its present and new colleagues, partners and investors. Together
we wish to create a vision and provide long term well-being, always
keeping our fundamental corporate values in mind: CREATIVITY,
symbolized by a wave, PASSION, symbolized by the sun, and
GROWTH, symbolised by a mountain. Since its foundation Atlantic Grupa based its business activities on the Code of Corporate
Governance with which, particularly after the listing on the stock
market in 2007, the standards of business transparency in line with
EU directives and relevant Croatian legislation have been significantly improved. Atlantic Grupa is also a signatory of the Code of
Ethics in Business and in 2007 we joined the UN initiative Global
Compact. By promoting the concept of sustainable development
as the future cornerstone and by taking proactive measures, we
strive to make a significant step forward in this area. The corporate EMS (Energy Management System) allows for continuous
improvement of our environmental impact and for integration of
environmental values by increasing the level of knowledge, awareness and responsibility of all employees. The successful implementation of environmental management systems has resulted in the
reduction of adverse environmental impacts, while we are striving
to improve the community where we live and work by undertaking
numerous activities. The international ISO 14001 environmental management system certificate shows that our processes are
among the best global practices, while sustainability reports prepared according to the standards of the Global Reporting Initiative
(GRI) confirm the company’s dedication to a higher degree of responsibility and transparency towards all interest groups. Finally,
but certainly not least, Atlantic Grupa, as a part of the wider community, is aware of the importance and need for making its own
impact on the improvement of general social conditions, promotion of correct values and the need to invest a part of its own profits into the community. In addition to a wide range of donor projects, our sponsorship activities are also notable, especially when
it comes to the promotion of sports and healthy lifestyle for youth
and adults. The largest sustained, structured and comprehensive
arrangement in this sense we invested in supporting projects such
as the basketball club Cedevita where, other than being the main
sponsor, through the club’s basketball academy attended by over
one thousand children and youth, we are trying to promote correct
values among the new generations. Not neglecting investments
in socially beneficial activities with a focus on culture, we are also
systematically supporting a number of organisations involved in
protecting and helping vulnerable social groups.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
THE STATEMENT OF APPLICATION OF THE CODE
OF CORPORATE GOVERNANCE
Since its foundation and listing on the ZSE, Atlantic Grupa based its business activities on the Code of Corporate Governance of
Atlantic Grupa with which the standards of business transparency are aligned with Croatian and EU legislation. With the given
Code, Atlantic Grupa defined the procedures for the functioning of the Supervisory Board, Management Board and other bodies
and structures responsible for decision-making, thus ensuring the avoidance of conflicts of interest, efficient internal control and an
effective responsibility system. The Code also prescribes the obligation of publishing data belonging to categories of price-sensitive
information, all in an effort to ensure equal treatment of shareholders and information transparency for present and future investors.
In line with consistent implementation of the Code’s principles, Atlantic Grupa develops and operates in accordance with the good
corporate governance practice and strives to contribute with its business strategy, business policy, key internal acts and business
practice to transparent and efficient business operations and quality relations with the business environment in which it operates.
The Code of Corporate Governance of Atlantic Grupa has been published on the Company’s website (www.atlanticgrupa.com).
Considering that the shares of Atlantic Grupa d.d. are quoted on the Zagreb Stock Exchange, Atlantic Grupa applies the valid Code
of Corporate Governance of the Croatian Financial Services Supervisory Agency (HANFA) and the Zagreb Stock Exchange. In accordance with relevant regulations, Atlantic Grupa in 2016 issued a Statement of Application of the Code of Corporate Governance, thereby confirming its actions and development in accordance with the good corporate governance practice in all business segments. The
Statement of Application of the Code of Corporate Governance has been published on the Company’s website (www.atlanticgrupa.
com) as well as on the official website of the Zagreb Stock Exchange (www.zse.hr) whereas exceptions are as follows:
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23
Are the shareholders allowed to participate and
to vote at the general assembly of the company
using modern communication technology?
(If not, explain)
Is the remuneration received by the members of
the Supervisory or Management Board entirely or
partly determined according to their contribution
to the company’s business performance?
(If not, explain)
NO
NO
Currently, the Company negotiates about
the engagement of the service to provide
the members of the General Assembly with
participation and voting by means of modern
communication technology.
The remuneration is set as a fixed amount,
providing the members of the Supervisory Board
with independence from the Company and those
who represent the object of their supervision.
Information on the significant shareholders is provided within the overview of the ownership structure (pages 16 and 17 of this Annual Report). The overview of main elements of the internal control and risk management system in reference to the financial reporting
of the Company is provided as follows, within the description of work of the Audit Committee and Internal Audit of the Company.
In addition to the above, Atlantic Grupa is a signatory of the Code of Ethics in Business initiated by the Croatian Chamber of Economy. The listed Code lays down guidelines for ethical behaviour of business subjects in the Croatian economy. Such definition of
ethical criteria contributes to more transparent and efficient business operations and high quality relations between economic
operators in Croatia and the business environment in which they operate. By signing the Code of Ethics, its parties are obliged to
responsible and ethical behaviour towards the other companies on the market as well as the development of high quality relations
and loyal competition.
At the business conference on Corporate Governance in Croatia held in September 2016, Atlantic Grupa won the award for the best
corporate governance in Croatia. Atlantic Grupa is developing and acting in accordance with good practice of corporate governance
and endeavours, through its business strategy, business policy and key internal acts, to contribute to transparent and efficient business and quality relationships with the business environment in which it operates, following global and European trends.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
ORGANISATION OF CORPORATE MANAGEMENT IN ATLANTIC GRUPA
Atlantic Grupa’s corporate management structure is based on a dual system consisting of the Company’s Supervisory Board and
Management Board. Together with the General Assembly, they represent the three principal bodies of the Company under the
Articles of Association and the Companies Act.
GENERAL ASSEMBLY
The General Assembly is a body in which shareholders accomplish their rights in Company matters. In order to decide on
issues prescribed by law and the Company’s Articles of Association, the regular General Assembly of Atlantic Grupa d.d. was
held on 16 June 2016. The following decisions were made at
that Assembly: issuing the note of release to the members of
the Management Board and the Supervisory Board, paying a
dividend to the Company shareholders in the amount of HRK
13.50 per share, in proportion to the number of shares held by
each shareholder, amendments of Atlantic Grupa’s Articles
of Association, appointment of a member of the Supervisory Board, and appointment of an independent Auditor of the
Company for the year 2016. All decisions from the held General
Assembly were made in line with legal regulations and are available on web pages of Atlantic Grupa (www.atlanticgrupa.com)
and the Zagreb Stock Exchange (www.zse.hr).
SUPERVISORY BOARD OF ATLANTIC GRUPA
The joint stock company Atlantic Grupa has a Supervisory Board
consisting of seven members. After the end of term for Vedrana
Jelušić Kašić, under the decision of the General Assembly dated 16 June 2016, Jean-Louis Gourbin was appointed as a new
member of the Supervisory Board, with his term beginning on
the date of adopting the said decision. In 2016, the Supervisory
Board held four sessions in accordance with the previously announced Schedule posted on web pages of the Company (www.
atlanticgrupa.com) and the Zagreb Stock Exchange (www.zse.
hr). The members of the Supervisory Board are:
ZDENKO ADROVIĆ
president
ZDENKO ADROVIĆ, one of the leading experts in Croatian financial industry, is the director and
one of the founders of the Croatian Banking Association. He was Chairman of the Management
Board of Raiffeisenbank Austria d.d in the period 1996 – 2014, which in his term of office developed into one of the leading financial institutions and received several awards from the Croatian
Chamber of Economy as the most successful bank in Croatia. Prior to his current position, he was
the Executive Vice President responsible for the treasury and liquidity at Privredna Banka Zagreb,
where he also worked as the Investment Banking Sector Manager and Deputy General Manager.
Since 2008 until today he is a member of the Executive Board of the Croatian Employers Association, while in the period 2004 – 2013 he was a member of the Management Board of the Croatian
Chamber of Economy. In addition to the above, he was a member of the Supervisory Board in
Pliva d.d. in the period 1999 – 2006. He graduated from the Faculty for foreign trade, University
of Zagreb, where he also earned his M. Sc. degree in corporate finance. He also continued his
professional specialisation at universities in USA and UK.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
LADA TEDESCHI FIORIO
vice president
LADA TEDESCHI FIORIO began her career in Atlantic in
1997 as the Deputy Director for Finance. As Vice President for
Investor Relations she had an important role in negotiations
with potential investors during different Atlantic’s acquisitions
as well as in the initial public offer process in 2007. As Atlantic
Grupa was transformed into a joint stock company, she was
appointed Vice President of the Supervisory Board and today
she is also heading the Investment Committee. Before joining
Atlantic, she acquired business experience in multinational
companies, Wrigley in Germany and Mars Masterfood in the
United Kingdom, the Netherlands, Poland and the United Arab
Emirates. She received her bachelor’s degree in economics at
Universita’ commerciale L. Bocconi in Milan, and continued
her professional specialisation at the London Business School.
SINIŠA PETROVIĆ
member
SINIŠA PETROVIĆ is a tenured professor at the Commercial
and Company Law Department of the Faculty of Law at the University of Zagreb. In 1995, he was a special envoy of the delegation of the Republic of Croatia for negotiations with the international community as well as a member of the delegation of the
Republic of Croatia at the International Peace Conference for
Bosnia & Herzegovina in Dayton. He was Vice President of the
Council for the Protection of Market Competition and the Croatian representative in the Arbitration Committee of the International Chamber of Commerce. He is the author of many expert
papers and participated in the drafting of Croatian regulations
concerning companies, market competition, real estate mediation, privatisation, sports and prevention of conflicts of interest
in performance of public functions. He was a member of the
Negotiating Team for the Accession of the Republic of Croatia
to the EU. He received his bachelor’s, master’s and doctor’s
degrees from the Faculty of Law at the University of Zagreb.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
FRANZ-JOSEF FLOSBACH
member
FRANZ-JOSEF FLOSBACH is an internationally recognized expert. He obtained a “Diplom
–Wirtschaftsingenieur” (industrial engineer) degree at the Technische Hochschule Darmstadt in
1973. He had spent most of his working life, since 1975, in the DEG-Deutsche Investitions und Entwicklungsgesellschaft mbH. DEG is a subsidiary of the German KFW – Bankengruppe, Frankfurt,
since 2001. Mr Flosbach has been assigned a number of executive tasks – Management Audit
(responsibility for the investments in Asia, the Arab countries, South East Europe, English speaking Africa), Business Planning and Controlling, (successful implementation of the SAP System),
Business Development and Portfolio Management Subsahara Africa, Consultancy activities –
“Deutsche Mittelstand”, Programmes of the European Community, Foreign Promotion Agencies,
Stability Pact for South East Europe. At last he was responsible for DEG’s Business in East and
South East Europe, Caucasus, Central Asia, Turkey and Near East (about 30 Countries, 1.5 billion
Euro investment, about 110 portfolio companies, 200 – 500 million new Commitments per year).
Prior to his career in DEG, he worked as a Senior Consultant at the Treuhand-Vereinigung AG/
Coopers & Lybrand GmbH, today PriceWaterhouseCoopers (PwC) with a special focus on Merger
& Acquisition activities. Mr Flosbach has special knowledge in the following areas: financing –
project financing, providing long-term loans, equity; mergers and acquisition; restructuring and
privatization; advisory service; risk management. He has a profound country and sector knowhow. Mr Flosbach has retired in early 2013 and currently serves as a Supervisory Board Member
in four renowned companies in the region.
ALEKSANDAR PEKEČ
member
SAŠA PEKEČ is an Associate Professor at Duke University’s Fuqua School of Business. He is
an expert in managerial decision-making in complex competitive environments, and has published articles in top academic journals in management sciences, as well as in top journals in
other fields such as economics, mathematics and psychology. His consulting experience includes
banking, internet, pharmaceutical, retail, and telecommunications industries. He was a member
of the Economic Council of the President of the Republic of Croatia in the period 2010 – 2015.
Saša Pekeč holds a Ph.D. degree from Rutgers University and B.Sc. degree from the University
of Zagreb.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
JEAN LOUIS YVON GOURBIN
member
JEAN LOUIS YVON GOURBIN has a 40 years of business experience in executive positions
in consumer foods and agricultural commodities companies in Europe, North America, Latin
America, Asia Pacific, Middle East and Sub-Saharan Africa. He spent the majority of his career,
more than 15 years, at Kellogg Company. He built his career in companies such as Kronenbourg,
leading beer company, La Maison du Café, ground coffee company, Ralston Purina pet food
company, Danone Group and Bunge, one of the three global leaders in agricultural commodities
trading and agribusiness. He is retired since 2012, when he became engaged in projects where
he may contribute with his multi-faceted career. Since 2013 he has been a member of the Supervisory Board of Desmet Ballestra Group, the world leader in the fields of engineering and supply
of plants and equipment. In 2015, he has created the annual Grand Prix Generation Entrepreneur,
a program promoting the young entrepreneurs in Switzerland. He has a post-graduate degree in
Economics from the Sorbonne University.
LARS PETER ELAM HÅKANSSON
member
LARS PETER ELAM HÅKANSSON As Chairman and Chief Investment Officer Peter Elam
Håkansson leads East Capital’s different investment teams in East Europe and Asia. Peter established East Capital’s investment philosophy and strategy, which he still oversees. He has worked
within emerging and frontier markets since the early nineties and continues to travel and visit
companies throughout the world. Peter has been awarded the Gold Star for best Fund Manager
five times by Morningstar and Sweden’s largest financial daily Dagens Industri. He and the investment teams have also received numerous Lipper awards for the performance of the funds
that East Capital manages. He is Chairman of the Board of Swedish Music Hall of Fame, member
of the Board of Bonnier Business Press, Inter Peace Sweden and the Advisory Board of Stena
Long Term Equity. Prior to founding East Capital, Peter held a series of senior positions at Enskilda Securities in London, Paris and Stockholm – where his last role was Head of Equities and
Global Head of Research. Peter has a degree from Stockholm School of Economics and has also
studied at l´EDHEC in Lille. He is fluent in Swedish, English and French.
The members of the Supervisory Board have been remunerated for their work and have the right to remuneration which is appropriate for the tasks performed as well as the Company’s situation and business performance. In 2016, members of the Supervisory
Board of Atlantic Grupa d.d. on the said grounds received compensation in the total gross amount of HRK 1,370,904.39.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
SUPERVISORY BOARD COMMITTEES
Three Committees function within the Supervisory Board with
the purpose of assisting the operation and functioning of the Supervisory Board: Audit Committee, Nomination and Remuneration Committee and Corporate Governance Committee. Each of these Committees consists of three members, of
which two are appointed from the ranks of the Supervisory Board
members, while one member is appointed from the ranks of top
experts in the subject area.
THE CORPORATE GOVERNANCE COMMITTEE defines a
system of mechanisms for ensuring a balance between the rights
of shareholders and the needs of management to direct and
manage the company’s operations. It provides a framework to
establish the company’s objectives and define the funds required
to achieve those objectives as well as to monitor the implementation and efficacy of those objectives. The Committee is chaired
by Siniša Petrović, Nina Tepeš was appointed as a member from
the ranks of external experts, while Vedrana Jelušić Kašić, until
expiry of her term in the Company’s Supervisory Board, i.e. 15
June 2016, acted as the member appointed from the ranks of the
Supervisory Board.
THE NOMINATION AND REMUNERATION COMMITTEE
proposes candidates for the Management Board, Supervisory
Board and senior management personnel as well as contents
of contracts with the members of Management Board, structure of their compensation and compensation of the Supervisory Board’s members. The Committee is chaired by Aleksandar
Pekeč, Lars Peter Elam Håkansson was appointed as a member
from the ranks of the Supervisory Board and Zoran Sušanj as a
member from the ranks of external experts.
THE AUDIT COMMITTEE analyses in detail the financial reports, provides support to the company’s accounting and establishes good and quality internal control within the Company. It
monitors the integrity of financial information of the company,
particularly the accuracy and consistency of accounting methods
used by the Company and the Group to which it belongs, including the criteria for consolidation of financial reports of the companies that belong to the Group. Also, the Committee assess the
quality of the internal control and risk management system, with
the aim of properly identifying, publicizing and managing the
major risks to which the company is exposed to. The Committee is chaired by Lada Tedeschi Fiorio, Franz-Josef Flosbach was
appointed as a member from the ranks of the Supervisory Board
and Marko Lesić as a member from the ranks of external experts.
The members of the said Committees who are not members of
the Supervisory Board have received remuneration for their work
and contribution to the functioning of the Supervisory Board
of Atlantic Grupa in 2016 in the total gross amount of HRK
71,936.19.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
MANAGEMENT BOARD OF ATLANTIC GRUPA
The Management Board of Atlantic Grupa consists of the President and Group Vice Presidents. Nineteen sessions of the Management Board were held in 2016. The Management Board of Atlantic Grupa operates in the following composition:
EMIL TEDESCHI
26
MLADEN VEBER
president of the
management board
senior group vice president
for business operations
EMIL TEDESCHI is the founder and majority owner of Atlantic Grupa. In his career he has received
numerous professional and media awards and in
2010 received the state decoration of the President
of the Republic of Croatia for his special contribution to Croatian economy. He was actively engaged
in the process of Croatia’s accession to the EU by
participating in the work of the Parliamentary Committee overseeing the negotiating process. He was a
member of the Social-Economic Council, President
of the Croatian Employers Association in the period
2005 – 2007 and a member of the Council of Economic Advisers to the President of Croatia in the
period 2010 – 2015. He is an Honorary Consul of
the Republic of Ireland in the Republic of Croatia, a
member of the Trilateral Commission, the INSEAD
Alumni Association, the Programme Council of the
Zagreb School of Economics and Management, the
Business Council at the Faculty of Economics in Ljubljana. the Council of the University of Rijeka and
the Board of Trustees of Moscow State Institute for
International Relations.
MLADEN VEBER joined Atlantic in 1996 as the
Director of the Rijeka Distribution Centre, while
as the General Manager of Ataco (a partnership
company in BiH) he made a key contribution to its
development as one of the leading distributors in
BiH. In July 2001, he was appointed Vice President
of Atlantic Trade responsible for brand management and international markets. In 2006 he was
appointed Senior Vice President responsible for all
business operations of Atlantic Grupa. Since 2001,
he has been a board member of the Trade Association Council of the Croatian Chamber of Economy. He is the President of the Management Board
of the Basketball Club Cedevita. He graduated at
the Faculty of Mechanical Engineering and Naval
Architecture at the University of Zagreb, and continued his education at the business school IEDC
in Bled.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
NEVEN VRANKOVIĆ
ZORAN STANKOVIĆ
group vice president
for corporate activities
vice president
for finance
NEVEN VRANKOVIĆ joined Atlantic Grupa in
1998 as the Executive Director of Corporate Activities. In 2001 he was responsible for Atlantic
Grupa’s merger and acquisition activities, while in
2002 he was appointed Vice President for Corporate Activities. He gained his business experience
by working in the legal department of Bergen Bank
in Norway and as a career diplomat at Croatian
embassies in Washington and Belgrade. He was a
member of the Working Group for Preparing Negotiations for the Accession of the Republic of Croatia
to the European Union for Chapter 6 – Company
Law. He graduated from the Faculty of Law at the
University of Zagreb and received his master’s degree from the Washington College of Law, USA.
Furthermore, he gained additional professional
knowledge in the field of mergers and acquisitions
at the business school INSEAD in France.
ZORAN STANKOVIĆ joined Atlantic Grupa in
February 2007 at the position of Vice President of
Finance. Prior to that, he spent three years at Pliva
as the Group’s Director of Controlling responsible
for the coordination and supervision of financial
activities of the Pliva’s network of companies, both
domestic and abroad. Before his arrival to Pliva,
from 1995 to 2003, he worked at Arthur Andersen
and Ernst&Young as a Senior Audit Manager responsible for key accounts. He is a member of the
international Association of Chartered Certified Accountants. He Graduated from the Faculty of Economics and Business at the University of Zagreb.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
REMUNERATION POLICY FOR
MANAGEMENT BOARD MEMBERS
The contract on performing activities of a member of the Management Board i.e. the employment contract for board members who
are employed at Atlantic Grupa lays down the rights and obligations of board members based on their function as the Management Board members, as follows:
• monthly salary for board members, set in the gross amount,
• annual bonus (bonus remuneration) per year of contract duration, set in the defined percentage of the realised principal annual
gross salary and remuneration on the grounds of membership
in supervisory boards of associated companies. The payment of
the annual bonus is conditioned upon the realisation of planned
business results in the ratio of at least 95% of the EBIT plan for
the consolidated Atlantic Grupa’s business year. Provided that all
contractual criteria were satisfied, board members are paid the
amount of realised bonus remuneration through the Stock Option Programme by acquiring own shares of Atlantic Grupa. For
the President of the Management Board, the whole bonus remuneration amount is paid in cash,
• life insurance policy for the members of the Management
Board contracted by Atlantic Grupa at the reputable insurance
companies in Croatia, with the annual premium of HRK 8,250.00,
• personal accident insurance policy with the annual premium
of HRK 8,300.00,
• voluntary health insurance policy that includes the Management Board members, with which Atlantic Grupa, as the insurance contractor, with an annual premium of HRK 7,500 per
person, provides a quality health treatment through an annual
comprehensive health examination, any required specialist medical tests with the application of most contemporary and efficient
medical devices and equipment in specialised polyclinics with the
best health experts,
• right to use an official vehicle, right to compensation of all
costs incurred by the Management Board member while performing his/her functions.
All Management Board members have manager contracts which
include a whole set of binding provisions as well as incentive
ones, as follows:
• confidentiality clause – board members are obliged to keep
confidential the Company’s business secrets during and after
their employment, regardless of the reasons for employment
termination. The obligation of confidentiality extends to business
secrets of AG’s associated companies as well,
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• no-competition clause – binds a board member to a period of
one year from the date of receiving severance pay, if he/she is
entitled to it,
• contract penalty – in case of breaking the no-competition
clause, any board member shall be liable to pay the contract penalty in the amount of twelve average net monthly salaries paid to
that board member in the period of three months before contract
termination,
• prohibition of participation of any board member in the
ownership and/or management structure, whether directly
or indirectly, in any company which is in market competition with
Atlantic Grupa and associated companies, or in a company with
which Atlantic Grupa and associated companies have business
cooperation, as well as to act as an advisor or consultant in such
companies, regardless of being paid or not for such activities,
• performance of other activities as a board member, except
those performed for Atlantic Grupa’s associated companies,
regardless of being paid or not for such activities, including the
membership in supervisory boards, advisory bodies, etc. shall
only be allowed pursuant to the prior approval of the Management Board of Atlantic Grupa,
• employment, contract duration and termination periods –
board members are employed for an indefinite period in Atlantic
Grupa or its associated companies, and the contract on performing the function of a board member is concluded for the period of
3 years, with the possibility of termination in accordance with the
periods prescribed by law,
• severance pay – severance pay is contracted in the amount
of six average monthly gross salaries of the board member and
gross remunerations based on the membership in supervisory
boards of associated companies paid to that board member in
the period of three months prior to contract termination. The obligation of severance payment occurs in a case of contract termination by Atlantic Grupa in the period of its duration, unless the
contract is terminated due to reasons caused by the fault of the
board member.
In 2016, members of the Management Board of Atlantic Grupa d.d.,
on the grounds of salary and remuneration for supervisory board
membership in operating companies and annual bonus received
a gross amount of HRK 17,778,162. From that amount, on the basis of salary, remuneration for supervisory board membership in
operating companies and annual bonus, President of the Management Board Emil Tedeschi in 2016 received a gross amount of HRK
5,157,683.00.
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C O R P O R AT E M A N A G E M E N T
O F AT L A N T I C G R U P A
STRATEGIC MANAGEMENT COUNCIL
Since its establishment in early 2012, the Strategic Management Council operates as a multifunctional body that discusses vital strategic and operational corporate issues, business analysis,
priority definition, supervision of strategic plans, coordination between organisational units and
key decision making. The Council includes the following members: President of the Management
Board, Senior Group Vice President for Business Operations, Group Vice President for Finance,
Group Vice President for Corporate Activities, Vice Presidents for Zone West and Zone East, Managing Directors of Strategic Business Units, Strategic Distribution Units, Strategic Distribution
Regions, Executive Director of the Business Unit Gourmet, Senior Executive Director of Corporate Legal Affairs, Investments and Asset Management, Senior Executive Director of Business
Development, Strategy and Information Technology, Senior Executive Director of Corporate Key
Accounts Management, Secretary General, Executive Directors of Central Purchasing, Corporate
Human Resources, Corporate Controlling, and the Head of the Investment Committee.
BUSINESS COMMITTEES
THE INVESTMENT COMMITTEE assists the Management Board by providing expert analyses and opinions on strategic decisions regarding the acquisition of companies, brands, businesses, or the sale of existing organisational business parts and on all individual investment
projects exceeding EUR 2 million. The Investment Committee is headed by the Management
Board Advisor, and its members are the Director of Internal Audit and Control and the Director
of Corporate Treasury.
THE SOCIAL RESPONSIBILITY COMMITTEE contributes to the implementation of principles of sustainable development in the company’s everyday operations, monitors its status and
starts initiatives for the improvement of socially responsible business conduct. The Social Responsibility Committee is headed by the Company’s Secretary General, while its members are the
Executive Director of Corporate Human Resources, the Director of Corporate Communications
and the Director of Corporate Quality Management.
INTERNAL AUDIT IN 2016
The corporate internal audit of Atlantic Grupa performs an independent audit and control function
and informs managers through comprehensive audit reports (findings and proposed improvements). Internal audit is responsible for estimating the level of risk management in business
processes, reviewing the efficiency of the internal control systems with the purpose of advancing
risk management and compliance with procedures, testing and analyses of compliance of the
existing business systems with adopted policies, plans, procedures, laws and regulations that
can have a significant influence on business reports. It is responsible for recommending preventive measures in the area of financial reporting, compliance, business and control in order to
eliminate risks and eventual deficiencies that could lead to inefficient processes or fraud. Internal
audit informs the Board of Auditors on its activities and audit plans, while its findings and recommendations help the management to improve processes, preventively eliminate potential risks or
reduce risks to an acceptable level.
In 2016, fourteen audits were performed in the following areas: information systems, distribution, logistics and non-current assets, detecting no significant irregularities.
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S P O N S O R S H I P S A N D D O N AT I O N S
S O C I A L LY R E S P O N S I B L E B U S I N E S S
SOCIALLY RESPONSIBLE BUSINESS
In its broader sense, socially responsible business conduct is a determinant of Atlantic Grupa’s actions. Through its sponsorships and donations, the company aims to promote the values
shared with its social environment, namely passion, responsibility and growth. There is a multitude of activities and support that the company provided last year to different associations,
organisations and actions, of which some are listed below.
SPORT
• PLANICA SKI JUMP
• B2B RACE
• BASKET TOUR (STREET BASKETBALL)
• EUROPEAN UNIVERSITIES GAMES
• BC CEDEVITA
• WTA BOL
• BC BOSNA
• HELLA HALBMARATHON
• BC MZT SKOPJE
• OSTSEEMAN TRIATHLON
BASKETBALL
Atlantic Grupa is actively involved in the promotion of basketball as a sport of national importance by attracting increasingly better players and trainers. We are proud sponsors of basketball
clubs Bosna and MZT Skopje, while the flagship of all Atlantic’s sponsorships continues to be the
basketball club Cedevita, which this year revealed the club’s new visual identity, i.e. new colour,
logo and jerseys that are now more closely related to the brand Cedevita. What is particularly
important and upon which the success of this project lies is Atlantic Grupa’s dedicated support
in financing, organising, and managing the club’s Basketball Academy with over 1000 children.
The club and academy actively work in 24 basketball schools organised in Zagreb’s elementary
schools, thus ensuring both the future of this sport and the option of a healthy and useful free
time activity. As a result of Atlantic Grupa’s sponsorship, as well as the efforts put in getting additional sponsors for the BC Cedevita, the club is now one of the most promising teams in Croatia
and regional leagues which is also successful in Euroleague, primarily by entering the TOP 16.
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1,000
ch il dren
in cl ub ’s
b as k et b al l
academy
24
b as k et b al l
s ch o o l s are
o rg anis ed
in zag reb ’s
el ementary
s ch o o l s
sponsor ships and donations
31
S P O N S O R S H I P S A N D D O N AT I O N S
S O C I A L LY R E S P O N S I B L E B U S I N E S S
OTHER SPORTS (CYCLING, SKIING, EXTREME SPORTS,
WAKEBOARDING)
Atlantic Grupa practices socially responsible action in all the countries in which it is present
with its business entities. To that end, Atlantic is a major sponsor through its sports food brand
Multipower, as well as many others. In 2016, Multipower sponsored sports such as cycling, triathlon, running, as well as adrenaline sports. In cycling, we are proud sponsors of Gran Fondo and 9
Fossi races, the cycling team Moviestar and the well-known Italian cyclist Fabio Aru. In triathlon,
an extremely challenging discipline and sports adventure, we support the brave triathlete Jan Froden. Atlantic Grupa is a traditional sponsor of the Slovenian Ski Federation – Alpine and Nordic
skiing national team, as well as a long-standing sponsor of the ski jumping competition in Planica by supporting successful skiers Peter Prevc, Robert Kranjec and many others. However, the
support to skiing does not end after the Ski Cup. We are sponsoring a special Cockta Cup, a yearround competition system that allows younger skiers to gain experience and improve their skiing
technique for new victories. The brands Kala, Cedevita and Cockta are official beverages of the
women’s tennis tournament (WTA) in Bol, Croatia, in running we supported the business race
B2B as well as the European Universities Games, the largest university sport event in Europe.
VALUE DAY
The fifth in a row Atlantic Grupa’s Value Day has once again exceeded all expectations and showed
that hard-working Atlantic employees can, with their teamwork, limitless positive energy, humanitarian efforts and great will, leave a positive trace and live their corporate values. More than
1,300 Atlantic employees participated in over 60 different activities in nine countries where they
passionately, creatively and responsibly assisted their local communities and each other through
different forms of help: cleaning their work spaces and the environment, gardening, painting,
cleaning and by donating blood. This time the special feature was as much as 28, “green” activities within the project Atlantic Green – Opportunity to grow in harmony with nature, with which
Atlantic Grupa entered the new era of responsible growth in harmony with nature and environmental protection. This traditional gathering of Atlantic Grupa’s employees reminds us how little
efforts can result in many valuable accomplishments and make our community a better place.
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S P O N S O R S H I P S A N D D O N AT I O N S
S O C I A L LY R E S P O N S I B L E B U S I N E S S
CULTURE AND KNOWLEDGE
• 22ND SARAJEVO FILM FESTIVAL
• SEMPL
• INNOVATION INSTITUTE
• GOLDEN DRUM
• ŠPANCIRFEST
• LEAP SUMMIT
• ROATIAN CHAMBER OF
DENTAL MEDICINE
• FOOD FILM FESTIVAL
ZAGREB
• TRIPLE BRIDGE
• BELGRADE MANIFEST
Atlantic Grupa has again in 2016 supported the 22nd Sarajevo Film Festival (SFF) as a central cultural manifestation in the region, once more not only as a Festival sponsor, but also as the main
partner of the special festival project Sarajevo grad filma (“Sarajevo Film City”). On one hand, the
project is concerned with the future of young professionals and, on the other, the future of the
regional film industry. This year, visitors had a unique opportunity to experience a simultaneous
screening of the film that was staged at the same time in cities across the region. In the last year
Atlantic also signed a golden partnership agreement with Croatian Innovation Institute for 2016.
In addition to supporting the Institute’s work, the cooperation also includes a series of trainings
for Atlantic employees. With the brand Plidenta, Atlantic also supported the work of the Croatian
Chamber of Dental Medicine; with the education project Zubomobil (Teethmobile), we visited
over 50 schools and gave a smile to more than 17,000 children. Furthermore, we participated
in sponsoring the largest media trends conference SEMPL and the festival of creativity Golden
Drum, aiming to encourage young experts across the region to create new trends and novelties.
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S P O N S O R S H I P S A N D D O N AT I O N S
S O C I A L LY R E S P O N S I B L E B U S I N E S S
TRIPLE BRIDGE
With regard to culture, cooperation with the European Career Centre for Artists – Triple Bridge
holds a special place among our sponsorships. It is a centre for the career training of classical
musicians coming from 40 European countries. Triple Bridge is a unique organisation founded
on the idea to merge artists and audiences, the traditional and digital age, and business and
culture. The slogan “We support great music with good taste” also marks the prospective cooperation with this talented orchestra which plays many concerts in European cities.
YOUTH EDUCATION - VISITING ATLANTIC PRODUCTION
FACILITIES - OPPORTUNITY FOR YOUTH TO TASTE THE
FUTURE
In 2010, we have started organised tours of Cedevita in Zagreb for preschoolers, pupils and
students, spreading this good practice all the way to Belgrade. After touring the factory and its
laboratory, children have the opportunity to learn first-hand how products are made and to test
new potential flavours, thus making this educational visit even sweeter. Since 2013, Soko Štark,
our chocolate and sweets production plant in Serbia, hosts regular weekly tours of school children that arrive from all parts of the country. So far more than 7,500 little explorers discovered
the secrets of producing their favourite brands in our facilities. These young visitors do not just
come to take a tour, but also to roll up their sleeves and get to work – from pouring chocolate in
Štark’s development team to pressing candies in Cedevita’s laboratory – each child here has an
opportunity to taste what the future brings.
EDUCATION - SUCCESSFUL COMPLETION OF THE 2ND
INTERNATIONAL ARGETA BUSINESS HACKATHON
International Business Hackathon is an international business marathon, a two-day competition
of business individuals and young managers in solving business challenges. In cooperation with
the Business Intelligence Centre, Argeta encouraged participants, assorted into groups, to look
for creative and innovative business solutions. The winning team won a Cotrugli MBA Entrepreneurship module and a 2000 € cash prize, and the winner of Argeta International Business
Hackathon, Matteo Mozetič, won a Harvard Business School modular education, HBX Disruptive Strategy programme.
34
sponsor ships and donations
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S P O N S O R S H I P S A N D D O N AT I O N S
S O C I A L LY R E S P O N S I B L E B U S I N E S S
SOCIALLY VULNERABLE GROUPS
• REHABILITATION CENTRE ZAGREB (PAUNOVAC)
• SERBIAN CLINICAL CENTRE
• FOUNDATION SOS CHILDREN’S VILLAGES SERBIA
Atlantic Grupa has in 2016 made a donation to the Children’s Home Zagreb in Nazorova Street,
which was used to purchase furniture for its little beneficiaries. Atlantic Grupa also continued to
donate the Rehabilitation Centre Zagreb in Paunovac and, after several years of joint cooperation,
a roof over the botanic garden was built where protégés will learn to plant seeds and grow plants.
Furthermore, Cockta organised a humanitarian action Be Human aimed to provide help and
collect funds for socially vulnerable children in elementary schools in Vukovar. Care for others
knows no bounds, so we are involved in significant humanitarian activities across the region,
trying to adjust our actions to the current local needs and to respond as quickly as possible to
social problems of the countries in which we operate. Likewise, Atlantic supported the Serbian
Clinical Centre by reconstructing some of the rooms in the chemotherapy ward. Additionally, after
a catastrophic storm and floods in Macedonia, we donated the much needed food products to
the population in the area that suffered the most damage. Finally, Argeta designed a special packaging of Junior Original 3x95g, produced 100,000 items and then donated 0.10 KM for every item
sold to the fund for supporting the association The Heart for Kids with Cancer in the Federation
of Bosnia and Herzegovina in Sarajevo and the Association of Parents of Children with Cancer
Iskra in Banja Luka.
PLASTIC BOTTLE CAPS FOR EXPENSIVE
MEDICINES
Atlantic Grupa’s employees in Croatia continue to eagerly collect plastic bottle caps in order to support a humanitarian action of the Association of Leukaemia and Lymphoma Patients
– “Plastic Bottle Caps for Expensive Medicines” which aims to
use the funds collected by recycling bottle caps for co-financing expensive medicines for the treatment of the Association’s
members.
2700
k il o s o f p l as t ic
b o tt l e cap s w ere
co l l ect ed in t h e
h umanitar ian ac ti on
“ p l as t ic b o tt l e
cap s f o r exp ens ive
medicines ”
ATLANTIC GRUPA AS THE OCEAN OF OPPORTUNITIES FOR
EMPLOYMENT OF PERSONS WITH DISABILITIES
Employment of Persons with Disabilities is a project by which Atlantic Grupa, as one of the first in
its business environment, joined the process that includes a review of the status and adaptability
of work positions for potential employment of persons with disabilities, thus offering them an
opportunity for equal participation in our professional environment. With this project, Atlantic
Grupa has once again shown that it participates in projects which promote, raise awareness and
the level of discussion about the issues of employment of persons with disabilities. This is not the
first such project in which Atlantic participates. It is already for years a partner of Poslovni dnevnik
in the project Iskustvo zlata vrijedi (Experience is Golden) which every year provides practical
training to students with disabilities, so this project is a logical next step with the same objectives
and efforts in Croatia and, over time, in the region.
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S U S TA I N A B L E D E V E L O P M E N T A N D
E N V I R O N M E N TA L P R O T E C T I O N I N 2 0 1 6
The principles of sustainable development in Atlantic Grupa are present in every step of business
operations. As regards environmental protection, activities in 2016 were focused on strengthening the energy management system for the purpose of reducing energy consumption, energy
costs and the carbon footprint. The next step in implementing the energy management system
is the certification planned for early 2017, which will confirm our focus on continuous improvements in the area of energy efficiency and environmental protection.
RAISING THE ENVIRONMENTAL AWARENESS OF EMPLOYEES
Raising the environmental awareness of employees continues within the framework of traditional
projects and activities:
• VALUE DAY is already a tradition that joins together Atlantic employees in performing different activities, including those aimed at preserving the environment, such as planting trees and
flowers, cleaning coasts, rivers and public areas;
• GREENINOWAVE – upgrading the internal programme for promoting creativity and innovative ideas Innowave is still a place for collecting ideas on environmental protection, green
innovations and economic use of natural resources;
• WALK AND RIDE – the Atlantic’s project Walk and Ride, aimed at promoting a healthy lifestyle and protecting the environment, has shown that Atlantic employees are fit, active, sociable
and competitive. They have covered 10,000 kilometres by cycling or walking;
• INTERNAL TRAININGS to raise awareness about waste separation, reducing the carbon
footprint, increasing energy efficiency and EXCHANGE OF GOOD PRACTICES in the area
of environmental protection.
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S U S TA I N A B L E D E V E L O P M E N T A N D
E N V I R O N M E N TA L P R O T E C T I O N I N 2 0 1 6
ENERGY AND WATER CONSUMPTION
The Energy Management System (EnMS), which was introduced in 2015, represents the framework for optimising the company’s energy efficiency. In Atlantic Grupa, EnMS is integrated into
quality management systems of all production facilities. The system takes account of guidelines
and requirements of the international standard ISO 50001. It is based on the energy policy, which
is a part of the company’s corporate quality policy, and on the PDCA model which consists of four
management phases aimed at continuous process improvement. Among good practices in the
area of energy efficient improvements, we can point out cooling at the site Izola in Slovenia. It
concerns the use of cold water from coolers and increasing the productivity of the manufacturing
process. The investment resulted in electricity savings of 10%. The existing lighting fittings were
replaced with a new generation in Cedevita’s production plants in Zagreb and Apatovac, in order
to reduce the electricity consumption in production facilities and reduce CO2 emissions. This is a
significant investment co-financed from EU funds. The production plant in Nova Gradiška invested in a washroom for washing pasta moulds, which directly reduces water consumption during
production. The installation of sensor faucets in all “clean” production rooms at the production
plant of Fidifarm contributed to significant water consumption savings.
WASTE AND WASTEWATERS
For the purpose of improving separate waste collection in production plant sites of Grand Prom
and Soko Štark, special attention was given to establishing a recycling yard for non-hazardous
waste. Additionally, we have found a solution for multi-layered composite packaging, the so called
aluminium foil, at the Soko Štark’s facility. Further contribution to successful waste management
is the recognition that Grand Prom and Soko Štark received for their results in reducing CO2
emissions based on sold and recycled quantities of packaging waste in 2016. As regards the
Cedevita’s production plant in Zagreb, a concrete bund wall was constructed and attested for
temporary storage of hazardous waste within the registered temporary waste storage; as regards
the Cedevita’s plant in Apatovac, additional investments into laboratory equipment were made
for the purpose of improving wastewater control and management on a daily basis.
ENVIRONMENTALLY FRIENDLY PRODUCTS
By following the trends in environmentally friendly products and criteria for sustainable packaging, Barcaffè Black’n’Easy made another step towards reducing adverse environmental impacts.
One of the main project goals, other than practical and attractive design, was to reduce the weight
of the packaging. Annually, this means 2 tonnes less of flexible packaging that would burden the
environment. The nomination, that is, entering the final round for the Slovenian Packaging Oscar
confirms that we are on the right track.
REPORTING ACCORDING TO GRI PRINCIPLES
Aware of our responsibility regarding sustainable development and importance of transparent
reporting on the company’s performance, in 2016 we have continued our practice of reporting
according to GRI principles, by presenting the results and achievements of our company in its
constant efforts to find the best solutions for economic, social and environmental sustainability.
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sustainable development and environmental protection in 2016
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I N T E G R AT E D P R O C E S S
MANAGEMENT SYSTEM IN 2016
1
Our key objectives in 2016 were:
IMPROVING THE SYSTEM IN ACCORDANCE WITH THE
REQUIREMENTS OF ISO 9001 &14001:2015 STANDARDS
Based on the GAP analysis of compliance with new requirements of ISO 9001:2015, we were
focused on certain system elements that directly affect the efficiency of business processes. The
identification of risks and opportunities for improving the system was recognised as an important tool in improving and developing business processes. In 2016, special attention was given
to implementing the corporate risk management methodology and connecting the different risk
management levels and methodologies in Atlantic Grupa.
Risk management levels in Atlantic Grupa
CORPORATE LEVEL
SBU / SDU LEVEL
PROCESS / OPERATIONAL LEVEL
PROJECT LEVEL
The identification of risks and potential opportunities became an integral part of the process
performance analysis, and it is included in annual reports on process efficiency. In parallel with
activities at the corporate level and activities in the Group’s specific strategic business and distribution units, we carried out a series of trainings aimed at promoting the decision-making model
based on risk analysis as the basis for a proactive approach to risk management in all processes.
At the same time, we analysed and tested the corporate model for risk management in crisis
situations (basis for a reactive approach to risk management).
2
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IMPROVING THE NON-CONFORMITY
MANAGEMENT SYSTEM
The common platform for managing non-conformities was implemented in all the key markets
by the end of 2016. The implementation of this new tool allowed for easier reporting of non-conformities, process standardisation, transparent monitoring of every non-conformity during the
life-cycle, communication during the solving process, monitoring costs related to non-conformities, traceability through tool-based records, real-time analytics and reporting, management of
tasks and activities resulting from corrective measures, quality management of follow-up activities and establishing a knowledge base. In addition to the new tool, the process of non-conformity management was reconstructed by focusing on key non-conformities (status of deviation/
non-conformity), introducing the new improved classification of non-conformities, linking each
non-conformity to one primary process, clear system of responsibilities and authorisations, and
raising knowledge and awareness about the importance of non-conformity management on all
our markets. In addition, one of the important objectives in 2016 was to interconnect the different
forms of reporting on the system efficiency in order to improve transparency and clarity of information for review by the management.
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integr ated process management system in 2016
39
I N T E G R AT E D P R O C E S S
MANAGEMENT SYSTEM IN 2016
3
4
IMPROVING THE CONTROL OF EFFICIENCY
PROCESSES AT THE SBU LEVEL
In 2015 we introduced a new monitoring model that includes management reviews at the level of
each site, with the aim of focusing on individual goals and risks specific for that site. In 2016, our
focus was on monitoring levels, i.e. SBU management review. The achieved specific objectives
were to put more focus on meeting the key performance indicators (KPI), focus on risk management and clearer, shorter presentation and improved communication within the department.
ANALYSING THE POTENTIAL BENEFITS OF ISO 50001
STANDARD (ENERGY EFFICIENCY) CERTIFICATION
The analysis of the existing system confirmed that, within environmental management, there is
already a whole series of activities aimed at efficient energy management. As the company’s next
step towards sustainable development, a decision was made to implement the ISO 50001 standard in all key sites in the next three years. The first 5 sites operating under Droga Kolinska (Izola,
Rogaški Vrelci and Mirna) and Cedevita (Planinska, Apatovac) will be included in Atlantic Grupa’s
integrated certification supervision scheme in early 2017. The large family of certified systems was
in 2016 joined by a food safety management certificate FSSC 22000 for the company Foodland.
All the above activities were followed by continuous work on improving knowledge and skills
related to the process approach through planned activities under the Function Lab Quality module intended for development of specific knowledge related to the process approach and quality
systems, of which we should mention the following conferences: Process Management, Quality
Assurance, Environmental Management, Distribution Quality, Conference of Atlantic Grupa’s
Internal Auditors, as well as workshops of all quality control departments and the production
process workshop.
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integr ated process management system in 2016
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I N T E G R AT E D P R O C E S S
MANAGEMENT SYSTEM IN 2016
Our certificates in 2016:
Legal entity (location)
Market
Quality
Management
Standard
Food Safety
System
Certification
Food Safety
Standard
Environmental
Management
Standard
Atlantic Grupa
cro
iso 9001
Cedevita (Planinska)
cro
iso 9001
fssc 22000
haccp
iso 14001
Cedevita (Apatovec)
cro
iso 9001
fssc 22000
haccp
iso 14001
AMHR
cro
iso 9001
ifs
Good
Manufacturing
Practice
iso 14001
gmp (cl)
iso 14001
haccp
APHC
Neva
cro
iso 9001
ifs
iso 14001
Montana
cro
iso 9001
haccp
iso 14001
Fidifarm
cro
iso 9001
haccp
iso 14001
Atlantic Trade
cro
iso 9001
haccp
iso 14001
Bionatura
cro
Droga Kolinska (Ljubljana)
slo
iso 9001
Droga Kolinska (Izola)
slo
iso 9001
Droga Kolinska (Mirna)
slo
iso 9001
Droga Kolinska (Rogaška)
slo
iso 9001
Argeta
bih
iso 9001
Kofikom Product
bih
iso 9001
Soko Štark
ser
iso 9001
fssc 22000
haccp
iso 14001
Soko Štark Ljubovija
ser
iso 9001
fssc 22000
haccp
iso 14001
Palanački kiseljak
ser
iso 9001
haccp
iso 14001
Grand Prom
ser
iso 9001
haccp
iso 14001
Foodland
ser
iso 9001
Atlantic Brands
ser
iso 9001
Atlantic Multipower
ger
iso 9001
Droga Kolinska (Skoplje)
mac
Atlantic Trade (Skoplje)
mac
iso 22716
gmp
haccp
iso 14001
fssc 22000
haccp
iso 14001
haccp
iso 14001
fssc 22000
haccp
iso 14001
fssc 22000
haccp
iso 14001
iso 14001
fssc 22000
haccp
haccp
iso 14001
haccp
iso 14001
iso 9001
haccp
iso 14001
iso 9001
haccp
iso 14001
ifs
* n e w sta n da r ds i m pl emen t ed i n t he l a s t t hree year s are highlighted in red
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HUMAN RESOURCES
IN 2016
In human resources management, we are guided by the idea that our activities and competencies
should contribute to creating added values for the company. In order to improve ourselves, we
are regularly monitoring indicators with which we can create a highly efficient, entrepreneurially-oriented company. Basic measures used as guidelines are performance management results,
desired fluctuation rate, assessment of management competences and monitoring of employee
engagement. The highest value of our activities for the company operations is reflected through
programmes related to strengthening the corporate culture, talent development and management, and support provided in performance management processes.
We recognise our purpose in supporting employees to make a difference, which is important for
them, the company and society as a whole. We want to be the key driver in creating the corporate culture, with engaged employees and strong leaders. It is our view that successful human
resources management is realised within the role of a strategic partner who understands the
company’s operations and strategy, and who adjusts its actions accordingly, giving the employee
perspective to all business decisions, who foresees trends and acts proactively. By timely offering
quality, innovative and integrated solutions in the field of human resource management, we are
gaining the trust of our internal clients. We have concluded the year 2016 with 5,492 employees
in 12 markets.
t h e year 201 6
ended w it h
5,492
12
emp l o yees in
mark et s
As internationalisation is one of the company’s strategic determinants, the Human Resources
Department also adjusts its programmes to new business models and in 2016 it organised the
first international StartA – a corporate job orientation programme for new employees.
We continue to adopt good practices, and corporate culture projects are well-recognised among
the employees. The programme “Value a Colleague” was implemented this year as well, in which
all employees may nominate a colleague and/or team for whom they think that he/she best represents the company’s corporate values.
Every company is a reflection of its employees and their individual stories. In order to be reminded of this important fact, Atlantic in 2015 launched a comprehensive programme “Atlantic’s
Reflections – Opportunity to share your story”. The project was initiated in order to collect photos
and stories of our employees for the purpose of employment ads, so that individual stories of participants can reflect the company, through LinkedIn communication and new employment ads.
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HUMAN RESOURCES
IN 2016
We are proud of the project Employment of Persons with Disabilities, which was launched in 2016
and by which Atlantic Grupa, as one of the first in its business environment, joined the process
of reviewing the status and adaptability of work positions for potential employment of persons
with disabilities. The project is for now focused only on Croatia and includes two approaches; one
is to review the possibilities for persons with disabilities to work in Atlantic, and the other is the
possibility of employment of such persons. The project manager is Damir Živković in cooperation with the Human Resources Department. This cooperation includes assistance from external
partners that participate in assessing the adaptability through questionnaires-forms, analysing
work positions with different forms of tasks so that the results of analyses would be applicable to
a wide range of work positions within Atlantic Grupa. Based on the analyses of work positions,
assessments were made for each work position with regard to its capacity to be adapted to different types of disabilities, which contain information on proposed adaptations with a tentative cost
estimate and level of feasibility.
t he p ro j ect
b o d y an d mi n d
g at h ered
114
144
t eams,
in d ivid u al
ru n n er s an d
110
The project Body and Mind – Opportunity to be fit, successfully initiated in 2015, this year developed into an event that gathered 114 teams, 144 individual runners and 110 walkers. This year we
had many novelties; in addition to a new sport – darts, there was a digital dimension of the Sports
Weekend – all participants had the opportunity to watch news and posts on social networks in
real-time via the application on their mobile devices. The project’s vision is to, by engaging employees in different programme activities, develop a good feeling – both physically and mentally
– as a result of physical activity, improved mental relaxation and awareness that the company
looks out for them.
In addition to the above, within the 13th annual Slovenian conference “Human Resources
Management”, best practices in the field of human resources management were selected. A
three-member expert panel evaluated a total of 14 applied projects, among which Atlantic’s Body
and Mind won an excellent second place.
walk er s
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human resources in 2016
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HUMAN RESOURCES
IN 2016
Atlantic Grupa lives its values daily, and once a year it organises Value Day, where employees can,
with their positive energy, humanitarian efforts and great will, leave a positive trace and live their
corporate values. In 2016, more than 1,300 of our colleagues used the opportunity to help their
local communities and each other. In Hamburg we organised an animal farm for children, in Vienna we cooked for the homeless and spent time with teenagers under the programme “Learning
after School”. Youth education was supported by our colleagues in Frankfurt by decorating the
local school’s premises. In Russia, we visited a home for children without parents, in Macedonia
children with special needs, in Bosnia and Herzegovina we spent time with elderly people in their
home, while Atlantic’s employees in Slovenia were joined by their Italian colleagues in activities
aimed at protecting the environment.
1.300
at l ant ic
emp l o yees
p art icip at ed
in v al ue day
We continue to encourage innovative thinking and to recognise an award the best ideas through
the programme INNOWAVE, merging the words “innovation” and “wave” in its title, symbolising one of our core corporate values – creativity. In order to promote innovative, entrepreneurial
thinking, the project itself will be redesigned during the next year.
Wishing to continuously confirm the successfulness of our practices and further improve them,
we want to compare our human resources management practices with other practices on the
market. After the successful certification with high scores in all evaluation segments and confirming the status Employer Partner two years in a row, we are continuing the recertification process,
which we would also like to expand to Western European markets.
With regard to the performance management process (U3), which is used to measure employee
performance, after the successful introduction of measuring manager performance by monitoring the rate of desired fluctuation and realisation of the successors’ development plans, in 2016
we have added the function of providing a quick feedback by using the option Real-Time Feedback. In doing so, we wanted to strengthen the culture of dialogue, objectivity and transparency of
feedbacks and achieve a quality assessment of the performance of employees on projects within
interdisciplinary teams, with the primary goal of improving employee performance, motivation
and development.
In order to improve efficiency and centralise operational processes, in 2016 we continued to
improve functionalities within the HRIS system (HRnet), which is used to manage most of the
personnel administration processes (annual leave management, travelling, personnel planning
via the employment module, as well as the modules related to planning and reporting, employee
performance and development management).
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HUMAN RESOURCES
IN 2016
LEARN DEVELOPMENT@AG
Development in Atlantic Grupa is defined and realised in four development LABs: LEADER LAB,
FUNCTION LAB, TALENT LAB, MY LAB.
The primary task of LEADER LAB is to develop LEARN leadership competencies for all Atlantic Grupa
leaders. By concept, it consists of two parts: Basic Leadership Skills and Leadership in Action. The Basic
Leadership Skills programme is designed for newly hired or newly promoted leaders and it is realised
through a set of development activities intended to develop basic leadership skills, while the Leadership in Action is a concept that supports active involvement of leaders in rethinking and maintaining
the desired leadership culture. The programme Leadership in Action, initiated in 2015, with 30 teams
composed of over 200 leaders who have proposed 30 projects/proposals for improvement related to
business processes, continued its activities in 2016, during which 8 projects were selected that will be
presented to the company’s Strategic Management Council in 2017 for the purpose of making decisions on their implementation.
In 2016, we implemented the first module CUTTING EDGE, which included a visit of our top leaders
to the European headquarters of the company LinkedIn.
Functional competences of employees are developed through the programmes under FUNCTION
LAB. The key areas covered by the programme are Quality, Safety, Pharma, Marketing and KAM. The
areas of Quality, Safety and Pharma are under the organisation and control of the business units that
manage them, while Marketing and KAM are realised as the joint project of Central Marketing, that is,
KAM/Sales Department and the Corporate Talent&Development Team. The year 2016 saw the continuation and, in some segments, expansion of the areas of Quality, Safety and Pharma, while the areas of
Marketing and KAM were realised with some of the best consultants in the world.
TALENT LAB covers programmes defined on the corporate level, corresponding to the development
needs resulting from the talent management process, while MY LAB covers all forms of individual
development. Under TALENT LAB, a special focus in 2016 was on recognising young talents, thus
successfully completing the second cycle of the Adventure programme. At the beginning of April 2016,
the teams presented their projects in order to receive approval for their implementation, which after
ten months of intensive work and development marked the successful completion of their educational
adventure through this programme. In this second cycle, the Atlantic’s development programme for
young professionals gathered 5 international teams that, through dedicated projects, explored different
business opportunities for Atlantic Grupa. In order to be able to successfully develop their business
ideas, Adventurers were in parallel gaining new knowledge and skills through trainings at the Business
School Cotrugli and, in addition to mentors from the ranks of the Strategic Management Council, received support from an external business trainer who helped them in their personal and professional
development. Thus, Adventure has helped the second generation of young professionals to stand on
their own feet and they are now ready to dive into serious business adventures.
We are also proud of the pilot programme organised in cooperation with Delta Holding Serbia (AG &
DELTA HOLDING SERBIA EXCHANGE PROGRAMME) for the purpose of exchanging ideas and best
practices between young employees of both companies.
In order to monitor best practices in the field of human resources management, we have started the
Graduate Trainee programme which aims to attract young talented people with high potentials. After
passing a specifically prepared selection process, they were included in a structured one-year development programme where they will have the opportunity to prove themselves and be permanently
employed in one of our business units. In addition to the above, every employee of Atlantic Grupa,
through his/her individual development plan provided by the information system, had access to the
catalogue of development activities according to defined competencies as well as to options related to
applying for and realising required activities which are not a part of the standard catalogue of trainings.
46
human resources in 2016
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HUMAN RESOURCES
IN 2016
TALENT MANAGEMENT
Through the project “Organization & people” we are continuing with focused management of
internal talents. The general aim of this project is to introduce a structured process of identification, selection, development and retention of talents/successors for present and future needs of
Atlantic Grupa. After the mode is established at the level of all employees, we expect that it will
ensure a highly flexible and agile organisation through the creation of a sustainable succession
of management personnel at all levels. In 2016, we included additional levels of employees in
the Talent Management process in order to raise awareness about the knowledge and potentials
available within the company.
A strategic corporate project under a working title Fast Forward covers thirteen projects that will
focus on people, culture, our clients, consumers, value system optimisation, digital technology
and analytics. Project teams, consisting of around 80 Atlantic employees, will work on its development by the end of 2017. The project goal is to develop Atlantic Grupa into a company with a
unique culture and the status of an important participant in international markets where clients
or consumers are at the centre of attention. Within the project area related to people, behaviour
and culture, two project teams will concentrate on finding and keeping talents and key employees, further leadership development, improvement of the remuneration policy and overall care
for employees.
EMPLOYEE ENGAGEMENT
The engagement of employees, which is monitored through a survey offering employees a chance
to express their opinion on what motivates them, makes them happy or dissatisfied, provided
very good results so far. Atlantic began to measure employee engagement in 2012 by using Gallup’s methodology which provides the so called engagement ratio. In 2015, this ratio increased
from 3.18:1 to 3.47:1, meaning that there are 3.47 engaged employees to one non-engaged employee. In order to improve the quality of measuring and monitoring employee engagement in
comparison with the industry in which Atlantic operates and with European standards, since last
year we are using AON Hewitt’s methodology under which it was established that Atlantic Grupa
has 70 percent of engaged employees, placing it among the companies with the highest engagement ratio in Europe. Employees expressed the highest satisfaction level in the areas of diversity
and job inclusion, organisation in general and cooperation, while they see room for improvement
in remuneration programmes and career opportunities.
EMPLOYER BRANDING
Employer Branding is a project initiated in mid 2014, dedicated to the targeted and structured
building of Atlantic Grupa’s image as an employer. It extends beyond that as well, as a business
entity in countries we are active in since, by its nature, it extends to other similar corporate areas.
According to the results of research and our aspirations, Atlantic Grupa is defined as an inspirational company (society) of people who operate and love to work in an inspirational environment. Open, inquisitive and motivated, Atlantic offers present and new colleagues, partners and
investors an endless ocean of growth and development opportunities. Together we wish to create
a vision and provide long term well-being, always keeping our fundamental corporate values in
mind: CREATIVITY, symbolized by a wave, PASSION, symbolized by the sun, and GROWTH,
symbolised by a mountain. In 2016, we started to build the company’s image via LinkedIn, where
we regularly publish initiatives and projects aimed at presenting the company as an attractive
employer for potential future employees.
70%
eng ag ed
emp l o yees
I N F O R M AT I O N S Y S T E M S
IN 2016
With regard to information technologies, the year behind us was marked by a number of significant projects that grew from the technological domain into the beginning of digital transformation of the entire organisation. Atlantic Grupa decided to apply an approach according to which
technological development is ensured through a comprehensive programme that includes all required and initiated activities. The programme “Transformation Engine” includes: basic assumptions – the organisation’s capacity for digital transformation, transformation of the Group’s information systems, and initiated activities whose approach to the end user follows the latest trends
in this sector. When it comes to the organisation’s basic capacities for digital transformation, the
IT Department was reorganised, significant investments were made into the core infrastructure
and a new process management approach was introduced. As a result, the IT Department was
organised as a corporate support function which facilitates synergies, balanced development
of technology and adequate processes, and equalises the quality of IT support provided to all
employees of Atlantic Grupa. At the same time, this created preconditions for the use of human
resources at the Group level, which raises the general level of knowledge and expertise and also
provides additional opportunities for career development. Numerous investments into the core
infrastructure are used to build the group information network with fast and reliable links that
connect all the Group sites, data centres are being concentrated in a smaller number of sites with
their higher reliability and capacity, the project of establishing the Group IT support centre is underway and will provide better support to internal users, and a number of measures are taken in
view of increasing information security. At the same time, attention is paid to increasing the cost
excellence, particularly in the area of the Group’s telecommunication costs. A special focus was
placed on introducing new processes and optimising the existing ones in order to provide support to users at any time, to structure work with requirements for changes and to formalise the
method of introducing new functions. When information systems are concerned, activities can be
generally divided into two groups: consolidation and development, with focus on reporting and
analytics. Consolidation projects are aimed at introducing new IT systems integrated at the level
of the entire Group for the purpose of increasing operational efficiency and reducing complexity,
i.e. minimising the total number of systems of the same type at the Group level. This group includes one of the largest IT projects in Atlantic’s history, the introduction of a new ERP system
in the distribution company Atlantic Trade Zagreb. This successfully executed implementation of
the SAP system has, by quality risk management, set a new group standard for ERP in distribution
companies. At the same time, the Group is also implementing a SAP ERP solution for its new offices in Frankfurt and Vienna. By successful risk management, this new tool was introduced into
operations of all companies without losing a single day for the delivery of products to customers.
As an example of the group approach to introducing new systems or functionalities for internal
users, we should mentioned DMS (Document Management System – a system for electronic
document management), a project initiated in the fourth quarter. This centrally managed project
will, in the next 18 months, introduce document management into all companies of Atlantic
Grupa, a solution that will, depending on regulations, either entirely eliminate or minimise the
need for paper documents in office operations, together with all synergies generated by a single
group process solution and software tool. The development activities in the area of reporting
were focused on introducing a group standard, report generation automation and quicker and
more precise reporting. The introduction of advanced analytics in real time, predictive analytics
and cognitive analytics (as one of the first companies in CEE) means that, in practice, there are
better foundations for quick decision-making based on facts. In this regard, the Group is relying
on IBM solutions with the support of local integrators. In Atlantic Grupa, activities aimed at using
information technologies for marketing analyses and direct work with end users are considered
to be very important. In this area, analytics of unstructured data archives (big data), listening to
social networks, mobile applications and the internet-of-things open new possibilities for targeted contacts with users and for developing products and offers adjusted to their needs. In this way,
the Group’s strategic determinant that the user is at the centre of corporate activities receives its
technological base.
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I N F O R M AT I O N S Y S T E M S I N 2 0 1 6
49
S TAT E M E N T O F T H E S E N I O R G R O U P
V I C E P R E S I D E N T F O R B U S I N E S S O P E R AT I O N S
MLADEN VEBER
senior group vice president
for business operations
50
business oper ations of atlantic grupa
ATLANTIC GRUPA in 2016 continued to strengthen its position of the leading regional distributor and, at the same time,
implemented ambitious plans for expanding the distribution
business to Western European countries, primarily Austria and
Germany. Other than as a major distributor, Atlantic Grupa is
present in South-East Europe as one of the leading producers
of consumer goods. Business operations in 2016 were marked
by the growth in sales of own brands in all business segments
except sports food, as well as by concluding new distribution
agreements. With the aim to develop a high quality own distribution support to the overall Atlantic Grupa’s portfolio in all key
international markets, Atlantic Grupa continued its significant
investments in local sales teams on the markets of Austria and
Germany, where in 2016 it established fully functional distribution companies. With Multipower as the leading European
brand of sports food and the group of strong Atlantic’s regional
brands with outstanding positions in South-East Europe, which
are also present in the Western markets and have a strong international potential (Argeta, Bakina Tajna (Granny’s Secret),
Donat Mg, Cedevita), Atlantic Grupa plans to significantly
increase its presence in Western European markets. Atlantic
Grupa continued to expand its distribution in the segment of
spirits by taking over the distribution of premium spirits of the
company Beam Suntory for the markets of Serbia, Macedonia,
Montenegro, Kosovo and Albania. Beam Suntory is the third
largest global company in the production of premium spirits
and the main categories we started to distribute are whisky and
tequila, sold under famous brands such as Jim Beam, Teachers, Canadian, Courvoisier and Sauza. On Western European
markets, Atlantic Grupa signed the agreement with the principal Nocco, a Swedish manufacturer of functional beverages
focused on health and fitness, whose products started to earn
substantial revenues. The restructuring of the Strategic Business Unit Sports and Functional Food was continued in 2016,
resulting in a simplified business model, lower costs and fewer
employees coupled with sustainable business growth. This included improvements in the production process, divesting of
low-profitability products, and reducing the number of product
ingredients by inventing new and advanced recipes, thus allowing for significant savings in the production process. At the beginning of March 2016, the cooperation with the major buyer of
the private label was terminated, causing a significant decrease
in sales. The Sports and Functional Food’s R&D department is
working on the development of new products and negotiations
with new potential partners for the production of private labels
are underway. In addition to many prizes and awards, Atlantic Grupa continued to work on strengthening its own brands,
namely through innovations, redesign of the existing portfolio,
launching of numerous new products and extensions of existing ones, while at the same time applying strict cost control
and increased focus on the company’s profitability. We enter
the year 2017 as a strong consolidated company with great expectations.
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STRATEGIC BUSINESS UNITS AND BUSINESS UNITS
Strategic Business Units and Business Units produce and develop brands which have through continuous development
of new and innovation of existing products secured leading
market positions not only in Croatia and the region, but also
in European Union and CIS markets. Business Units include
six Strategic Business Units – Beverages, Coffee, Snacks, Savoury Spreads, Pharma and Personal Care, and Sports and
Functional Food and two Business Units – Baby Food and
Gourmet.
S T R AT E G I C B U S I N E S S U N I T
BEVERAGES
As a prominent regional producer, Atlantic Grupa is continuously developing the activities of the
Strategic Business Unit Beverages (SBU Beverages) with the aim of better utilisation and stronger recognisability of its brands which are market leaders in their respective categories: Cedevita
and Multivita in the category of instant vitamin drinks, Multivita in the category of effervescent
tablets, Cockta and Jupi in the exceptionally strong and sizeable category of refreshing soft drinks,
Donat Mg in the category of mineral waters rich in magnesium and the brands Kala, Kalnička,
Tempel and Karađorđe in the category of non-carbonated and carbonated mineral and spring
waters.
In 2016, the SBU Beverages generated sales in the amount of HRK 637.2 million, focusing on actively managing the sales portfolio with the aim of increasing the share of more profitable product
groups with strong competitive advantages.
Sales in the region are at the level of the record-high 2015, while sales in the markets where Atlantic Grupa opened its own distribution companies recorded high growth (104% sales growth in
Germany and 11% in Austria). Compared to 2015, a growth in sales was achieved on the markets
of Sweden, Australia, Poland and Great Britain. Sales in the market of Russia recorded a 9% drop
compared to the previous year, as a result of the continuing decrease in purchasing power caused
by the depreciation of the national currency. However, the end of 2016 showed signs of recovery
and stabilisation on this market. Compared to 2015, a significant growth in sales was recorded in
the markets of Ukraine, the Baltic states and CIS countries (19% sales growth).
In the period between Q4 2015 and Q4 2016, the price of white sugar on the global market went
up from 380 USD/t to 610 USD/t, or 60%. The SBU Beverages uses long-term contracting methods in order to mitigate annual purchase value fluctuations of this key raw material in the industry
of soft drinks and instant vitamin drinks.
After the extensive redesign of Cedevita’s “At Home” segment in 2015, consumers recognised
Cedevita’s new identity and in 2016, according to the survey on the brand strength performed
by an independent Slovenian market research agency Valicon, Cedevita is the third strongest
regional brand. The brand strength index was higher on all the markets compared to 2015 (4% in
BiH). The latest research show a market share growth on the main markets in the retail segment
compared to the same period in 2015.
QUENCHING
YOUR THIRST
WHEREVER
YOU ARE
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53
S T R AT E G I C B U S I N E S S U N I T
BEVERAGES
637.2
millio n hrk
of sales
reven u e
in 2 0 16
104%
sa les g row t h
in g erman y
11%
sa les g row t h
in au st r ia
In the Cedevita’s “On-The-Go” segment, the 345 ml packaging recorded excellent results in its
second year after the redesign. The growth in value on the main regional markets amounted
to 9% compared to 2015. The success in the “Kids” segment of products intended for children
was facilitated by the new flavour Tropic and the packaging redesign, which contributed to a
double-digit growth in the “Kids” segment compared to 2015. Cedevita “On-The-Go” is the segment that leads Cedevita’s expansion to Western European markets, and Cedevita is, since 2016,
available in the largest retail chains in Austria and Germany, such as the largest German retail
chain Edeka. In the HoReCa segment, Cedevita achieved a double-digit growth compared to the
previous period. Growth was recorded on all markets, amounting to 12% compared to 2015. As
regards marketing activities, the campaign “Osvoji Fiću u kafiću” (Win a Fiat 500 in a café) in
the markets of Croatia and BiH attracted a lot of attention, ending with the total of 75,485 players
with 1,070,755 codes, which we consider to be one of the most successful prize contests in this
business segment – during the prize contest, sales in Croatia grew by 10% and in BiH as much
as 22%.
Cockta in 2016 retained its position of a different “cola” drink on the extremely competitive key
regional markets of carbonated soft drinks. This is also reflected on respective market shares,
which remained the same as in 2015. In 2016, Cockta defended its position of the strongest brand
in Slovenia according to the brand strength index measured in the category of carbonated soft
drinks and, according to the same index, achieved growth in Serbia, the largest market of carbonated drinks in the region. In 2014, Financial Times also recognised that Cockta is a top product even in global terms by ranking Cockta Original among the best 4 cola drinks in the world.
In 2016, Donat Mg continued its journey towards the vision of being a successful solution for
healthy digestion, after its effectiveness in regulating digestion was demonstrated in a clinical
trial performed in 2015 by the Analyze&Realize institute from Berlin. The fact that 2016 was a very
successful year for the brand Donat Mg was confirmed by 8 major communication awards that
Donat Mg received for advertising. Donat Mg made a significant step forward in retail sales and
presented a unique user experience with an interactive shelf that became a personal assistant
for solving different health problems. A total of four shelves were set-up, two in Slovenia and
two in Germany. The motto of our marketing is innovative ideas with a little humour, which was
confirmed in 2016 with a viral campaign “Donat Trump”, which was shared more than 8,000
times on social networks. Further, in 2016 Donat Mg strengthened medical evidence in the area
of detoxification and carried out the observation study Detox Mg in cooperation with the Medical
Centre Rogaška.
t he g row t h in
va lu e in t he
ced ev ita’s “o n t he- g o ” seg me n t
amo u n t ed t o
9%
co mp ared
t o 2 0 15
54
The SBU Beverages’ quality and environmental management systems comply with the strict international standards (ISO 9001, 14001, HACCP, FSSC 22000), while sites in Croatia and Slovenia
hold the most comprehensive food safety management system certificate FSSC 22000.
str ategic business units and business units
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S T R AT E G I C B U S I N E S S U N I T
BEVERAGES
SALES BY COUNTRIES
3.2 %
rus
so u r ce : i nt e r na l at la nt i c data
9.4 %
mac 2 . 7 %
mn e 2 . 3 %
ot h er 1. 8 %
au t 1. 4 %
ita 0 . 9 %
ge r 0 . 3 %
36.8 %
cro
9.7 %
b& h
14.7 %
se r
26.1 %
slo
S A L E S B Y C AT E G O R I E S
vi d
43.3 %
fun ct io n al d r i n ks
24.8 %
cs d
21.2 %
bo tt led wat er
5.4 %
can d ies
4.1 %
ot h er
1.3 %
in 201 4
f inancial t imes
r ank ed co ck ta
o r ig inal
amo ng t h e
b es t
4
co l a dr ink s
in t h e w o rl d
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str ategic business units and business units
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S T R AT E G I C B U S I N E S S U N I T
COFFEE
With its Strategic Business Unit Coffee (SBU Coffee), Atlantic Grupa’s coffee brands successfully compete in all coffee segments and have impressive market leading position in the Adria region. This
means that Atlantic Grupa is the leading coffee producer in the region known for consumption of
traditional or Turkish coffee. Key business strengths are strong brand portfolio, product and regional
know/how, flexible business operations and high quality product portfolio in the categories of Turkish,
instant and espresso coffee. The most important brands are Barcaffè, Grand Kafa and Bonito. As a
market leader in the category of Turkish coffee in Slovenia, Serbia, Bosnia & Herzegovina and Macedonia, SBU Coffee stands out as Atlantic Grupa’s leading business unit by generating sales in the
amount of HRK 1.06 billion in 2016, which represents 21% of total AG turnover with the total of 23,956
tonnes of coffee sold in 2016. Key markets in 2016 are Serbia and Slovenia, accounting for 46.7% and
28.3% of sales, respectively, followed by BiH (8.8%), Croatia (8.0%) and Macedonia (6.2%). Exports to
other markets recorded a 34% value growth compared to the previous year. Sales in coffee categories
are dominated by Turkish coffee with 89% of total sales, followed by espresso 7%, instant coffee 3%
and other coffee 1%.
In late 2016, the market of raw coffee recorded a 30-percent increase in price caused by 50% lower
yields of the Brazilian robusta coffee Conilon. The resulting compensation of Conilon with Rio Minas
directly affected the price of Rio Minas raw coffee, which was in some cases 50% higher than in previous periods. Moreover, global raw coffee reserves ended the year at minimum levels due to low yields
in Vietnam and Indonesia, which had a direct effect of carrying the trend of increasing prices and low
global reserves from 2016 into 2017, while forecasts indicate that this trend will continue until 2019;
all of the above reflects the challenging and dynamic conditions in which the SBU Coffee operates.
Despite the complex market situation, the leading market shares in all regional markets were successfully maintained and increased. The upward trend in traditional coffee in Slovenia, present from
the beginning of the year, is primarily led by the upward trend of the leader in this category, the brand
Barcaffè. At the end of the year, Barcaffè recorded the highest value share in the last two years of 81%.
After a downward trend at the beginning of the year, the market of traditional coffee in Croatia has stabilised and Barcaffè recorded a 1.1 % increase in value share compared to the last year. In Bosnia and
Herzegovina, Grand Gold improved its volume and value shares and remained the absolute leader
with 18.5% of the market in the last measurement period, while Grand Aroma maintained its stable
market share. As in the previous year, the segment of traditional coffee in Serbia recorded lower sales.
Despite the category’s declining trend, on its largest market the SBU Coffee ended the year 2016 with
a 52.9% value market share in this category. Grand Gold remains the highest-selling product, while
Bonito successfully retained its second position in Serbia, continuing the trend of highest growth in
the entire segment of traditional coffee from the previous year.
THE REGION
WAKES UP
WITH US
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S T R AT E G I C B U S I N E S S U N I T
COFFEE
1.06
bi llio n h rk o f
sa les reven u e
in 2 0 16 w h ich
rep res en t s
21%
of t o tal ag
t u rn ov er
As regards the development of new products, in 2016 we launched Black‘n’Easy sugar coffee. This
new category represents a revolution in traditional coffee – now for everyone who loves coffee with
sugar. Under this innovative brand, last year we have successfully launched the concept of traditional
coffee offer in the HoReCa channel, B’n’E Make it yourself, offering the possibility to make an always
fresh cup of B’n’E coffee in your favourite café, which is a strong trend among young people. Sales in
the region show that B’n’E products continue to successfully build their market position with great
development potentials. The year 2016 also saw the entry into the market of Montenegro by creating
a new product, Grand Kafa Dark Gold, additionally roasted special coffee blend with strong aroma.
In the “White cup” category, Barcaffè launched a new product line Fantasy Cappuccino, consisting
of four new flavours – Cherry Vanilla, Spicy Cake, Choco Nougat and Irish Vanilla. The Grand Kafa’s
instant coffee assortment was also expanded with a new flavour of strong coffee – Grand Student in
the segment 3in1, as well as a new ice coffee flavour Grand Freeze Irish Cream.
23,956
t o n n es o f co f f e e
so ld in 2 0 16
k ey mark et s in 2 0 1 6
are s erb ia w it h
46.7%
of sales reven ue
an d s loven ia w i th
28.3%
of sales reven ue
The SBU Coffee is strongly developing Barcaffè&Go segment, a modern and trendy concept that
provides freedom of movement together with excellent quality of Barcaffè espresso coffee. In 2016,
Barcaffè&Go sales in Croatia increased to 1.4 million beverages, while in Slovenia this number reached
9 million, which represents a 34% growth in sales compared to the previous year. In parallel, the SBU
Coffee in 2016 continued to work on developing products that will meet the contemporary needs – developing coffee machines and coffee in capsules, both for in-home consumption and in the HoReCa
channel, building its future strategic positions.
The year 2016 was also significant for communication platforms of all brands under the SBU Coffee.
In Croatia, Barcaffè continued its communication on the platform “For a beautiful day” with targeted activities of distributing free product samples across the country. In Slovenia, Barcaffè launched
a successful marketing campaign 360 degrees and a prize contest called “Okus, ki nagrajuje!” (An
awarding taste). In Serbia, coffee Grand Aroma organised the Night of Aroma, a loyalty programme
whose unique and innovative concept gathered 18,000 faithful consumers, as well as many other
prize actions. The SBU Coffee fosters a two-way communication with consumers and invests in developing consumer relations through new digital media and campaigns, online contests, YouTube
magazine and Facebook and Viber applications. The modern communication strategy of Grand Kafa
brands resulted in numerous awards, of which we should in 2016 point out 7 awards of the Serbian
Association of Market Communication Professionals (UEPS), and many other prizes and awards.
The SBU Coffee’s production facilities increased their operational efficiency and enabled the packaging of 24,000 tonnes of coffee in four production sites.
58
str ategic business units and business units
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S T R AT E G I C B U S I N E S S U N I T
COFFEE
6.2 %
mac
2.0 %
o t h er
8.0 %
cro
8.8 %
b& h
28.3 %
sl o
so u r ce : i nt e r na l at la nt i c data
SALES BY COUNTRIES
46.7 %
s er
S A L E S B Y C AT E G O R I E S
t u rk is h co f f ee
88.9 %
esp res so
6.9 %
in stan t s
3.0 %
ot h er
1.2 %
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S T R AT E G I C B U S I N E S S U N I T
SNACKS
The Strategic Business Unit Snacks (SBU Snacks) consists of one of the leading regional candy
companies – Soko Štark d.o.o. Production facilities with 870 employees are located in Serbia
(Belgrade and Ljubovija). A majority of product categories (chocolate, cookies, tea biscuits, wafers, flips, and sticks) are manufactured under own technical and technological conditions in
the above mentioned facilities, while a smaller share of products are manufactured by service
partners. A new sales record was set in 2016 – over 28,000 tonnes of sold products, revenue in
the amount of HRK 651.3 million, which represents a 3% growth in sales compared to 2015. As
regards the sales structure, the dominating categories are chocolates and flips with around 60%
share. In general, the year 2016 was marked by above-average growth in the sweets segment,
particularly the categories of chocolates and chocolate bars. The category of sticks is the most
important in the salty segment.
As regards the geographical sales structure, no significant changes were recorded. Serbia remains the primary market with around 65% share, with a growing share of export markets, mostly
in the region. Markets outside the region posted a noticeable 8% growth compared to the last
year, but their contribution to the business results still remains below 2%. We started cooperation
with almost 20 new buyers, and our products had their début in stores across Bulgaria, Moldova,
Cyprus and the Netherlands. The SBU Snacks is focusing more attention on developing its own
retail network, building direct consumer relations and developing a respectable corporate image.
At present, the network consists of 12 stores in Belgrade. A novelty in the SBU Snacks’ operations
is the development of the B2B sales channel. In line with the available product range, B2B is
oriented towards the bakery and pastry industry, and cooperation was established with several
partners.
Smoki, rightfully called the “favourite snack”, retained its leading positions in all markets in the
region other than Macedonia, where it is for years competing with a strong local brand. Mega
Hrsker, a product with a higher share of peanuts in its composition, earned a permanent place
in the portfolio with its quality. In addition to the brand Menaž, chocolates under the brand Najlepše Želje ensure the Štark’s position of the leading chocolate producer in the market of Serbia,
in front of the regional leader Milka. The development of this brand over the last years resulted
in a significant move from an exclusively traditional, somewhat conservative image to the brand
whose subvariants appeal to a wide consumer base. In 2016, emphasis was placed on developing
the latest brands PLUS and LOL by launching extensions with new flavours (apricot and wheat
crispy). Bananica, as one of the oldest Štark brands, reached almost a third of the market share
on an exceptionally diverse bars market. The year 2016 will be marked in Bananica’s history as
the year of the first product innovation – Skroz Čoko Bananica. Sweeet, as a modern brand in the
category of chocolate sticks, retained its stable market position, while a lime flavour was added to
its fruit extensions. The redesign, new flavour extensions (lemon-ginger in 2016) and marketing
support have brought Integrino to the position of a prominent member of the Štark’s biscuit
family. In the segment of integral cookies in Serbia, it holds a significant position with a 12.8%
volume market share.
at l a n t i c g r u p a
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Originalna boja
Napolitanke
S A LT Y O R S W E E T –
A PERFECT SNACK
FOR EVERYBODY
str ategic business units and business units
61
S T R AT E G I C B U S I N E S S U N I T
SNACKS
651.3
millio n hrk o f
sa les reven u e
in 2 0 16
3%
gr ow t h in s ale s
co mp ared t o 2 0 1 5
Innovations in the production programme are followed by innovative marketing communication.
There is a growing trend of direct inclusion of consumers by developing a two-way relationship
that strengthens brand association. The campaign PRANKS, which followed the portfolio expansion of the latest Najlepše Želje sub-brand LOL, with its contest for the best video, is an example
of creative consumer animation. The professional public gave a special award to the action “Najlepše Želje – say it with chocolate”. This action was awarded as the BEST BRAND PR PROJECT
by the PR association of Serbia, while UEPS (Serbian Marketing Communications Association)
ranked it highly in the categories of promotion at the point-of-sale, customer relations and direct
marketing. This action was implemented in Štark shops for Valentine’s Day and Women’s Day,
offering customers an opportunity to give their loved one a chocolate with a personal message
engraved in beautiful letters written by a calligrapher.
Record-high sales are followed by record-high production. By continuous efforts we increased the
utilisation rate of chocolate and Bananica production lines. The investment into pneumatic sugar
transport is particularly significant as sugar is strategically a very important raw material. The new
procedure of handling this raw material on five production lines not only improved operating efficiency, but also had positive effects on the quality and safety of final products. In respect of other
investments, we should mention the start of Smoki’s packaging optimisation and automation.
As recognition for the company’s environmental responsibility, Štark again received a certificate
for reducing CO2 emission given by the company Sekopak. In this regard, the investment in a
separate waste collection system played a significant role. The preparation of the wastewater treatment facility action plan is also an indicator of our permanent focus on operations coupled with
environmental protection. The company’s attitude towards responsible business conduct was officially confirmed by a number of certificates of compliance with international quality standards.
62
str ategic business units and business units
at l a n t i c g r u p a
annual report 2016
S T R AT E G I C B U S I N E S S U N I T
SNACKS
3.5 %
sl o
4.9 %
cro
5.1 %
mac
3.2 %
o t h er 1 , 7 %
kv 1,5 %
5.6 %
mn e
12.9 %
b& h
so u r ce : i nt e r na l at la nt i c data
SALES BY COUNTRIES
64.8 %
s er
S A L E S B Y C AT E G O R I E S
co n f ect io n ary
66.0 %
sa lt y sn ack s
34.0 %
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annual report 2016
str ategic business units and business units
63
S T R AT E G I C B U S I N E S S U N I T
SAVOURY SPREADS
The SBU Savoury Spreads reached outstanding results in 2016 and recorded a 9% growth relative
to the previous year. Both brands contributed to that growth, with sales of Argeta and Montana
up 12% and 1% respectively in terms of value.
Among novelties in Argeta’s portfolio that contributed to the largest extent to the brand’s growth,
definitely are the new tastes adapted locally and for particular occasions. First, in a warmly received campaign Argeta offered consumers in Slovenia, Croatia, Bosnia and Herzegovina and in
Serbia to vote and choose their favourite among three local tastes in each country, where each
taste with its ingredients represented the country and its regions to the fullest. In an exciting
vox popoli voting the winning taste in each country was recognised and Argeta proceeded with
the production of the winning local tastes. The campaign left an amazing emotional mark with
consumers immensely appreciating Argeta’s efforts to bring forward local ingredients and tastes
which also reflected in outstanding sales results of those products. Second, the new Argeta Ramadan pâté, a milder and less salty variation, presented a warmly welcomed meal component for
fasting time. Also, this thoughtful consideration of consumer’s needs, habits and preferences
brought plenty of positive feedback. Third, the immensely successful adaptation to local preferences preformed extraordinary also among Austrian and German consumers. The Jagd-Aufstrich
or the Hunters Pâté in English resonated extremely well with Austrian and German consumers
used to strong and specific taste of similar pates. A locally adapted approach therefore proved to
be vastly benefiting to Argeta.
Due to the success of Argeta Exclusive sub-brand in previous years when it was present on the
shelves only during the end of the year festive season, Argeta Exclusive with truffles and Argeta
Exclusive venison with rosemary were launched as all year present tastes in 2016. Additionally,
following the tradition of the past years, a special Chef’s Selection Argeta Exclusive was launched
in October of 2016. This time, an amazing recipe combining smoked sea bass, honey and pear
was developed in cooperation with renowned Istrian restaurant Stari Kaštel.
THE GOOD
SIDE OF
BREAD
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annual report 2016
str ategic business units and business units
65
S T R AT E G I C B U S I N E S S U N I T
SAVOURY SPREADS
9%
gr ow t h in s ale s
co mp ared t o 2 0 1 5
12%
gr ow t h in
sa les o f
arg eta
1%
gr ow t h in
sa les o f
mo n tan e
Following an outstanding consumer insight indicating that a considerable amount of consumers
mixes cheese bread spreads and pâté, a new taste Creamy Tuna was launched under the Argeta
Junior sub-brand, containing 20% of cheese bread spread. The Creamy Tuna was immediately
warmly received by both children and parents alike and became instantly one of the most beloved
Argeta Junior tastes.
In 2016 Argeta celebrated 15 years of the slogan “Good side of bread”, proving that outstanding
amount of people in our region – but also far beyond it – really consider Argeta as being their
favourite bread topping. The emotional connection with Argeta brand was highlighted in brand’s
marketing communication featuring a new emotional communication platform “How do you
love yours?”. Reminding people why they love Argeta, the campaign brought immense amount of
goodwill to Argeta brand and confirmed its robust position among the top 10 strongest brands in
the Adriatic region (source: Valicon research, 2016).
The strategy of “thinking globally, acting locally” and strong increase in the Lovemark status of
Argeta brought outstanding business results. Sales in terms of value increased significantly in
Croatia, where Argeta closed the gap in market share towards market leader considerably, also in
Serbia, Slovenia, Bosnia and Herzegovina, Montenegro and Kosovo.
Argeta was again very successful on the markets outside the region: Argeta is the best-selling pâté
on the Austrian market, has achieved its highest market share to date in Switzerland, where it has
gained considerably on the market leader. Argeta also achieved high growth in sales outside the
region in United Kingdom, Canada and Australia.
Despite the decreasing trend in the sandwich category in Slovenia and Croatia, and strong price
increases that were implemented at the end of 2015 in Croatia and in mid-2016 in Slovenia, ranging from 20% to 40%, Montana has still managed to slightly grow in value in 2016. Aggressive
price increase and exit from the Serbian market has reflected in a 12% volume decrease, but
having in mind the 1% growth in value, we have managed to substantially grow our profitability.
The growing trend in Snacking and Grab’n’Go categories rolling from Western Europe to the
Balkan region is visible in intensive Grab’n’Go corners growth in the Retail and Petrol Channel.
In line with our strategy we have successfully launched new Grab’n’Go categories: Pancakes (two
flavours, with chocolate-nut and apricot marmalade filling) and Ready-to-Eat salads in 3 versions
in Petrol channel. New products have contributed to our growth in value, but to a lesser extent in
volume, being limited to Petrol channel distribution. With learnings from 2016 we have developed
new strategy for Montana, which will expand Brand’s footprint in other Sales channels, especially
in Retail by introducing new Grab’n’Go categories that will fit new consumers’ needs in regards
to snacking and convenient meal solutions out of home. In Slovenia we have already moved
the Brand in new direction with current Sandwich portfolio, that was successfully introduced to
Mercator and Tuš hyper and supermarkets. Our Triangle sandwich portfolio was refreshed with
two new sandwich recipes, Hummus for more health oriented consumers, and Piko intended for
children that adore Piko salami.
As planned we have successfully introduced new Savoury Spreads Brand, ŠEF, targeting heavy
pork liver pate consumers buying explicitly mainstream liver pates, which still represent more
than 48% of the biggest pate market in Zone East, Serbia, and cannot be converted to Argeta due
to Argeta’s premium pricing and no pork meat policy.
66
str ategic business units and business units
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S T R AT E G I C B U S I N E S S U N I T
SAVOURY SPREADS
7.8 %
au t
7.1 %
s w e 2.7 %
rus 2.1 %
mne 1 .6 %
ita 0.7 %
8.0 %
kv
8.3 %
mac
6.3 %
g er
9.4 %
se r
4.8 %
ch
12.9 %
cro
3.9 %
o t h er
13.9 %
sl o
17.6 %
b &h
so u r ce : i nt e r na l at la nt i c data
SALES BY COUNTRIES
SALES BY BRANDS
arg eta
95.8 %
mo n tan a
4.2 %
at l a n t i c g r u p a
annual report 2016
str ategic business units and business units
67
S T R AT E G I C B U S I N E S S U N I T
PHARMA AND PERSONAL CARE
The Strategic Business Unit Pharma and Personal Care, as a quality example of vertical integration (production – distribution – retail), has for years been recognised in Croatia and the region
as a successful business model that follows its own brands (Dietpharm, Melem, Plidenta, Lip
Balm, etc.) from production to their final consumers. The production of dietary supplements,
over-the-counter (OTC) medicines and cosmetics, other than the usual retail distribution through
the wholesale pharmacy, was also implemented in the pharmacy market, both in own and other
pharmacies and specialised stores.
The company Fidifarm, as the market leader in dietary supplements in Croatia, is under its brand
Dietpharm already present for many years in the region, with a special focus on export markets.
The brand Dietpharm in 2016 retained its leading position on the Croatian market of dietary supplements with a 22% market share. The brand that included 92 products has been additionally
strengthened with two new dietary supplements: Magnesium Night for insomnia and the probiotic Biotic Baby. A new medicine was launched in the growing segment of flu and cold – Acekal C.
In 2016, Dietpharm put even more focus on developing its loyalty programme Health Club that
has over 80,000 members who are collecting points in contracted pharmacies across Croatia.
Dietpharm is present on 10 export markets, of which Russia is one of the most important ones,
and which is still experiencing negative economic impacts. Nevertheless, Multivita maintained its
high market share in Vitamin C sales on that market. At the conference organised by the Pharmaceutical Organisation of Saint Petersburg and Russia’s North-western region, Multivita Vitamin
C was selected as the “Product of the Year 2016”.
Neva, which established itself on the domestic market with the brands Plidenta, Melem and
Rosal Lip Balm, outside Croatia continued to strengthen its focus on the segment of production
of private labels. Plidenta stands out as a major brand in the product portfolio with a 25% share
in the total sales of Neva, and in 2016 two new products were launched – Plidenta Fresh & White,
and Plidenta Extra Smile White.
at l a n t i c g r u p a
annual report 2016
W E TA K E
CARE OF
YOUR BEAUTY
A N D H E A LT H
str ategic business units and business units
69
S T R AT E G I C B U S I N E S S U N I T
PHARMA AND PERSONAL CARE
Under the brand Rosal, the highest share in sales is held by Lip Balm products, where in 2016 we
redesigned the entire Lip Balm assortment and launched new products – RLB Magic Pink – the
first black balm that colours your lips pink, and RLB Sun Protect – balm with the SPF factor 30
for protection from the Sun. In 2016, Rosal Lip Balm Magic Pink won the Cosmopolitan Beauty
award for the most innovative product given by the magazine’s female readers, i.e. our consumers.
At the year’s end, we successfully launched Rosal Lip Balm Macarons, lip balms in innovative
packaging similar to French macaron cookies, with increased aroma, which protect and give lips
a special glow.
Melem shows improved brand strength and consumer loyalty, which is reflected in a double-digit
growth in sales (+12%) for a second year in a row. A new product was launched, Melem 25 ml in
a tube, which also started the implementation of a more feminine packaging design of the entire
product line. Melem continues to put special focus on the Melem Club users by giving out numerous prizes and by organising social events between users.
70
str ategic business units and business units
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S T R AT E G I C B U S I N E S S U N I T
PHARMA AND PERSONAL CARE
Other than distributing own brands, the wholesale pharmacy Atlantic Pharmacentar each year
expands its distribution portfolio with new exclusive agreements with cosmetics and other OTC
brands. As regards the sales assortment, the share of principal brands, particularly in the segment of cosmetics, is growing, while Dietpharm has a 41% share in the wholesale pharmacy’s
total sales.
The chain of pharmacies and specialised stores Farmacia by further acquisitions and opening of
new stores continues to strengthen its position as the leading private pharmacy chain, offering
additional services, specialised counselling centres and following global trends in this sector.
Farmacia has a total of 81 units (48 pharmacies and 33 specialised stores). In 2016, it continued
its actions in three directions: relations with patients through expert recommendations and the
counselling centre, further employee training through its own education centre, and relations
with the professional community. At the Ministry of Health, Farmacia is participating in the work
of a newly established Committee for preparing the pharmacy sector strategy, a very important
document that will set the future development of the pharmacy sector in Croatia. In 2016 we
continued cooperation with the Croatian Medical Chamber as well as with the Croatian Pharmaceutical Society, where Farmacia supported several public health actions. At the session of the
Faculty of Pharmacy and Biochemistry held for the purpose of celebrating 134 years since the
establishment of this faculty in Zagreb, Farmacia received a certificate of gratitude for its support
and successful cooperation in improving scientific-educational activities and the student standard. A new webpage farmacia.hr was launched, and Farmacia is also present on social networks
Facebook and Instagram.
81
v enues o f
p h armacies an d
s p ecial is ed
s t o res
f armacia across
t h e rep ub l ic of
cro at ia
33
s p ecial is ed
s t o res
48
p h armacies
As the quality and safety of products are key factors in acquiring and maintaining consumer trust,
high product quality is ensured by systematic investments in knowledge, equipment, technical
skills, marketing and consumer communication. The SBU Pharma and Personal Care’s quality management systems comply with the strict international standards (ISO 9001, ISO 14000,
HACCP, GMP).
at l a n t i c g r u p a
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str ategic business units and business units
71
S T R AT E G I C B U S I N E S S U N I T
PHARMA AND PERSONAL CARE
so u r ce : i nt e r na l at la nt i c data
SALES BY COUNTRIES - PHARMA
6.3 %
r us
4.0 %
b&h
6.5 %
o th e r 2 . 9 %
ser 2.4 %
mac 0.8 %
i ta 0 . 4 %
83.3 %
cro
S A L E S B Y C AT E G O R I E S - P H A R M A
72
farmacia
65.3 %
neva
12.9 %
d i e tph a r m
12.4 %
m ulti v i ta
6.0 %
o th e r
3.4 %
str ategic business units and business units
at l a n t i c g r u p a
annual report 2016
S T R AT E G I C B U S I N E S S U N I T
PHARMA AND PERSONAL CARE
7.9 %
ot h er
5.4 %
ita 2.8 %
mac 2.6 %
17.4 %
b& h
so u r ce : i nt e r na l at la nt i c data
SALES BY COUNTRIES - PERSONAL CARE
3.2 %
s er
66.1 %
cro
S A L E S B Y C AT E G O R I E S - P E R S O N A L C A R E
pl id en ta
29.5 %
pr ivat e la b el
21.8 %
melem
20.8 %
ro s al
20.1 %
ot h er
7.8 %
at l a n t i c g r u p a
annual report 2016
str ategic business units and business units
73
S T R AT E G I C B U S I N E S S U N I T
SPORTS AND FUNCTIONAL FOOD
The Strategic Business Unit Sports and Functional Food (SBU Sports and Functional Food) specialises in the development, production and marketing of sports nutrition and weight-management products. In 2017, it will celebrate forty years. Tradition and constant innovation in the
sports food segment have resulted in being one the leading producers of sports and functional
food in Germany. The headquarters of the SBU Sports and Functional Food are in Hamburg and
the products are sold on the European market under the three brands, Multipower, Champ and
Multaben.
The SBU Sports and Functional Food’s production processes are certified by ISO 9001:2000
and IFS. The production plant for powder products and supplements is located in Bleckede near
Hamburg, where some of the first protein powders in Europe were produced. The plant is employing 70 people, producing protein powders and meal replacement products for three of our
own brands as well as for private label customers. In 2016, the production facility was certified
with Environmental certificate ISO 14000 and can produce Halal certified products. The plant for
production of protein and variety of other bars opened in 2015 in Nova Gradiška, Croatia. The
facility is equipped with the top technology capable of producing around 100 million protein bars
a year. This new plant enabled the SBU Sports and Functional Food to transfer the production of
this segment from external producers to its’ own manufacturing. Following constant innovation
on the market, additional technological investments were performed during 2016 in order to improve the production efficiency and product safety: production equipment for protein bars sprinkling and automatic transport and sieving system of dry premixes. The plant in Nova Gradiška at
the end of 2016 employed a team of 87 people.
The SBU Sports and Functional Food in 2016 continued its restructuring process with focus on
business simplification, cost reduction and preparation for sustainable business growth. Within the restructuring process, product portfolio was optimized and simplified, and the number
of raw ingredients was significantly reduced. Focus sales markets were defined and new sales
policy for all other markets was implemented. Key processes in the supply chain, such as the
planning process and production cycles, were reset, including inventory management. This led to
the reduction of raw materials and finished goods inventory, improved operational efficiency and
reduced out of stock situations. Overall costs were levelled to the size of the business, most of it
coming from the headcount reduction in company headquarters and production plant Bleckede.
In line with the new strategy, the SBU focused on the branded part of the business, strengthening both major brands, Multipower and Champ. Historically, Multipower was positioned in the
sports channel, now shifting focus to the two most growing channels in sports nutrition: mass
market and online. Most of the Multipower portfolio was renovated in 2016, with a clear focus on
protein bars development and entering the mass market. The biggest success of 2016 was the
launch of Multipower 53% protein bars with the highest protein content on the market. Multipower premium powder range was supported by all year engaging online campaign “Join the power”,
which reached more than 14 million impressions via online media.
at l a n t i c g r u p a
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FEED YOUR
INNER
CHAMPION
str ategic business units and business units
75
S T R AT E G I C B U S I N E S S U N I T
SPORTS AND FUNCTIONAL FOOD
40
The endurance line was redesigned and enriched by the launch of the new endurance gel, developed together with world leading triathlon athlete, Jan Frodeno.
year s o f
t r ad it io n
Champ, the first brand ever present in the sports nutrition German mass market, was renovated
and re-launched in order to regain his former strong position and profitability. The re-launch was
supported with a marketing campaign “Gratis testen”, which invited consumers to try the new
and better Champ.
Private label business is historically an important pillar of Sports and Functional Food. In order to
improve its profitability and bring volumes to both of our plants, strategic approach of the business moved from small and complex customers to high volume and profitable ones. This resulted with the first successful contract in 2016 for bars manufacturing and opening of more than 20
new projects for 2017. Termination of the contract with the largest private label customer in the
bars segment in early 2016 caused a big drop in private label sales, affecting the overall business
situation. Private label will continue its aggressive growth in powders and bars to support SFF
branded business on its way to quick return to profitability.
During 2016, Multipower as the focus brand kept its highest sales share within the SBU’s portfolio, with stable sales on the domestic market. Highest growth was achieved on the Austrian
market. The United Kingdom’s exit from the European Union and the pound-to-euro exchange
rate had a negative effect on the UK market, which experienced a decline compared to 2015. In
the next three years, the SFF plans to stay focused on the domestic German market and further
develop opportunity markets of Austria, UK, Italy and Croatia. Mass market and online channels
will be in focus, supported by stable sales in the Sports channel. SFF will keep investing in our
three brands through innovation, brand building and sales support:
• Multipower: a top line sport food for active and professional sportsmen with the highest quality of ingredients and recipes within all major segments of the Sports Food category;
•
• Champ: a mainstream entry-level brand for active people and health conscious individuals,
offering easy intake of proteins every day;
•
• Multaben: moving from weight loss to meal replacement and healthy lifestyle categories,
targeting women who would like to feel good in their body and enjoy tasty meal replacement
products during their busy day.
76
str ategic business units and business units
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S T R AT E G I C B U S I N E S S U N I T
SPORTS AND FUNCTIONAL FOOD
7.0 %
uk
5.7 %
ita
9.4 %
ch
5.0 %
aut
4.3 %
es p
3.3 %
t ur
17.6 %
ot h er
2.3 %
swe 1,3 %
cro 1 , 0 %
so u r ce : i nt e r na l at la nt i c data
SALES BY COUNTRIES
45.5 %
g er
SALES BY BRANDS
mu lt ip ow er
42.5 %
pr ivat e la b el
35.9 %
champ
11.7 %
mu lta b en
8.4 %
ot h er
1.5 %
at l a n t i c g r u p a
annual report 2016
str ategic business units and business units
77
BUSINESS UNIT
GOURMET
In 2016, the BU Gourmet generated sales in the amount of HRK 33 million. The decrease in sales
compared to 2015 was mostly caused by the implementation of a new commercial policy, with the
largest impact on the Serbian market. Additionally, the business unit’s strategic decision to cease
the production of private labels had further adversely affected the sales performance. It is worth
noting that the brand Bakina Tajna (Granny’s Secret) recorded a double-digit growth in relation to
the last year, namely in the most significant markets like Croatia, Slovenia, United Kingdom and
France, which indicates the viability of the business unit’s strategy.
A significant focus in 2016 was on optimising the portfolio in line with Atlantic Grupa’s market
segmentation into Zone East and Zone West. After reviewing commercial terms and negotiating
with the key clients in Serbia, we found a mutually satisfying solution for the current profitability
challenges. At the same time, we designed a portfolio for Zone West with 41 products that are
presented on international markets.
We established cooperation with many new clients in the markets of Germany, Austria, France,
United Kingdom, Croatia and Slovenia. In the HoReCa channel, our orange juice was launched in
the markets of United Kingdom and France. We have also promoted a new brand identity with a
more readable label, new cap colour and a new design of samples.
Concurrently with designing and implementing the sales strategy, significant efforts were invested in optimising production processes and thus the costs. In this part of operations we managed
to create preconditions for purchasing a majority of raw materials for production in the season
and we are able to process them using our own capacities, which has a positive impact on our
profitability. A review of all components and standards for all semi-finished products and finished
products was carried out and the complexity of labelling was reduced by forming language groups
in German, English, French, Russian, Croatian and Serbian languages. The prices and assortment
of Bakina Tajna (Granny’s Secret) were revised in the markets of Austria and Germany. The strategy for market approach and support was harmonised in all markets in accordance with their classification and we successfully passed all internal and external audits in line with ISO standards.
33
mil l io n h rk
o f s al es
rev enue
in 201 6
In Croatia, we implemented a campaign aimed at increasing recognisability of the brand Bakina
Tajna (Granny’s Secret) and communicating that Ajvar relish can be enjoyed on many occasions.
We are proud winners of the “Site of the Day” award for the best designed webpage in the world,
and for a fifth time in a row we won the “Great Taste Award” in United Kingdom for our blackcurrant juice.
As regards capital investments in 2016, the most significant one is the pepper roasting line and
the system for automatic washing of equipment (the so called CIP system). In addition to increasing the capacities, the new roasting line provides an option of processing fresh peppers in
the season, with further positive effects on profitability, while the procurement of the CIP system
represents an additional investment in raising the quality of our products.
at l a n t i c g r u p a
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FOOD FOR
THE SOUL
str ategic business units and business units
79
BUSINESS UNIT
GOURMET
so u r ce : i nt e r na l at la nt i c data
SALES BY COUNTRIES
7.2 %
r us
5.8 %
b&h
7.6 %
slo
4.8 %
fr a
10.6 %
o th e r
4.1 %
mne
3.9 %
uk
3.8 %
ger
11.0 %
cro
41.2 %
ser
SALES BY BRANDS
80
g r a n n y ’s s e c r e t
78.4 %
amfissa
21.0 %
pr i v ate l a be l
0.6 %
str ategic business units and business units
at l a n t i c g r u p a
annual report 2016
BUSINESS UNIT
GOURMET
BUSINESS UNIT
BABY FOOD
While most of the Russian market segments struggle with macroeconomic environment, depreciation
of the Russian rouble, reduced purchasing power and decrease in value and volume, the Baby Food
category shows significant growth in the cereals segment: +10% in value and + 8% in volume. Parents
did not cut expenses for babies’ needs and, in addition, the positive birth rate dynamic provides the
market with new opportunities for development. The Business Unit Baby Food shows the same positive dynamics in rouble terms, especially in the baby cereals category, keeping the fourth market share
position. The main progress deliverer are Baby Special Stores, where the brand has +24% of value and
+7% of volume growth.
In order to win new customers, we launched four new products in the Baby cereals segment: two
products in the goat milk products sub-category and two new products in the milk cereals category. The
products reached 4.5% of cereals portfolio volume and 6.1% value with sales starting from July 2016.
Adaptation of the top seven products’ packaging for Baltic region with product description in Latvian,
Estonian, Lithuanian language instead of a sticker over Russian packaging increased brand locality and
recognition in the Region.
The process of core range assortment review was held. As a result, the recommended assortments for
key channels were proposed and assortment mix for top clients was approved, in order to present more
categories of our assortment and discontinue unpopular and non profitable products.
We actively worked with all main social media in the region: Vkontakte, Facebook, Odniklassniki and
Instagram, with admirable results: +750 new followers in social networks VKontakte, Facebook, Odnoclassniki, Instagram, 1,640,830 people covered (two times more than the previous time) and doubled
the engagement rate on social networks. Simultaneously, web site bebi.ru was improved and a new
visual code for posts and communities was implemented, which helped to increase brand recognition
and engagement rate.
FROM THE
F I R S T D AY
OF LIFE
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str ategic business units and business units
83
BUSINESS UNIT
BABY FOOD
SALES BY COUNTRIES
10%
va lu e g row t h
in t he cereals
se g men t o n
t he ru ssian
mark et
14.4 %
o th e r c i s c o un t r ies
6.4 %
u kr
8%
vo lu me
gr ow t h in
t he cereals
se g men t o n
t he ru ssian
mark et
so urce: internal atlantic d ata
79.2 %
r us
84
S A L E S B Y C AT E G O R I E S
b a by c e r e a l s
78.3 %
m i l k f o r m ul a
9.5 %
b a by bi s c ui ts
6.3 %
b a by te a s
3.0 %
b a by wate r
2.9 %
str ategic business units and business units
at l a n t i c g r u p a
annual report 2016
The STRATEGIC DISTRIBUTION UNITS AND DISTRIBUTION UNITS have a highly developed know-how in the
fields of key client management, product category management, supply chain management, trade marketing and sales
improvement, which is continuously adapted to market
trends. The primary activity of Strategic Distribution Units
and Distribution Units is to distribute the entire product
range from Atlantic’s own production and the portfolio of
external principals in two main zones, Zone East and Zone
West, whereas Zone East is divided into seven regions: Croatia; Serbia; Slovenia; Macedonia; CIS & Baltic; HoReCa; and
Kosovo, Bulgaria and Romania, while Zone West is divided
into regions: Dach&Benelux; Mediterranean & Africa; Northwest Europe and Australia; and Central Europe and Overseas. Distribution in BiH and Montenegro is organised in
cooperation with the partner company Ataco.
S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
SDU CROATIA
The SDU Croatia improved its revenue performance (growth of HRK 20.7 million or +2.2% compared to 2015) as a result of capturing season opportunities, horizontal growth and widening of
the category portfolio, thus assuring a sustainable volume growth trend over the years. At the
same time, in 2016 revenue performance was challenged by the continuation of market concentration (Konzum, dm, Plodine, Lidl, Kaufland) resulting in overall higher pressure on terms and
conditions, which were higher by 0.6% compared to 2015.
Speaking of key brands and categories, the SDU Croatia achieved impressive results. Argeta in
the category of savoury spreads grew by 18% in comparison to 2015, due to the successful execution of brand initiatives while focusing on visibility and excellence in overall market placement.
Snacks category (comprised of Smoki, Chipsos and Keksići) grew by 15%, with the growth assured through securing physical availability and promotional wheels to stimulate rotation, which
proved to be especially effective in traditional trade and discounters. The coffee segment was also
very successful and grew by 7%, as a result of balancing promotional tactics and synchronising
implementation rhythms contributed to the stable growth, still having to capture opportunities
even in the biggest formats such as hypermarkets, and Konzum out of the top key accounts.
Vitamin instant drink Cedevita in the beverages segment maintained its market share within
the stable category, while only challengers were private labels through extra price promotional
cuts. Category development initiatives were also put in place for long term growth. Speaking of
principals, Ferrero and Unilever showed strong growth, by 7% and 6% respectively, Ferrero due
to visibility improvements, key portfolio activations and stronger support during the key seasonal
drives, while Unilever by managing to balance investments for new category player vs level of
marketing mix. On the other hand, Wrigley achieved 4% lower performance due to overall underperformance of the whole chewing gum category (AT Nielsen MAT -7%) and due to the reduced
number of impulse outlets in the market.
2.2%
o f rev enue
g row t h
co mp ared
t o 201 5
20.7
mil l io n h rk
o f rev enue
g row t h
co mp ared
t o 201 5
Logistic optimisation (cost per pallet -4.7% vs 2015) assured through continuous efficiency improvements as a result of applying the delivery workflow in its full scope, double decker utilisation, tour-retour deliveries for pallets from distribution centres to SBUs, preload deliveries from
Central towards Bionatura Bidon Vode warehouse, etc. As overall non-food categories are highly
competitive and volume delivery is under bigger promotional pressure, with careful adjusting
and monitoring we have managed to deliver substantial growth towards our customers through
brands that deliver actual category growth. The complexity of nurturing food categories overall
was dependent on their respective category’s maturity stage and brand penetration levels that
dictated the dynamics of support. Horizontal trade market growth is supported through continued capital investments primarily related to installation of new coffee-to-go and cold drink
equipment and maintenance of its existing positions.
As a final note, we have followed our strategic intent of being the distributor that outperforms
the competitors, providing top physical availability throughout the year and maximising it in the
summer season through reinforcing sales force organisational model in Dalmatia and Istria. The
achieved improvement and frequency of visits helped the visibility and volume rotation of our
represented brands in an immediate way (beverages category by +12% or +11.6 million HRK vs
PY). The SDU Croatia’s portfolio in a majority of cases outperformed the targeted competition
in terms of placement and visibility in major and secondary placements, ensuring the brands’
relevant and contextual touchpoints, allowing them to close their 360 degrees strategies.
The company Bionatura Bidon Vode, operating under the SDU Croatia, realises most of its sales
from water Kala, which it delivers in containers (bidons) together with water coolers of the highest quality, thus offering natural spring water at your reach. In 2016, the sales of Bionatura grew
by 10%, whereas growth was led by additional assortment products.
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87
S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
SDU SERBIA
54.7%
mark et s h are o f
t u rk is h co f f ee
in serb ia
22%
mark et s h are o f
cho co lat es in
se rb ia
In 2016, the SDU Serbia recorded a mild decrease in sales compared to 2015, primarily due to
terminating cooperation with one principal, devalvation of the Serbian dinar, and partly due to
challenging economic conditions in Serbia. On the other hand, by applying careful cost management and achieving significant savings under different items, as well as a significant growth in
sales of individual product groups, the listed drop in sales was partially compensated. With the
market share growing to 54.7%, the unit managed to retain its leading position as a supplier of
Turkish coffee. In the segment of chocolates, Najlepše Želje reached a record-high market share
of 22.0% as did Argeta with 18.6% in the segment of meat savoury spreads, while the fish segment continues to set records, reaching a 56% market share. In 2016, we continued our successful cooperation with international principals, such as L’Oreal, Rauch, Schwartau, Del Castello and
Alkaloid, all of which recorded significant annual growth (e.g. Rauch 25%, Corny 26%), as a direct
consequence of the divisional organisation implemented during 2015. In mid-2016, the distribution portfolio of the SDU Serbia welcomed a new principal, the producer of premium spirits Beam
Suntory. Their product assortment includes the most famous brands of premium spirits, such as
the prestigious cognac Courvoisier, Jim Beam and Teachers whiskey, which will complement the
drinks portfolio offered in Serbia by Atlantic Brands.
DU SLOVENIA
8%
eb it d a g row t h
an d an eq u al
pe rcen tag e o f
eb it g row t h
in 2 0 16
The Distribution Unit Slovenia (DU Slovenia) in 2016 stabilised its operations and affirmed itself
as the largest distributor of consumer goods in Slovenia. Compared with the last year, in 2016 it
recorded a 8% EBITDA growth and an equal percentage of EBIT growth. In terms of consumers,
the market of Slovenia is still stagnating (the annual index of food, drink and tobacco consumption is at the level of 87 compared to 2010). This is a result of price pressures by the fast-growing “hard discount” retail channel, which represents 23% of the retail market, and the changed
purchasing habits of end consumers. In terms of physical availability, reflected in numeric and
weighted distribution levels of brands in the DU Slovenia’s portfolio, all results were better than
the targeted competition.
Despite the stagnating market, we achieved respectable sales growth for the following brands:
• Barcaffè in the category of instant coffee + 9%
• Argeta in the category of savoury spreads +8%
• Smoki in the category of salty snacks +15%
• Montana in the category of ready-made sandwiches +8%
• Ferrero in the category of chocolate products and pralines +5%
• BiC in the category of disposable razors +37%
The growth in sales achieved in these categories is organic growth, meaning stronger brands and
higher market shares in their respective categories compared to the competition. All the brands
above are leaders by market share in their respective categories. In particular, this includes the
brand Barcaffè and its Turkish coffee assortment with 77%, Argeta with 43.8%, Smoki with 46.2%,
Ferrero with 22.6% and BiC with 30,2% in the category of disposable women’s razors.
Such excellent results were achieved through continuous control of operating costs and the collection process, and constant use of sales opportunities on this extremely concentrated and competitive market of Slovenia.
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S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
s du c r o at i a
s du s e r b i a
du s lov e n i a
at l a n t i c g r u p a
annual report 2016
str ategic distr ibution units and distr ibution units
89
S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
DU MACEDONIA
6%
of reven u e
gr ow t h
co mp ared
t o 2 0 15
This year the Distribution Unit Macedonia (DU Macedonia) recorded growth and increased the
company`s sales coupled with the associated rise in profit. The DU Macedonia remained one of
the top distribution companies of consumer goods in Macedonia. With a wide-ranged and diversified portfolio, and with high-quality products, our company satisfies a broad range of consumer
needs. In addition to the familiar and famous domestic brands, the DU Macedonia offers goods
from well-known international companies – with a high level of satisfaction of our consumers as
an ultimate goal:
• Ferrero
• BarLatte
• Beam Suntory
In comparison with the year 2015, the DU Macedonia recorded a 6% growth in sales and even
higher profit growth, which is a result of the excellent organisation as well as the method Atlantic
Grupa uses to offer its products. A new brand for this year is Beam Suntory, with a wide spectrum
of alcoholic beverages that are distributed both in retail and HoReCa segment. The best selling
brand in 2016 is Grand Kafa, followed by Argeta, while the third place is shared by Štark and the
external principal Ferrero – both of which experience a new expansion on the Macedonian market every year. Our products are offered in 2,146 retail outlets, 203 wholesale outlets, 206 petrol
stations, 198 kiosks, 254 pharmacies and other places of delivery, with a lower cost of service
than in the previous year by 0.5%. Organisationally, our 24-hour delivery is carried out from two
warehouses on different locations, i.e. the retail warehouse and the HoReCa/pharma warehouse,
is served by own and outsourced logistic transport services. Every day, 130 employees are focused
on the improvement and promotion of our products and our company, deployed in different
departments by function, including the HoReCa segment. In the future, we expect further sales
growth and improvement of operational efficiency.
SDR HORECA
12%
of reven u e
gr ow t h
co mp ared
t o 2 0 15
90
In 2016, the Strategic Distribution Region HoReCa (SDR HoReCa), which covers business operations in Croatia, Serbia, Slovenia and Macedonia, focused on achieving significant growth rates,
together with controlling costs and maintaining profitability. Our result-oriented approach lead to
a double-digit growth (12%), achieved due to both higher sales of own brands and higher sales of
the existing principals, while new agreements with principals provided an additional contribution.
Special emphasis was placed on branding the so called “image” of the venues located in the
most attractive parts of the city, in order to raise consumer awareness and ensure their loyalty.
As regards espresso coffee sales, an increased coffee consumption per machine was taken into
account when making investments by installing espresso machines, i.e. it was invested in venues
with higher consumption. Owing to such an approach, we established cooperation with 780 new
buyers, achieved a 19% volume growth and a 11% growth in average consumption per machine.
In 2016, a new distribution agreement with the company Beam Suntory was signed, thus further
strengthening the Atlantic Grupa’s presence in the HoReCa channel. Beam Suntory is the third
largest global producer of premium spirits, such as the globally best-selling bourbon Jim Beam,
Japanese whiskey Yamazaki, whiskey Canadian Club, Teachers and many other brands. The distribution agreement covers the markets of Serbia, Macedonia, Montenegro, Kosovo and Albania.
The SDR HoReCa proactively considers new potentials in terms of principal partners, as well as
sales opportunities for own products in the HoReCa channel to meet competitive market demands and increase business efficiency.
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S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
s dr h o r e c a –
c r o at i a , se r b i a ,
s lov e n i a a n d
m a c e do n i a
at l a n t i c g r u p a
annual report 2016
str ategic distr ibution units and distr ibution units
91
S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
SDR CIS & BALTIC
The ongoing crisis and further deterioration of the economic situation forced the SDR CIS & Baltic team to put even more efforts in order to preserve and develop existing distribution and secure
sustainable development in a profitable direction for all of its brands.
Constant work on increasing of the awareness of Bebi brand helped the SDR CIS & Baltic team to
execute two successful launches and achieve excellent sales results for two new cereals’ products
based on goat milk. With tremendous efforts, the sales team of Atlantic Brands Moscow managed to execute several successive price increases, which have driven Argeta to better profitability
both in retail and distributors channel.
A huge step was made in further development of Donat Mg, with introduction of a new distributor
and creating a competitive environment vs. monopoly, giving Atlantic Grupa more possibilities
to leverage the brand success. With 70% of shelf price increase, caused by unfavourable currency
movement, the SDR CIS & Baltic team managed to keep sales on the level of the previous year
under conditions of constant decrease in purchasing power, which indicates strong brand recognition on the Russian market. After three years of attempts, in 2016 Atlantic Brands Moscow team
succeeded to enter #5 retail chain in Russia – Lenta. In addition, the introduction of the base
price list gave possibility for better control over commercial policy and made it more transparent.
The high birth rate and growing economics provide new opportunities for further development of
the company’s activities on the market of the Commonwealth of Independent States (CIS), where
the focus will continue to be on strengthening operations.
SDR ZONE WEST
SDR DACH&Benelux
On 1 January 2016, the wholly owned sales companies started operations in Austria and Germany.
Atlantic Brands Germany GmbH (ABGE) is now the sole distribution company for all Atlantic
Grupa brands in the German market. All modern trade customers and all customers in the sport
channel are serviced directly by the ABGE sales team, whereas the specialised retail channel is
served through a dedicated partner. During 2016, ABGE also added the first non-AG brands to
its portfolio.
Atlantic Brands Austria GmbH (ABAT) operates a similar concept as its German sister company.
All retail customers and sport channel customers are direct customers of ABAT, whereas also
here the specialised retail channel is serviced through a dedicated partner. In Austria we expanded the modern trade footprint to include hard discount customers now as well. Both companies
offer the full range of sales, trade marketing and logistics services for internal and external brand
owners.
The Swiss and Benelux markets are activated in close cooperation with selected external partners.
In both markets we experienced healthy growth, driven by higher sales with existing customers
and increased distribution with new customers. This will help to strengthen both top line sales
and bottom line profit in these markets.
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S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
s dr c i s ( a r m e n i a , bel a rus ,
k a z a k h sta n , k y r g yz s ta n ,
m o ldov a , r u s s i a , ta ji ki s ta n ,
t u r k m e n i s ta n , u kr a i n e,
u z b e k i s ta n )
at l a n t i c g r u p a
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93
S T R AT E G I C D I S T R I B U T I O N U N I T S
AND DISTRIBUTION UNITS
DR Mediterranean & Africa, DR Northwest Europe and Australia, PDR Central Europe
and Overseas
25%
of reven u e
gr ow t h o f ag
br an d s ( ex cep t
mu lt ip ow er)
t he b r an d s cede v i ta ,
nat u r av ita, d o n at
mg , g r an d an d š ta r k
reco rd ed g row th
r an g in g f ro m
21-68%
In 2016, the performance in the UK market has been heavily impacted by the unfavourable FX
effect. During the course of the year, the price increases across all of the Atlantic Grupa brands
have been implemented in the attempt to counterbalance, at least partially, the negative impact
of the rampant devaluation of the sterling vs. euro. The Multipower brand suffered the increased
competition from new sport nutrition suppliers entering in the independent gym channel and the
lower than expected sales in the key accounts. Despite the FX effect, the AG brands other than
Multipower registered a 25% growth. During 2016, Atlantic Multipower UK also added the first
principal brands to its portfolio.
In Italy and Spain, the Sport Channel registered a double-digit increase in numerical distribution.
A delay in the start of the endurance season and a decline in sales in key accounts have significantly impacted the overall Multipower sales performance. During 2016, Atlantic Multipower Italy
also added two principal brands to its portfolio. In France, the Granny’s Secret brand has significantly increased its presence in high-end modern trade retailers and specialised gourmet shops.
During 2016, the majority of countries of Central Europe and Overseas changed the operational
model, which resulted in a strong double-digit growth in sales of almost all brands. Consequently,
the brands Cedevita, Naturavita, Donat Mg, Grand and Štark recorded growth ranging from 21%
to 68%, while Cockta and Multipower recorded growth of 7% and 9%, respectively. The brands
Argeta and Bakina Tajna (Granny’s Secret) recorded lower sales than in 2015 due to changing the
strategy, distribution channels and distributors, but these changes created strong preconditions
for stronger growth in the coming years.
Sweden is the most important market in the region Scandinavia and Africa. The conclusion of
distribution agreements with new distributors in Sweden and Norway with a double-digit growth
of most brands did not compensate for Argeta’s lower sales compared to 2015, so this region
records a slight decline in sales compared to the previous year. The region USA, Canada and
Middle East posted almost a 30% growth, while Canada and Turkey are countries with the highest
growth (over 50%). The United States of America posted a lower, but still double-digit growth.
In America and Canada, the highest sales and growth are recorded by the brands Argeta, Štark,
Grand, Cockta and Jupi, while the strong growth in Turkey is a result of optimising the portfolio
and improving support to the Turkish distributor of Multipower. In the region Australia, Asia and
Central Europe, the most important market in view of sales is Australia, which is a cornerstone
of this region. The focus on the market of Australia, preparing a new strategy and selecting two
exclusive importers and distributors resulted in growth above 30%. Although the scope of operations in China, Japan and Singapore is somewhat smaller, those markets also recorded growth
rates above 50%, primarily the brand Bakina Tajna (Granny’s Secret).
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at l a n t i c g r u p a
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QUALITY
CONTROL
The processes of quality control in Atlantic Grupa are organised through independent quality
assurance departments within the company’s operating structure, and directed according to
balanced goals from the corporate level. Quality control departments exchange good practices
between themselves, and are each year given realistic, but challenging goals, while their activities
are optimised without increasing product-related risks. Such organisational structure enables the
following:
• coordinated monitoring of legislation,
• implementation of best practices,
• optimal improvement and use of expert knowledge in the field of microbiological, chemical
and other hazards,
• centralised supplier management in view of the quality of input materials,
• good and coordinated cooperation with other business processes,
• specialisation of the quality assurance system according to specific issues of individual Strategic Business Units in the product segments of beverages, savoury spreads, sweet and salty
snacks, children’s and sports food, cosmetics and medicines,
• traceability and maintenance of a high quality level in transport, storage and distribution to
customers.
From the very beginning of developing a new product or during the improvement of an existing
one, we endeavour to achieve a standard high quality of Atlantic Grupa’s products recognisable
to customers. The achievement of complex goals in the field of quality control requires a proactive
and coordinated involvement of experts from the processes of new product development, procurement, legal affairs and quality assurance. The following factors have an important role in the
production of health-safe products: selection of source materials (non-toxic, allergen-free, GMOfree, etc.), quality control of all input materials and ingredients, monitoring of all production and
distribution phases, quality assurance of finished products and monitoring customer satisfaction. In 2016, our experts shared their experiences within the regular annual internal professional
conference. They covered the following topics:
• risks related to foreign material management,
• allergens – new and more structured approach to allergen control,
• more efficient handling of complaints through the reorganised “Call center”,
• new microbiological risks (viruses) and their control,
• new knowledge in the field of microtoxins,
• argument-based risk assessment and control measures,
• service quality management, which directly affects the product quality (transport, hygiene
services, etc.),
• use of control cards for monitoring the process.
In addition, several courses within the internal programme for improving functional knowledge in
the field of quality and product safety management system were organised, with a primary focus
on service quality management, and in all nineteen production facilities we held workshops with
quality assurance teams for the purpose of confirming the efficiency of control plans.
CONTROL MEASURE
IMPROVED
CONTROL PLAN
(frequency, limits)
DEVIATION
NONCONFORMITY
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quality control
97
QUALITY
CONTROL
This year, special attention was given to preventing physical contamination and identifying potential additional control measures. The efficiency of the quality assurance process is assessed
on the basis of achieving target values for key indicators, such as the number of consumer complaints and the number of product recalls, while significant efforts are invested in collecting reactions and comments of our consumers through the call centre.
The number of justified complaints at the Group level shows a better result in relation to 2015 (by
more than 10%), while taking into account the higher number of products compared to the previous year, since the data processing for the first time included the Foodland’s product assortment.
NO. OF JUSTIFIED COMPLAINTS (2013–2016)
300
2 50
200
1 50
100
50
0
2 01 3
201 4
201 5
201 6
In 2016, we continued to raise the competence of local teams by regular targeted trainings, using
knowledge and experience of corporate experts. Significant support for these excellent results
was provided by the prevention programme for control of food hazards, which is managed at the
Group level in order to summarize all experiences of the company’s expert teams. Monitoring is
focused on input materials and adjusted to the supplier’s risk assessment. It implies the control
of pesticide residues, heavy metals, allergens, microtoxins, alkaloids, PAHs and dioxins, nitrates,
pharmacologically active substances, fatty acid ester content in high-fat products, and contamination by migration of substances from primary packaging. As a novelty, in 2016 we tested the
content of mineral oils in sports bars and baby food, analysed cyclo-di-badge residues in cans
and initiated search for specific pesticide fosetil-Al in raw materials and products. In 2016, we
tested about 50% more samples than in 2015, for the purpose of preparing products for new
target markets.
Laboratory testing of input materials, semi-finished products and finished products are carried
out in three central laboratories specialised for chemical, sensory and microbiological tests with
state-of-the-art measurement equipment. The accuracy of measurement results is regularly verified by the method of international interlaboratory testing. Depending on the type of contaminants, such tests are outsourced to accredited and specialised laboratories.
The activities in the field of quality assurance are supported by advanced IT solutions: the SAP
QM module was implemented in the Slovenian market and in some legal entities in Croatia, while
other locations use internal IT solutions on similar platforms according to the same model. In
2016, additional steps forward were also made in the fields of safety management and product
quality in food-related distribution operations. During 2016 we started to implement the good
practices already present in our established markets within the Zone East, such as the defined
quality of storage services, transparent and strictly defined procedures for managing complaints
and crisis situations, etc. into business processes in new markets and distribution centres within
the Zone West. Pleased with the results, in 2017 we will continue improvements and investments
into control equipment, gaining further excellence and expert knowledge in this field.
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S TAT E M E N T O F T H E G R O U P V I C E P R E S I D E N T
FOR FINANCE
ZORAN STANKOVIĆ
group vice president for finance
ATLANTIC GRUPA ended the year 2016 in line with its business plans, and for the ninth year in a row achieved the announced expectations. Although the termination of cooperation with the major buyer in the segment of private labels could
not be fully compensated, sales of own brands increased in
almost all Strategic Business Units, coupled with the market
share growth in nearly all categories of both own and principal brands in the markets of South-East Europe. In addition to
the above, the 2016 financial results were significantly affected
by investments related to establishing own distribution companies in Germany and Austria, continuation of the restructuring of the SBU Sports and Functional Food, the continuing
economic crisis in Russia, and the related depreciation of the
Russian rouble.
In 2016, Atlantic Grupa has taken two important steps in consolidation of its financial obligations – refinancing of long-term
loans and refinancing of five-year bonds, which, in addition to
increased flexibility, also lead to significant savings in interest
costs. Atlantic Grupa signed agreements with the European
Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) on amendments to the
loan conditions related to the total credit package of EUR 191.5
million, which defined more favourable financial terms and prolonged the maturity of loans by two years, until 2021. This new
arrangement confirms the confidence of the financial community in Croatia and abroad. In May, we have also successfully
issued five-year corporate bonds in the amount of HRK 200 million, at a fixed annual interest rate of 3.125%. The bonds were
issued on the domestic capital market and listed in the first
quotation of the Zagreb Stock Exchange. We used the funds
collected by this issue for refinancing the existing bonds with
maturity in September 2016, while the remaining portion of the
funds will be used for financing the working capital. In addition
to continued improvement of own sources of financing, by issuing bonds Atlantic Grupa continued its practice of fostering
the development of the domestic capital market.
Atlantic Grupa continuously manages financial and business
risks, fulfils its obligations in a timely manner and provides for
the company’s long term financial stability. We continue to be
an active participant in the capital market and the Atlantic Grupa’s share holds the ninth place according to the total turnover
of shares at the Zagreb Stock Exchange, which is a result of its
transparent corporate management system, excellent business
results, stable ownership structure and the free float of 44%.
We continue to regularly distribute the dividend, and in 2016
our shareholders received a total of HRK 45 million.
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financial oper ations of atlantic grupa
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SALES DYNAMICS
IN 2016
SALES PROFILE BY STRATEGIC BUSINESS UNITS
AND STRATEGIC DISTRIBUTION UNITS
2016
2015
(reclassified)
1,063.9
1,073.5
(0.9%)
637.2
642.2
(0.8%)
(HRK million)
5.1
SBU Coffee
SBU Beverages
bi llio n h rk o f
sa les reven u e
in 2 0 16
5.5%
decrease
co mp ared
t o 2 0 15
2016/2015
SBU (Sweet and Salted) Snacks
651.3
631.6
3.1%
SBU Savoury Spreads
543.0
496.6
9.4%
SBU Pharma and Personal Care
538.9
511.3
5.4%
SBU Sports and Functional Food
449.3
768.5
(41.5%)
SDU Serbia
1,101.1
1,175.1
(6.3%)
SDU Croatia
969.6
948.9
2.2%
DU Slovenia
754.4
761.9
(1.0%)
SDR Zone West
504.5
522.1
(3.4%)
Other segments*
Reconciliation**
Sales
763.0
821.7
(7.1%)
(2,869.9)
(2,947.9)
n/a
5,106.3
5,405.3
(5.5%)
In 2016, Atlantic Grupa recorded sales of HRK 5.1 billion, which is a 5.5% decrease compared
to the same period of the previous year. The decrease is largely a consequence of the decrease in
sales of the Strategic Business Unit Sports and Functional Food, caused mainly by the terminated
cooperation with the major buyer of the private label. If the effect of the sales revenue of this buyer is excluded, sales are 0.6% lower, and if the effects of the average depreciation of the Russian
ruble of 9.6% and the average depreciation of the Serbian dinar of 2.9% compared to the same
period of the previous year are also excluded, sales grew by 0.3%.
A positive impact on sales results was made by the majority of other business and distribution
units, with the most significant effect from the Strategic Business Units Savoury Spreads, Pharma
and Personal Care, Snacks and the Strategic Distribution Unit Croatia and the Strategic Distribution Region HoReCa.
Atlantic Grupa records sales by business segments in a way that sales of individual Strategic Business Units and Business
Units represent the total sales to third parties in the markets (either directly from a Strategic Business Unit or Business Unit,
or through a Strategic Distribution Unit, Strategic Distribution Region or a Distribution Unit), while sales of Strategic Distribution Units, Strategic Distribution Regions and Distribution Units include both sales of external principals’ products and
sales of own products. Comparative period has been adjusted to reflect current period reporting.
* Other segments include SDR HoReCa, SDR CIS & Baltic, BU Baby Food, DU Macedonia, BU Gourmet and business
activities not allocated to business and distribution units (headquarters and support functions in Serbia, Slovenia and
Macedonia) which are excluded from the reportable operating segments.
**Line item “Reconciliation” relates to the sale of own brands which is included in the appropriate SBU and BU and in SDUs,
SDRs and DUs through which the products were distributed.
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sales dynamics in 2016
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SALES DYNAMICS
IN 2016
• The STRATEGIC BUSINESS UNIT COFFEE records a slight decrease in sales, primarily due to
the sales results in the market of Serbia and Slovenia, caused by the inventory optimisation by a
key customer. This decrease was mainly compensated for by the great sales results in the markets
of Macedonia, Croatia, Kosovo and Bosnia and Herzegovina. The decrease in the Serbian market
was also caused by the average depreciation of the Serbian dinar (2.9% compared to the same
period of the previous year) and volume and value drops of the overall market category of Turkish
coffee (volume drop of 2.6%, and value drop of 5.4%*), despite the further growth of the market
share that enabled retaining the convincingly leading market position with a record-high market
share (value share of 52.9%*).
• The decrease in sales of the STRATEGIC BUSINESS UNIT BEVERAGES was recorded in the
Serbian and Slovenian markets, despite a strong sales growth in the HoReCa channel and onthe-go segment. In all regional markets (Croatia, Slovenia, B&H, Macedonia, Serbia) Cedevita remains the absolute market leader in the vitamin instant drinks category with value market shares
ranging from 72.5%** to 86.0%*. The growth of the above mentioned categories significantly
exceeded the decrease in sales of soft carbonated drinks category under the Cockta brand and the
decrease in sales caused by withdrawing a part of the Multivita’s product range (Multivita granules) from the market of Serbia. The increase in sales of vitamin instant drinks under the Cedevita
brand is also recorded by the markets of Germany and Austria, mainly in the on-the-go segment.
• The STRATEGIC BUSINESS UNIT SNACKS reached the record-high level of production,
where the sales growth was recorded due to the increase in revenues of the overall range in all regional markets, led by the markets of Bosnia and Herzegovina, Croatia and Serbia, followed by the
markets of Slovenia and Montenegro. The greatest contribution to the growth was made by chocolates under the Najlepše želje brand, chocolate bars under the Bananica brand and salty sticks
under the Prima brand, while great results were also recorded by biscuits and wafers. Najlepše
želje and Menaž with 25.4% of the market retain the leading position in the Serbian market, while
Bananica holds a third of the market of individually packaged wafers with 33.2% market share.***
The markets of Croatia and Slovenia recorded a double-digit sales growth, which in Slovenia is a
result of the increase in sales of flips under the Smoki brand, while the Croatian market records
increase in sales of all categories (biscuits, flips and chips).
• An exceptional sales growth of the STRATEGIC BUSINESS UNIT SAVOURY SPREADS is
based on a strong organic growth in sales on the regional markets (Croatia, Bosnia and Herzegovina, Serbia, Kosovo and Slovenia). Great results in international markets (primarily Austria, Switzerland and Germany) are recorded due to well-accepted local flavours. Argeta savoury spreads
keep increasing their market shares in the markets of Croatia (where they hold a quarter of the
market) and Serbia, where, with an increase in value market shares of 3.7% and 3.2%, respectively* compared to the last-year’s period, Argeta seriously catches up with market leaders. In the
Austrian market, Argeta remains the absolute market leader, as proven by the fact that among 5
top-selling products, 4 are Argeta’s savoury spreads.
• The STRATEGIC BUSINESS UNIT PHARMA AND PERSONAL CARE records a significant
increase in sales due to the increase in sales of the pharmacy chain Farmacia following the opening of five new specialised stores in 2016, better results of the existing locations and the increase
in sales of products from the Multivita range.
• The STRATEGIC BUSINESS UNIT SPORTS AND FUNCTIONAL FOOD recorded a decrease in sales primarily due to the terminated cooperation with the major buyer of the private label, but also due to the targeted restructuring of the overall strategic business unit, which, aimed
at simplifying the product range, led to a decrease in sales of own brands Champ, Multaben and
Multipower. It should be noted that this is a termination of sale of low-profitability products.
*
AC Nielsen Retail Panel, October 2016 – November 2016 (% annual changes)
** AC Nielsen Retail Panel, June 2016 – July 2016 (% annual changes)
*** AC Nielsen Brand Performance Monitor, October 2016 – November 2016 (% annual changes)
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103
SALES DYNAMICS
IN 2016
• The decrease in sales of the STRATEGIC DISTRIBUTION UNIT SERBIA is primarily a consequence of the decrease in sales of Turkish coffee caused by the decrease in the overall category
and of the inventory optimisation by the key buyer, the terminated cooperation with two principals
and the negative effect of the dinar exchange rate. The decrease in sales was partly compensated
by the increase in sales of Argeta and chocolate and biscuits from the Štark portfolio, as well
as the increase in sales of the principal Rauch. If the unfavourable effect of the dinar exchange
rate and discontinued principals are excluded, the sales of the Strategic Distribution Unit Serbia
dropped by 1.1%.
• The STRATEGIC DISTRIBUTION UNIT CROATIA recorded a sales growth due to (i) an increase in sales from the distribution of own brands, primarily Argeta, Barcaffè, Cockta and products from the Štark range, (ii) an increase in sales of principal brands Ferrero, Unilever and Rauch,
and (iii) the distribution of new principals Philips and SABMiler.
• The DISTRIBUTION UNIT SLOVENIA recorded a slight decrease in sales due to lower sales
results of Turkish coffee under the Barcaffè brand, caused by inventory optimisation by the key
customer. This decrease was largely compensated for by the increase in sales of the majority of
own brands, led by Argeta in the savoury spreads category, Donat, Cockta, flips under the Smoki
brand, chips under the Chipsos brand and products from the Bakina Tajna (Granny’s Secret) portfolio. Great sales results among principal brands are recorded by Ferrero and Rauch.
•
• The STRATEGIC DISTRIBUTION REGION ZONE WEST records a decrease in sales mainly
in the German market, as a result of restructuring the Strategic Business Unit Sports and Functional Food, which was partly compensated by the increase in sales in the markets of Switzerland,
Austria, Turkey, Australia and Canada. In this, savoury spreads under the Argeta brand, coffee and
new principal Nocco have the most prominent growth among segments.
• OTHER SEGMENTS recorded a decrease in sales primarily due to the decrease in sales of the
Business Unit Baby Food, the Strategic Distribution Regions the CIS & Baltic and the Business
Unit Gourmet, which was partly compensated by the double-digit increase in sales of the Strategic
Distribution Region HoReCa and the Distribution Unit Macedonia.
• Business Units BABY FOOD and the STRATEGIC DISTRIBUTION REGIONS CIS & BALTIC recorded a decrease in sales as a consequence of the difficult economic situation in Russia
(high inflation rate and depreciation of the ruble). The negative effect of the ruble exchange rate
was partly mitigated due to the active pricing policy.
• A significant increase in sales of the DISTRIBUTION UNIT MACEDONIA is a consequence of
the excellent increase in sales of the Turkish coffee segment, good results of savoury spreads and
chocolate, as well as good sales results of the external principal Ferrero.
• The STRATEGIC DISTRIBUTION REGION HORECA continues to record a double-digit increase in sales, where all markets (Croatia, Serbia, Slovenia and Macedonia) record growth, led
by the Slovenian and Croatian markets, which are also the two largest markets of this distribution
region. The most significant growth is recorded by the sales of espresso coffee under the Barcaffè
brand, the sales of vitamin instant drinks under the Cedevita brand and external principals.
• BUSINESS UNIT GOURMET recorded a decrease in sales due to terminating the non-profitable production of a private label and restructuring the product portfolio that led to the decrease
in sales of the Amfissa brand, while products under the Bakina Tajna (Granny’s Secret) brand
record sales growth. The decrease in sales was recorded primarily in the Serbian market, while a
large number of markets (e.g. Slovenia, Croatia, Russia, France, the United Kingdom, etc.) record
a double-digit growth.
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sales dynamics in 2016
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SALES DYNAMICS
IN 2016
SALES PROFILE BY SEGMENTS
pr in cip al b r an d s
21,4 %
co f f ee
20,8 %
sw eet an d salte d s n a c ks
12,8 %
be v er ag es
12,5 %
sav o u ry sp read s
10,6 %
ph arma an d p e r s o n a l c a r e
10,2 %
spo rt s an d fu n c ti o n a l f o o d
8,8 %
baby food
2,3 %
go u rmet
0,6 %
SALES PROFILE BY MARKETS
(in HRK millions)
2016
% of sales
2015
Croatia
1,471.0
28.8%
1,409.0
26.1%
4.4%
Serbia
1,183.7
23.2%
1,256.3
23.2%
(5.8%)
Slovenia
857.7
16.8%
855.0
15.8%
0.3%
Bosnia and Herzegovina
396.6
7.8%
381.7
7.1%
3.9%
Other regional markets*
343.4
6.7%
325.2
6.0%
5.6%
Key European markets**
514.0
10.1%
603.4
11.2%
(14.8%)
Russia and CIS
186.5
3.7%
237.1
4.4%
(21.3%)
Other markets
Total sales
% of sales
2016/2015
153.4
3.0%
337.6
6.2%
(54.6%)
5,106.3
100.0%
5,405.3
100.0%
(5.5%)
* Other regional markets: Macedonia, Montenegro, Kosovo
**Key European markets: Germany, United Kingdom, Italy, Switzerland, Austria, Sweden, Spain
• The sales growth of 4.4% in the CROATIAN MARKET is the result of: (i) an increase in sales
of own brands, primarily Argeta in the savoury spreads category and Barcaffè in the coffee category (on-the-go and Turkish coffee), the Cedevita brand in the vitamin instant drinks category in
the HoReCa and on-the-go segments, and Smoki in the flips segment, (ii) an increase in sales
of the pharmacy chain Farmacia, (iii) an increase in sales of the existing principals, especially
Unilever, Ferrero and Rauch, and (iv) the distribution of new principals Philips and SABMiler.
4.4%
s al es g row t h for
cro at ian market
• The MARKET OF SERBIA recorded a decrease in sales due to: (i) the decrease in sales of
coffee under the Grand kafa brand (the decrease in sales of Turkish coffee was primarily caused
by the drop in the overall category and the additional negative impact of the inventory optimisation by the key customer, while the increase in sales of Black’n’Easy instant Turkish coffee and
espresso coffee are encouraging), (ii) the decrease in sales of products from the gourmet portfolio (terminated production of private labels due to unsatisfactory profitability and lower sales
of Amfissa products after restructuring of the product portfolio), (iii) the decrease in sales of
the beverages segment due to the decrease in sales of Multivitia granules after the terminated
production, and (iv) the decrease in sales of principal brands due to the terminated cooperation
with two principals. If the effects of the dinar exchange rate and discontinued principals are
excluded, the sales in the Serbian market dropped by 0.5%.
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105
SALES DYNAMICS
IN 2016
• The SLOVENIAN MARKET recorded a slight sales growth due to the increase in sales of
most categories, especially: (i) Argeta in the savoury spreads segment, (ii) Smoki in the snacks
segment, (iii) products from the Bakina Tajna (Granny’s Secret) portfolio from the gourmet
segment, and (iv) the principal Ferrero.
• The growth in sales in the MARKET OF BOSNIA AND HERZEGOVINA was recorded due
to the growth in sales of: (i) savoury spreads under the Argeta brand, (ii) the Grand Kafa brand
in the Turkish coffee category and Black’n’Easy instant Turkish coffee, and (iii) chocolates under the Najlepše želje and Bananica brands, flips under the Smoki brand and chips under the
Chipsos brand.
• OTHER REGIONAL MARKETS* recorded a significant sales growth due to the increase
in sales on all markets (Macedonia, Montenegro and Kosovo). Analysed by categories, in all
three countries the most significant growth was recorded by products from the coffee, savoury
spreads and chocolate portfolios.
• The decrease in sales in the KEY EUROPEAN MARKETS is a consequence of the decrease in
sales of products from the sports and functional food portfolio, largely caused by the previously
mentioned terminated cooperation with the major buyer of the private label. Other categories
record growth, led by savoury spreads under the Argeta brand (due to expanded distribution
and further adjustment of products to local preferences) and functional waters under the Donat
Mg brand, coffee under the Grand kafa brand and the new principal Nocco.
• Sales in the MARKET OF RUSSIA AND THE COMMONWEALTH OF INDEPENDENT
STATES are negatively affected by the decrease in purchasing power caused by the depreciation of the ruble and high inflation rate. The most significant drop was recorded by baby cereals
under the Bebi brand and Multipower from the sports and functional food segment.
• OTHER MARKETS record a significant decrease in sales due to the drop in sales in the sports
and functional food segment caused by the decrease in sales of private labels, following the terminated cooperation with the major buyer. If the decrease caused by the mentioned terminated
cooperation is excluded, other markets record a 13.3% growth.
* Other regional markets: Macedonia, Montenegro, Kosovo
**Key European markets: Germany, United Kingdom, Italy, Switzerland, Austria, Sweden, Spain
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sales dynamics in 2016
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SALES DYNAMICS
IN 2016
S A L E S P R O F I L E B Y P R O D U C T C AT E G O R Y
2016.
ow n b r an d s
67,8 %
pr in cip al b r an d s
21,4 %
pr ivat e la b el
3,7 %
fa rmacia
7,1 %
2015.
ow n b r an d s
64,6 %
pr in cip al b r an d s
20,4 %
pr ivat e la b el
8,7 %
fa rmacia
6,2 %
Compared to the previous year, in 2016 OWN BRANDS recorded a mild decrease in sales of
0.9% to HRK 3.5 billion. The drop in sales was recorded by Champ, Multipower and Multaben
brands from the sports and functional food segment, baby cereals under the Bebi brand and
products from the Amfissa portfolio in the gourmet segment. On the other hand, the most prominent growth was recorded by: (i) Argeta in the savoury spreads segment, (ii) Najlepše želje,
Bananica and Prima in the snacks segment, and (iii) vitamin instant drinks under the Cedevita
brand in the beverages segment. If the effects of the drop in Sports and function food and negative impact coming from Russia and CIS markets are excluded, the sales of own brands would
have increased by 3.7%.
8.2%
s al es g row t h
b y p h armacy
ch ain f armac i a
co mp ared t o 2015
With HRK 1.1 billion, PRINCIPAL BRANDS record a decrease in sales of 1.0%, due to the terminated cooperation with two principals in the Serbian market, that did not meet the set profitability
standards. The decrease in sales was partly compensated for by good results of other principals,
primarily Ferrero, Rauch, Unilever, and the beginning of the distribution of new principals such
as Beam Suntory in the markets of Serbia, Macedonia, Montenegro, Kosovo and Albania and the
principal Nocco in the markets of Germany, the United Kingdom and Austria.
With sales of HRK 190.8 million, PRIVATE LABELS record a 59.6% drop compared to 2015 due
to the decrease in sales in the sports and functional food segment.
The pharmacy chain FARMACIA recorded sales of HRK 364.0 million, which is an 8.2% growth
compared to 2015, due to the 5 percent increase in sales of the existing Farmacia locations and
newly-opened specialised stores. In 2016, five new specialised stores were opened and two were
closed, so as at 31 December 2016, the pharmacy chain Farmacia consisted of 48 pharmacies and
33 specialised stores.
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107
P R O F I TA B I L I T Y D Y N A M I C S
IN 2016
PROFITABILITY DYNAMICS
(in HRK millions)
2016
2015
2016/2015
5,106.3
5,405.3
(5.5%)
EBITDA
474.4
567.3
(16.4%)
EBIT
307.8
404.0
(23.8%)
Net profit/(loss)
163.2
242.5
(32.7%)
EBITDA margin
9.3%
10.5%
-120 bp
EBIT margin
6.0%
7.5%
-145 bp
Net profit margin
3.2%
4.5%
-129 bp
Sales
Profitability margins
In 2016, Atlantic Grupa recorded EBITDA in the amount of HRK 474.4 million, which is a 16.4%
decrease compared to the previous year. The decrease in EBITDA is mainly affected by the decrease in revenues caused by the terminated cooperation with the major buyer of the private label
in Sports and Functional Food, and the restructuring of this business unit, higher staff costs,
marketing expenses and cost of services, following the targeted investments in the internationalisation of operations and the unfavourable exchange rate of the Serbian dinar and the Russian
ruble. These negative impacts were partly compensated by the increase in operating profit of the
majority of other business segments and additional favourable movements such as the decrease
in cost of production materials (primarily due to lower prices of raw coffee) and energy.
Additional positive effect on EBITDA came from the increase in other income of HRK 22.6 million
following the return of overpaid concession fee for water in Slovenia (due to the amended legislation) and reversal of provisions from previous years.
Following the decrease in EBITDA and the increase in depreciation and amortisation of 2 percent,
the recorded EBIT is 23.8% lower, which, despite lower finance costs and lower income tax, reflected on the net profit before minority interests, which recorded a 32.7% drop. Finance costs in
2016 include the fee for guarantees given to Atlantic Grupa in relation to syndicated loans in the
amount of HRK 45 million, of which HRK 30.7 million relates to previous years.
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profitability dynamics in 2016
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P R O F I TA B I L I T Y D Y N A M I C S
IN 2016
OPERATING EXPENSES STRUCTURE
(in HRK millions)
2016
% of sales
2015
% of sales
2016/2015
1,308.3
25.6%
1,483.8
27.5%
(11.8%)
Change in inventory
(14.0)
(0.3%)
1.2
0.0%
n/a
Production materials
Cost of goods sold
1,581.0
31.0%
1,729.2
32.0%
(8.6%)
Energy
56.0
1.1%
62.3
1.2%
(10.1%)
Services
404.6
7.9%
374.1
6.9%
8.2%
Staff costs
800.9
15.7%
767.8
14.2%
4.3%
Marketing and selling expenses
355.3
7.0%
332.8
6.2%
6.8%
Other operating expenses
226.2
4.4%
196.6
3.6%
15.0%
Other gains/(losses), net
(18.1)
(0.4%)
(64.0)
(1.2%)
n/a
166.6
3.3%
163.3
3.0%
2.0%
4,866.7
95.3%
5,047.0
93.4%
(3.6%)
Depreciation and amortisation
Total operating expenses
The decrease in cost of goods sold of 11.8% is a consequence of lower sales as a result of the
terminated cooperation with the buyer of the private label, impacting the decrease in the share of
cost of goods sold in sales revenues.
Costs of production materials are 8.6% lower, primarily due to lower prices of raw coffee and
lower production in the sports and functional food segment, following the terminated cooperation with the major buyer of the private label.
Costs of services increased due to costs of logistics services related to the beginning of own distribution in Germany and Austria, increased logistics costs in Russia and higher IT investments
(lease of licences, maintenance).
Staff costs grew by 4.3% due to a higher number of employees, partly as a result of employment
related to the opening of the distribution companies in Austria and Germany, despite significant
savings from the restructuring of the sports and functional food. As at 31 December 2016, Atlantic
Grupa had 5,492 employees (2015: 5,387 employees).
Marketing expenses increased by 6.8%, primarily due to the increase in marketing expenses in
the coffee, beverages and savoury spreads segments.
Other operating expenses are higher by 15.0%, primarily due to a higher inventory write-off,
mainly related with restructuring in the Strategic Business Unit Sports and Functional Food and
one-off expenses related to the establishment of own distribution in Germany and Austria.
Other (gains)/losses – net: Gains were realised primarily on financial (forward) instruments
in the coffee segment.
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profitability dynamics in 2016
109
P R O F I TA B I L I T Y D Y N A M I C S
IN 2016
OPERATING RESULT OF STRATEGIC BUSINESS UNITS
AND STRATEGIC DISTRIBUTION UNITS
2016
2015
(reclassified)
SBU Coffee
227.9
211.2
7.9%
SBU Beverages
161.8
151.8
6.6%
SBU (Sweet and Salted) Snacks
116.4
99.7
16.8%
SBU Savoury Spreads
119.8
121.8
(1.6%)
45.7
43.5
5.2%
(20.7)
(32.8)
(36.9%)
19.8
30.1
(34.4%)
(HRK million)
SBU Pharma and Personal Care
SBU Sports and Functional Food
SDU Serbia
2016/2015
SDU Croatia
10.3
21.1
(51.0%)
DU Slovenia
42.7
41.9
2.0%
SDR Zone West
Other segments*
Group EBITDA
(55.3)
10.6
n/a
(194.1)
(131.5)
47.6%
474.4
567.3
(16.4%)
Comparative period has been adjusted to reflect current period reporting.
*Other segments include SDR HoReCa, SDR CIS & Baltic, BU Baby Food, DU Macedonia, BU Gourmet and business activities not allocated to business and distribution units (headquarters and support functions in Serbia, Slovenia and Macedonia) which are excluded from the reportable operating segments.
SBU Coffee The increase in profitability is a result of lower
costs of raw material (lower price of raw coffee compared to
2015 and active hedging), and despite the increase in marketing
expenses.
SBU Beverages The growth in profitability is primarily a result
of a better sales mix (increase in sales of vitamin instant drinks
in profitable channels and HoReCa), the effect of one-off items
(concession for water in Slovenia) and control of other costs.
SBU Snacks The increase in profitability is a consequence of
the increase in sales revenue coupled with a good cost control.
SBU Savoury Spreads A slight decrease in profitability is recorded despite the significant increase in revenue, as a consequence of increased investments on most markets.
SBU Pharma and Personal Care The increase in profitability
is a result of the increase in sales revenue, coupled with a good
control of costs of production materials and staff costs and the
positive effect of foreign exchange differences.
SBU Sports and Functional Food The loss decrease caused
by the absence of one-off restructuring costs from 2015 and the
decrease in costs as a result of reorganisation.
110
profitability dynamics in 2016
SDU Serbia The decrease in profitability as a consequence of the
decrease in sales.
SDU Croatia The decrease in profitability, despite the increase in
sales, is a consequence of the stronger concentration of customers,
intensive investments in seasonal activities, the increase in costs related to the improved organisation and the implementation of the
SAP solution and higher marketing expenses.
DU Slovenia The growth in profitability is a result of a better customer mix.
SDR Zone West The decrease in profitability is caused by the development of own selling infrastructure in Germany and Austria, the
related one-off expenses, the decrease in revenues of the sports and
functional food segment and the depreciation of the British pound.
Other segments The DU Macedonia recorded a significant increase
in profitability due to the increase in sales and good cost control. The
growth in profitability of the SDR HoReCa is a result of the improved
profitability in the markets of Serbia and Croatia following the increase
in sales. The decrease in profitability of the BU Gourmet is a result of
the decrease in sales and the increase in staff costs and marketing expenses, despite a better control of production costs. The decrease in
profitability of the BU Baby Food is a result of the continued adverse
economic situation in Russia and the further strong depreciation of
the ruble. The costs attributable to support services are higher compared to 2015 due to the increase in staff costs and costs of services
(as a result of increased IT investments), and in 2015 they were also
partly compensated by the income from the sale of tea business.
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F I N A N C I A L I N D I C AT O R S
IN 2016
FINANCIAL INDICATORS
IN 2016
(in HRK millions)
2016
2015
Net debt
1,502.0
1,678.1
Total assets
5,395.8
5,294.6
Total Equity
2,016.5
1,945.3
Current ratio
1.4
1.3
Gearing ratio
42.7%
46.3%
Net debt/EBITDA
3.2
3.0
Interest coverage ratio
6.1
5.4
Capital expenditure
116.0
115.5
Cash flow from operating activities
267.9
470.8
Among key determinants of the Atlantic Grupa’s financial position in 2016, the following should
be pointed out:
• Due to the decrease in net debt of HRK 176.1 million, i.e. by 10.5% at the end of 2016, the gearing ratio decreased by 362 basis points. Despite the decrease in net debt, the debt measured as
the net debt to EBITDA ratio increased from 3.0 to 3.2, due to the decrease in EBITDA. At the
same time, the coverage of interest expense by EBITDA increased from 5.4 to 6.1.
T H E AT L A N T I C G R U P A’ S E Q U I T Y A N D L I A B I L I T I E S
S T R U C T U R E A S AT 3 1 D E C E M B E R 2 0 1 6
cap ital an d res e r v e s
37,4 %
lo n g t erm b o r r ow i n g s
22,7 %
t r ad e an d o t h e r paya bl e s
19,9 %
sh o rt t erm b o r r ow i n g s
10,9 %
ot h er lia b ilit i e s
5,5 %
bo n d
3,7 %
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financial indicator s in 2016
111
F I N A N C I A L I N D I C AT O R S
IN 2016
OVERVIEW OF KEY ITEMS IN
THE CONSOLIDATED CASH FLOW
STATEMENT
The decrease in cash flow from operating activities is primarily
the result of the previously explained decrease in EBITDA. Difficulties related to the implementation of the SAP solution also
caused the slow-down of payments to suppliers at the end of
2015, and the increased dynamics of repayment of these payables additionally negatively impacted cash flow from operating
activities in 2016.
The positive effect on the cash flow from investing activities
came from the sale of the building in Ljubljana and amounted
to HRK 42 million. In cash flow from financing activities, the
bond refinancing is shown (repayment of HRK 115 million, and
issuance of the new bond in the amount of HRK 200 million),
and also HRK 45 million of dividend paid to the shareholders.
Capital expenditure in 2016 primarily relates to investments in
the production equipment of business units for the purpose of
increasing the efficiency of production processes, and in the
development of IT infrastructure, business systems and applications.
Among significant investments, we should mention:
• SBU SAVOURY SPREADS: investment in a new line for
the production of 95-gram pâté, the upgrade of the cooling
system of the production site;
• SBU BEVERAGES: purchase of a new line for rigid containers packaging of Cedevita, purchase of modern refrigerated
display cabinets, investment in the improved production
efficiency, infrastructure and energy efficiency;
• SBU COFFEE: purchase of espresso and Coffee2GO machines, investment in the improved production efficiency;
• SBU SNACKS: automatisation of sugar transport, investment in the improved production efficiency, expansion and
reconstruction of business premises and investment in the
cooling system;
• SBU GOURMET: investment in equipment for roasting and
improved production efficiency and the CIP* system;
• SBU SPORTS AND FUNCTIONAL FOOD: investment in
improved production efficiency and raw materials handling;
• IT: implementation of the SAP system and business applications.
* CIP system is a closed system for washing and cleaning the production equipment.
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OUTLOOK
FOR 2017
MANAGEMENT’S VIEW ON MACROECONOMIC EXPECTATIONS
After a long decline in economic activity and personal consumption, in 2016 the Croatian economy showed a solid growth, primarily due to the recovery of domestic demand. Atlantic Grupa’s management expects positive trends in the Croatian economy to
continue in 2017.
In countries in the region, in 2017 management also expects economic growth to continue. The Slovenian economy continues to
grow due to the strong increase in domestic demand and we expect that this will have a positive impact on the decrease in unemployment and the increase in consumption. The growth in the Serbian market will also be encouraged by the increase in domestic
demand, but it will also be somewhat limited by the slow-down of the fiscal consolidation, while significant depreciation of the
Serbian dinar is not expected. A growth is also expected in Bosnia and Herzegovina, due to the expected significant decrease in
unemployment.
After positive indicators of eurozone countries in 2016, Atlantic Grupa’s management expects the positive growth trend to continue. The main driver of the eurozone growth in 2017 will be a strong increase in domestic demand encouraged by the decrease in
unemployment.
After negative 2016, management expects the Russian economy to slightly recover despite the challenges Russia faces due to the
prolongation of international sanctions.
ATLANTIC GRUPA’S MANAGEMENT STRATEGIC GUIDANCE FOR 2017
In 2017, management will focus on (i) continued internationalisation of operations (Multipower, Argeta, Donat Mg, Bebi, Cedevita,
Bakina Tajna (Granny’s Secret)), (ii) strengthening the position of regional brands (Cockta, Cedevita, Smoki, Grand Kafa, Barcaffè,
Najlepše želje, Chipsos), (iii) active development of the regional HoReCa portfolio, and (iv) completion of restructuring the Sports
and Functional Food business unit.
Special focus will be on continued investments in listing and positioning of our brands in the retail channel in Germany and Austria
and intensive marketing activities on these markets.
In addition, Atlantic Grupa’s management in 2017 expects significantly higher average prices of raw coffee on global commodity
markets in addition to the unfavourable effect of the EUR/USD exchange rate, which will have a significant impact on the profitability of the Strategic Business Unit Coffee. A portion of this negative impact will be compensated by increasing the selling price of
coffee, and the remainder by increasing the profitability of all other business units.
Accordingly, management’s expectations for 2017 are as follows:
(in HRK millions)
2017 Guidance
2016
2017/2016
5,300
5,106
3.8%
EBITDA
475
474
0.1%
EBIT
310
308
0.7%
65
78
(17.0%)
Sales
Interest expense
In 2017, we expect capital expenditure in the amount of approximately HRK 150 million.
The expected effective tax rate in 2017 should be at the same level as in the previous year.
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RISKS OF
AT L A N T I C G R U P A
BUSINESS ENVIRONMENT RISK
Business environment risk includes political, macroeconomic
and social risks with a direct impact on business activities in
all markets in which the company operates, while the company
cannot individually influence any of them. Political risk relates
to all the risks associated with a potential political instability of
an individual state. Taking into consideration the current internal and external political affairs, Croatia functions as a stable
parliamentary democracy that successfully entered the European Union on 1 July 2013 and became its 28th member state.
Considering that the political and general social risk is inherent
to all parts of a society, it cannot be individually influenced by
any single person.
In conclusion, it should be pointed out that the Atlantic Grupa’s
Pan-European strategy is reflected in the combination of recognisable European brands in the segment of sports and functional food with the leading brand Multipower, in the segment
of savoury spreads with the brand Argeta and in the gourmet
segment with the brand Bakina Tajna (Granny’s Secret), in the
segment of baby food with the brand Bebi and in the segment
of beverages with the brand Donat Mg and regional brands in
the segment of coffee with leading brands Barcaffè and Grand
Kafa, in the segment of beverages with leading brands Cedevita,
Cockta and Donat Mg, in the segment of snacks with leading
brands Najlepše Želje, Bananica, Štark and Smoki and, finally,
in the segment pharma and personal care with leading brands
Dietpharm, Plidenta, Melem and Rosal.
As previously stated, political and general social risk is inherent
to all components of a society and therefore cannot be individually influenced by any single company. International companies that do business in more countries can diversify the listed
risk, which primarily depends on individual risks of the states in
which such companies operate. The companies that operate in
regional markets i.e. the area of former Yugoslavia should bear
in mind the political and general social risk considering that
those countries are still in the process of political transition.
Therefore, each investor should be aware of the political and
general social risk inherent to the markets in which the company operates.
Business transactions of any company are influenced by macroeconomic risks, but the extent of their impact depends primarily on the level of cyclicity of the industry in which a company operates. Despite its relatively diversified business model,
Atlantic Grupa operates in a stable non-cyclical food industry.
Considering that the sales of Atlantic Grupa’s production and
distribution portfolio are influenced by macroeconomic variables like personal consumption, the level of disposable personal income and trends in retail trade, the company continuously
monitors the aforementioned macroeconomic factors despite
the expected positive macroeconomic trends in 2017.
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RISKS OF
AT L A N T I C G R U P A
INDUSTRY AND COMPETITION RISKS
CONSUMER GOODS INDUSTRY AND RETAIL (PHARMACIES) When considering the development of the consumer goods industry, it is the market liberalisation and globalisation which
opened the gates to global producers and retail chains, which in the end resulted in a stronger
market competition, more diverse product offer, increase of product quality, establishment of
global manufacturing standards and opening of new distribution channels. In such conditions,
domestic manufactures can only compete through continuous investment in research and development of new production lines, technological development, marketing in order to improve the
brand recognition, and human resources.
Macroeconomic conditions, GDP fluctuation dynamics, in particular personal consumption as a
component of the GDP, fluctuation of the disposable personal income and the development of
the living standard of consumers largely dictate the trends in the consumption goods industry.
In addition to that, the development of the consumer goods industry is also largely influenced by
the ability of companies to constantly adapt to consumer needs and market trends, which in turn
requires investments in research and development, marketing and technology. Consequently,
main risks of this industry include limited growth rates in line with macroeconomic conditions
and the need for significant investments in order to achieve competitive advantages in relation
to local and global producers.
The consumer goods industry is strictly regulated and at the same time supervised by regulatory
authorities, primarily because it has direct influence on the health of consumers. At the same
time, this industry is exposed to the risk of uncertainty from the introduction of new, stricter
standards which may also require additional material costs.
Certain segments of the consumer goods industry, particularly the segment of food products, are
influenced by the factors which companies cannot control, like volatile prices of commodities
(coffee, sugar, cacao, etc.) on global markets, weather conditions or the tourist season efficacy.
Considering that within the company raw coffee is the most significant individual commodity by
value, special attention is given to planning procurement of raw coffee, following trends in global
markets, stock level management and risk management concerning price changes of raw coffee
in global markets. Atlantic Grupa manages the risk of price volatility of raw coffee in the global
commodity markets by using available hedging instruments. A higher average price of raw coffee in the global commodity markets is expected in 2017 compared to 2016, as well as negative
effects of the stronger dollar, which the management plans to largely compensate by active hedging, continuous cost management and optimisation of business processes. Certain segments of
this industry are of seasonal character, which makes quality management of working capital an
extremely important component of ensuring regular business operations of companies. Additionally, a relatively low level of cyclicity of the consumer goods industry makes it attractive to a
large number of companies, which in turn results in a larger number of competitors in the market. Furthermore, since there is no significant market leader in some categories, there is a risk of
new competitors entering the market.
Atlantic Grupa operates in the consumer goods industry segment that includes food products
with added value and, accordingly, it uses activities like investing in research and development,
investing in technology and closely monitoring market trends and consumer preferences to
maintain high market shares in the listed segment. The portfolio of Atlantic Grupa includes a
wide range of brands with leading market positions in the region in the segments of coffee, savoury spreads, snacks and beverages. Considering that some of the listed segments are exposed
to strong competitive pressures by local and multinational companies, Atlantic Grupa in 2016
continued to actively manage its own brands.
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RISKS OF
AT L A N T I C G R U P A
The segment of products dedicated to health and personal care largely depends on the purchasing power of consumers and, consequently, on GDP fluctuations. This segment is characterised
by strong competition pressures from multinational companies which have a variety of resources
at their disposal, including modern technology, aggressive pricing policy, aggressive and frequent
marketing campaigns, research and development investments and fast adaptability to changing
market trends. All of the above presents a significant challenge for domestic producers in this
segment that calls for significant financial investments in order to keep up with the competition.
Following its entry in the pharmacy business segment in 2008 and its further expansion of the
pharmacy chain Farmacia in subsequent years, Atlantic Grupa now owns a pharmacy chain with
a national distribution of its pharmacy units. Among the main risks in this business, three risks
stand out. The first one refers to the risk of uncertainty from the introduction of new and potentially stricter regulations the pharmacy units must comply with since pharmacy as an industry is
strictly regulated and supervised by regulatory authorities. The second pertains to fluctuations of
prices on the principal and supplemental list of medicines which must be complied with by pharmacies as subjects contracted by the Croatian Institute for Health Insurance (HZZO). Thirdly, in
addition to the volatility of price lists, a significant risk also arises from the risk of delayed payment of receivables by HZZO, which as a result aggravates quality and sensible working capital
management. However, Atlantic Grupa uses particular activities aimed at decreasing the listed
risks, such as the focus on increasing the share of over-the-counter medicines and food supplements in the product portfolio of pharmacy units, opening of specialised stores (with the portfolio of over-the-counter medicines and food supplements) which are regulated by the Agency for
Medicinal Products and Medical Devices and, finally, exploring of synergies across the company’s
distribution and production portfolio. Moreover, the company views pharmacy units as a significant distribution channel for other products from Atlantic Grupa’s production and distribution
portfolio.
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RISKS OF
AT L A N T I C G R U P A
COMPETITION RISK
With Croatia’s accession to the EU and the harmonisation of legislation with the acquis communautaire, new standards and norms
are established and, at the same time, final obstacles to free competition are removed as a result of the accession to the internal
market of the European Union. In line with the mentioned processes, on one hand local companies are becoming increasingly
exposed to international competition and, on the other hand, are
experiencing the opening of new business opportunities in foreign markets. In recent years, local companies have focused their
efforts on business expansion in regional markets that are generally characterised by the increasing demand for consumer goods
and, at the same time, the increasing recognisability of domestic
brands. The acquisition of the regional food company Droga Kolinska in 2010 certainly reflects the efforts of Atlantic Grupa in
expanding its business operations to regional markets.
Foreign food competitors have the advantage over local companies with regard to technological infrastructure, capacity to invest
in research and development, financial power, marketing budget
size and the global recognisability of their brands. However, the
Croatian market and regional markets display a high level of loyalty to tradition as well as to the previously acquired purchasing
habits, thus prompting the demand for domestic products. It is
exactly the brand recognisability of the products Atlantic Grupa
manufactures and/or distributes coupled with their high market
shares that emerges as the main comparative advantage of Atlantic Grupa’s production/distribution portfolio. With the strategic focus on the development of strong and market recognised
brands, Atlantic Grupa aims to reduce the risks brought on by the
competition.
Atlantic Grupa is facing strong foreign competition in the segment of health and personal care products, but the expansion of
the product offer, quality retention, marketing support, brand recognisability and distribution support provided by the distribution
units facilitate the consumption of products from this segment
with well-known brands like Plidenta, Rosal, Melem and Dietpharm.
Competition in the pharmacy segment comes primarily from city
and county pharmacies and small private pharmacies owned by
natural persons, and in lesser extent also from wholesale pharmacy chains and generic pharmaceutical companies which also
operate in the pharmacy segment. Atlantic Grupa aims to ensure
its competitive advantage over the existing competitors by combining several key factors related to: continuous expansion of the
pharmacy chain, national distribution of pharmacy units, opening
of specialised stores which represent an upgrade and development of the pharmacy business, managing the pharmacy business in line with the best pharmacy practices and focusing on the
education and competence development of pharmacy personnel
with the goal of achieving high-quality pharmacy service.
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RISKS OF
AT L A N T I C G R U P A
BUSINESS RISK
Business risk refers to the risks present in the company’s day-to-day activities which in turn directly influence the keeping of the
company’s competitive positions as well as the stability of the company’s regular business operations. The listed risk is determined
by the business environment in which the company operates and its regular business policies and decisions.
IMPACT OF INDIVIDUAL PRODUCTS AND BUSINESS PARTNERS ON BUSINESS PERFORMANCE In previous years
Atlantic Grupa has given significant attention to the diversification and expansion of its production as well as distribution portfolio
with the strategic objective of reducing its dependence on the sales of any individual product and thus also the volatility in the
realisation of sales results, particularly during the changes of macroeconomic cycles. Considering the listed diversification in its
production and distribution portfolios, changes in the business environment relating to either a specific production segment or a
specific partner will not jeopardise the overall business operations of Atlantic Grupa.
PRODUCT DEPENDENCE Resulting from the significant expansion and diversification of the production and distribution portfolio in previous years, today Atlantic Grupa’s regular business operations do not depend significantly on any individual product. At
the same time, the most prominent product category is the segment of coffee, followed by the segment of snacks and beverages.
During the past years, Atlantic Grupa combined acquisition activities, innovative approach to new product development and conclusion of new distribution agreements in the diversification of both the production and distribution portfolio. These acquisition activities resulted in what is so far Atlantic Grupa’s biggest acquisition – Droga Kolinska at the end of 2010, which has further reduced
the company’s dependence on one product.
BUSINESS PARTNERSHIP DEPENDENCE In previous years Atlantic Grupa developed strong partnerships with both domestic
and international producers of brands within the distribution portfolio of Atlantic Grupa and continues to realise good collaboration
with principals of the new brands in the company’s distribution portfolio. Although a loss of exclusive distribution rights to a particular product would have a certain impact on the business performance of Strategic Distribution Units, the risk of that has been greatly
reduced in recent years due to the significant expansion of the distribution portfolio. Moreover, in 2016 Atlantic Grupa continued
to expand its distribution portfolio by adding new categories and expanding the existing ones to new markets or new distribution
channels. Atlantic Grupa is continually monitoring developments in the brand market with the purpose of concluding new business
partnerships. The continuous expansion of the distribution portfolio enables the company to quickly adjust to new conditions in the
case of termination of cooperation with any of its present partners. Close business cooperation with leading domestic retail chains
is at the very nature of distribution activities. However, a distributor’s dependence on major retail chains may result in additional
costs of retaining the partnership in the form of additional discounts, longer payment terms and similar activities. Although Atlantic
Grupa has developed good business cooperation with a majority of domestic retail chains, which in turn are the company’s major
buyers, its dependence on any individual buyer is at an appropriate level. In the case of termination of partnership, or bankruptcy of
one of the more important buyers, the impact on business results of Strategic Distribution Units could be significant. However, with
the continuous monitoring of the buyers’ risk level and payment process and the resulting limitation of exposure to risky buyers, the
company aims to reduce the risk to its own operations in the case of termination of partnership or bankruptcy of one of its major
buyers. Moreover, Atlantic Grupa strives to reduce the dependence of distribution on retail chains by developing the “alternative
distribution channels” like the HoReCa channel (catering), outlets for sales of technical goods and the pharmacy channel.
FINANCIAL RISKS
The Group’s business activities expose it to a variety of financial risks (currency risk, equity securities risk, interest rate risk, credit
risk, liquidity risk and equity risks) that are described in detail in notes to the consolidated financial statements (Note 3 – Financial
risk management).
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A B B R E V I AT I O N S
B2B
Business to bussines
CEFTA
Central European Free Trade Agreement
CIS
Commonwealth of Independent States (ex-Soviet Union countries)
DDD
Disinfection, Disinfection, Deratisation
DEG
German Investment and Development Corporation
EBRD
European Bank for Reconstruction and Development
EMS
Environmental Management System
ERP
Enterprise Resource Planning
FSSC
Food Safety System Certification
GDP
Gross domestic product
GHP
Good Hygienic Practices
GMO
Genetically Modified Organism
GMP
Good Manufacturing Practices
GRI
Global Reporting Initiative
HACCP
Hazard Analysis and Critical Control Point
HoReCa Hotel Restaurant Caffe
HRIS
Human Resources Information System
HZZO
Croatian Health Insurance Fund
IFS
International Food Standard
KAM
Key Account Management
KPI
Key Performance Indicators
OTC
Over The Counter
PAH
Polycyclic Aromatic Hydrocarbons
PDCA
Plan Do Check Act
PET
Polyethylene Terephthalate
SBU
Strategic Business Unit
SDU
Strategic Distribution Unit
UEPS
Serbian Marketing Communications Association
ZSE
Zagreb Stock Exchange
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119
AUDITOR’S REPORT
A N D C O N S O L I D AT E D
F I N A N C I A L S TAT E M E N T S
AT L A N T I C G R U P A d . d .
31 DECEMBER 2016
Responsibility for the consolidated financial statements
Pursuant to the Croatian Accounting Act in force, the Management Board is responsible for ensuring that
consolidated financial statements, which are prepared for each financial year in accordance with International
Financial Reporting Standards (IFRS) as endorsed by the European Union (“EU”) give a true and fair view of
the financial position and results of Atlantic Grupa d.d. and its subsidiaries (the “Group”) for that period.
The Management Board has a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason, the Management Board continues to adopt
the going concern basis in preparing the consolidated financial statements.
In preparing those consolidated financial statements, the responsibilities of the Management Board include
ensuring that:
-
suitable accounting policies are selected and then applied consistently;
-
judgments and estimates are reasonable and prudent;
-
applicable accounting standards are followed; and
-
the consolidated financial statements are prepared on the going concern basis unless it is inappropriate
to presume that the Group will continue in business.
The Management Board is responsible for keeping proper accounting records, which disclose with reasonable
accuracy at any time the consolidated financial position of the Group and must also ensure that the
consolidated financial statements comply with the Croatian Accounting Act in force. The Management Board
is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The accompanying consolidated financial statements were approved for issuance by the Management Board
on 30 March 2017.
_______________
Emil Tedeschi
President and Chief Executive Officer
_______________
Mladen Veber
Senior Group Vice President for Business Operations
_______________
Zoran Stanković
Group Vice President for Finance
_______________
Neven Vranković
Group Vice President for Corporate activities
2
Independent auditor’s report
To the Shareholders and Management Board of Atlantic Grupa d.d.:
Our opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of Atlantic Grupa d.d. (the “Company”) and its subsidiaries (together –
the “Group”) as at 31 December 2016, and its consolidated financial performance and its consolidated
cash flows for the year then ended in accordance with International Financial Reporting Standards as
adopted in the European Union (“IFRS”)
What we have audited
The Group’s consolidated financial statements comprise:

the consolidated balance sheet as at 31 December 2016;

the consolidated income statement for the year then ended;

the consolidated statement of comprehensive income for the year then ended;

the consolidated statement of changes in equity for the year ended;

the consolidated statement of cash flows for the year then ended; and

the notes to the consolidated financial statements, which include a summary of significant
accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants (IESBA Code). We have fulfilled our other
ethical responsibilities in accordance with the IESBA Code.
PricewaterhouseCoopers d.o.o., Ulica kneza Ljudevita Posavskog 31, 10000 Zagreb, Croatia
T: +385 (1) 6328 888, F:+385 (1)6111 556, www.pwc.hr
Commercial Court in Zagreb, no. Tt-99/7257-2, Reg. No.: 080238978; Company ID No.: 81744835353; Founding capital: HRK 1,810,000.00, paid in full; Management Board: J. M. Gasparac, President; S.
Dusic, Member; T. Macasovic, Member; Giro-Account: Raiffeisenbank Austria d.d., Petrinjska 59, Zagreb, IBAN: HR8124840081105514875.
Our audit approach
Overview

Overall Group materiality: Croatian Kuna (HRK) 35,500 thousand,
which represents 0.7% of total revenue for the year ending 31 December
2016.

We conducted audit work at 22 legal entities in 8 countries.

Our audit scope addressed 91% of the Group’s revenues and 93% of the
Group’s total assets.

Impairment test for intangible assets with indefinite useful life

Indefinite useful life of Brands and Licenses
How we tailored our Group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the geographical and
management structure of the Group, the accounting processes and controls, and the industry in which
the Group operates.
Considering our ultimate responsibility for the opinion on the Group’s consolidated financial
statements we are responsible for the direction, supervision and performance of the group audit. In
establishing the scope of our audit work, we have determined the nature and extent of the audit
procedures to be performed at the reporting units to ensure sufficient evidence has been obtained to
support our opinion on the consolidated financial statements as a whole.
In establishing our overall approach to audit the Group, we considered the significance of the
components to the Group financial statements, our assessment of risk within each component, the
overall coverage across the Group achieved by our procedures, as well as the risk associated with less
significant components not brought into the full scope of our audit.
In establishing the overall approach to the Group audit, we determined the type of work that needed to
be performed directly by us, as the Group engagement team or component auditors represented by us
and other network firms operating under our instruction. Where the work was performed by
component auditors, we determined the level of involvement we needed to have in the audit work at
those components to be able to conclude whether sufficient appropriate audit evidence has been
obtained as a basis for our opinion as a whole. As a result, we conducted full scope audit work (directly
by us or jointly in cooperation with other network firms) covering 70% of the Group’s revenue,
statutory audit scope covering 18% of revenue and review scope covering 3% of revenue. The
remaining 9% of revenue was subject to analytical review performed by the Group engagement team.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
in the table below. These, together with qualitative considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements, if any, both individually and in aggregate on the financial statements as a whole.
Overall group materiality
HRK 35,500 thousand (2015: HRK 36,000 thousand)
How we determined it
0.7% of total operating revenues
Rationale for the
materiality benchmark
applied
We chose total operating revenue as the materiality benchmark
because, in our view, it is the benchmark against which the
performance of the Group is most commonly measured by users,
and is a generally accepted benchmark.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Impairment test for intangible assets with indefinite
useful lives
See notes 2.7 and 4.c) of the financial statements
The Group has goodwill and other intangible assets with
indefinite useful lives (Brands & Licenses) with carrying
amounts totaling HRK 1,568,055 thousand at 31 December
2016.
We focused on the impairment testing of these assets because
the carrying amount of the indefinite life intangible assets
represents 29% of total assets and because management’s
assessment of the “fair value” and “value in use” of the
Group’s cash generating units (“CGU”) involves significant
judgments about the future results of the business and the
discount rates applied to future cash flow forecasts.
The risk that we focused on in the audit is that the carrying
values of goodwill and other intangible assets with indefinite
useful lives may be overstated and that an impairment charge
may be required.
How our audit addressed the Key
audit matter
We have evaluated and challenged the
Group’s future cash flow forecasts and the
process by which they were prepared, and
tested the mathematical accuracy of the
underlying value in use and fair value
calculations. We have compared the budget
inputs in the model to the approved budgets
and forecast inputs in the model to
management plans.
Overall we found the future cash flows
reasonable, and that the key assumptions
were subject to oversight by the
management.
We have compared current year (2016)
actual results with the figures included in
the prior year (2015) forecast to consider
whether any forecasts included
assumptions that are unreasonable. We
have compared management’s key
assumption for long-term growth rate by
comparing it to historical growth results.
In addition we analyzed and challenged
other key estimates including weighted
average cost of capital (WACC) and royalty
Key audit matter
For the year ended 31 December 2016 management has
performed an impairment assessment over the indefinite life
intangible assets by:
1. Calculating the value in use for each CGU using a
discounted cash flow model and/or fair value for each
individual Brand or License using the relief from royalty
(“RfR”) method which applies projected sales revenue and
applies a market based royalty rate (profit margin).
These cash flows were then discounted to net present value
using the Company’s weighted average cost of capital
(WACC).
2. Comparing the resulting value in use to their respective
book values.
Key assumptions used in the test include estimated future
cash flows, terminal growth rate, WACC and royalty rates.
How our audit addressed the Key
audit matter
rates used by comparing them to market
data and industry research.
We found that the discount rate and royalty
rate used by management was consistent
with market data and industry research.
We performed a sensitivity analysis around
the WACC and terminal growth rate to
ascertain the extent of change in those
assumptions which would trigger a further
material impairment. Based on our
sensitivity analysis we found that no new
material impairment would be triggered.
No material exceptions were noted from our
procedures.
CGU’s for goodwill impairment test are determined on an
operating segment level and for Licenses on a pharmaceutical
retail store level.
Management also performed a sensitivity analysis over the
value in use and fair value calculations by varying the
assumed WACC and terminal growth rates to assess the
impact on the valuations.
The impairment charge for the year related to Goodwill,
Brands and Licenses amounts to HRK 10,397 thousand.
Indefinite useful lives of Brands and Licences
See note 4.b) of the financial statements
The Group has determined that several Brands and Licenses
have indefinite useful lives. The carrying value of such assets
amounts to HRK 742,062 thousand at 31 December 2016.
We focused on the indefinite useful life test, because the
carrying amount of the indefinite life intangible assets
represents 14% of total assets and because management
assessment of the indefinite life involves significant
judgments about the strength of the brand and future cash
flows.
The risk that we focused on in the audit is that these assets
should be classified as definite life assets subject to
amortisation and therefore the assets balance may be
overstated.
The Group annually assesses the accounting estimates of
indefinite useful life. The assessment is performed by
reviewing external reports on brand strength, market share
position of individual brands in each country and stability of
We have evaluated and challenged the
Group’s assumptions on historical and
projected sales revenues.
In addition we have analyzed external
market reports related to market share of
the brands.
Based on the management review, the
Group revised its accounting estimates in
respect of Grand Kafa and determined that
the brand will have a definite useful life of 15
years. This estimated useful life is supported
by historical facts and industry data.
We found that the change in the accounting
estimate of the useful life of the Grand Kafa
brand and the manner in which it is
accounted for in the consolidated financial
statements is appropriate.
No material exceptions were noted from our
procedures.
Key audit matter
How our audit addressed the Key
audit matter
the industry or, in case of licenses, local laws and expiry dates
as licenses relate to the pharmaceutical retail business.
In addition, the Group reviews expected generation of net
cash flow from the Brands, obsolescence of the Brand, and
any plan to discontinue use of the Brand.
If there are no legal, contractual obligations or economic
factors that could limit the life, an intangible asset can be
considered to have an indefinite life. This also means that the
asset can contribute to an entity’s cash flows beyond the
foreseeable time horizon.
If management notices that there is a foreseeable limit to the
period over which the asset is expected to generate net cash
flow, the Group changes its estimates according to IAS 8 from
indefinite life asset to definite useful life.
As a result of the assessment in the current period,
management concluded there is no change of events for
licenses, however for the Grand Kafa Brand, the estimate has
been changed from indefinite useful life to definite useful life
and depreciation was charged in 2016. For more details refer
to Note 4.b).
Other information
Management is responsible for the other information. The other information comprises the
Consolidated Annual Report of the Group, which includes the Management Report and Corporate
Governance Statement but does not include the consolidated financial statements and our auditor’s
report thereon.
Our opinion on the consolidated financial statements does not cover the other information, including
the Management Report and Corporate Governance Statement.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
With respect to the Management Report and Corporate Governance Statement, we also performed
procedures required by the Accounting Act in Croatia. Those procedures include considering whether
the Management Report includes the disclosures required by Article 21 and 24 of the Accounting Act,
and whether the Corporate Governance Statement includes the information specified in Article 22 of
the Accounting Act.
Based on the work undertaken in the course of our audit, in our opinion:
·
the information given in the Management Report and the Corporate Governance Statement for the
financial year for which the consolidated financial statements are prepared is consistent, in all
material respects, with the consolidated financial statements;
·
the Management Report has been prepared in accordance with the requirements of Article 21 and
24 of the Accounting Act; and
·
the Corporate Governance Statement includes the information specified in Article 22 of the
Accounting Act.
In addition, in light of the knowledge and understanding of the Group and its environment obtained in
the course of the audit, we are also required to report if we have identified material misstatements in
the Management Report and Corporate Governance Statement. We have nothing to report in this
respect.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with International Financial Reporting Standards as adopted in the
European Union, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Siniša Dušić.
PricewaterhouseCoopers d.o.o.
Ulica kneza Ljudevita Posavskog 31, Zagreb
Zagreb, 31 March 2017
ATLANTIC GRUPA d.d.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
(all amounts expressed in thousands of
HRK)
Revenues
Cost of trade goods sold
Change in inventories of finished goods and
work in progress
Material and energy costs
Staff costs
Marketing and promotion costs
Depreciation, amortisation
and impairment
Other operating costs
Other gains/(losses) - net
Note
5
6
7
2.24,
13, 13a, 14
8
9
Operating profit
2016
2015
5,174,539
(1,308,331)
5,450,955
(1,483,783)
13,984
(1,166)
(1,636,983)
(800,863)
(355,339)
(1,791,442)
(767,779)
(332,773)
(166,580)
(163,297)
(630,774)
18,135
(570,722)
63,986
307,788
403,979
Finance income
Finance costs
10
10
41,378
(145,021)
84,287
(199,170)
Finance costs - net
10
(103,643)
(114,883)
204,145
289,096
(40,910)
(46,573)
163,235
242,523
162,800
435
163,235
242,291
232
242,523
48.83
48.83
72.67
72.67
Profit before tax
Income tax expense
11
Profit for the year
Attributable to:
Owners of the parent
Non-controlling interests
Earnings per share for profit attributable
to the equity holders of the Company
during the year (in HRK)
- basic
- diluted
12
The accompanying notes form an integral part of these consolidated financial statements.
10
ATLANTIC GRUPA d.d.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
(all amounts expressed in thousands of HRK)
Note
2016
2015
163,235
242,523
(826)
(826)
(1,260)
(1,260)
(47,577)
8,700
(38,877)
(7,777)
(2,052)
(9,829)
Other comprehensive loss
for the year, net of tax
(39,703)
(11,089)
Total comprehensive income for the year
123,532
231,434
Attributable to:
Owners of the parent
Non-controlling interests
123,109
423
231,208
226
Total comprehensive income for the year
123,532
231,434
Profit for the year
Other comprehensive income:
Items that will not be reclassified
to profit or loss
Actuarial losses from defined benefit plan
Items that may be subsequently
reclassified to profit of loss
Currency translation differences
Cash flow hedges
22
22
The accompanying notes form an integral part of these consolidated financial statements.
11
ATLANTIC GRUPA d.d.
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2016
(all amounts expressed in thousands of HRK)
31 December
2016
31 December
2015
1,082,059
1,259
1,756,217
47,293
915
59,102
2,946,845
1,083,566
1,748
1,797,791
37,066
959
83,695
3,004,825
623,318
1,300,568
10,326
18,139
227
490,730
2,443,308
603,491
1,192,314
16,018
12,728
305
365,692
2,190,548
13a
5,687
2,448,995
5,395,840
99,196
2,289,744
5,294,569
21
21
21
22
133,372
881,489
(88)
(80,964)
1,079,698
2,013,507
2,981
2,016,488
133,372
881,515
(198)
(26,264)
954,325
1,942,750
2,558
1,945,308
24
25
15
1,422,605
171,811
6,673
58,036
1,659,125
1,309,180
176,677
472
3,460
54,475
1,544,264
1,073,996
588,539
9,231
48,461
1,720,227
3,379,352
5,395,840
988,554
742,032
5,091
17,034
52,286
1,804,997
3,349,261
5,294,569
Note
ASSETS
Non-current assets
Property, plant and equipment
Investment property
Intangible assets
Deferred income tax assets
Available-for-sale financial assets
Trade and other receivables
13
14
25
17
18
Current assets
Inventories
Trade and other receivables
Prepaid income tax
Derivative financial instruments
Deposits
Cash and cash equivalents
19
18
15
18
20
Non-current assets held for sale
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Capital and reserves attributable to
owners of the Company
Share capital
Share premium
Treasury shares
Reserves
Retained earnings
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Deferred income tax liabilities
Derivative financial instruments
Other non-current liabilities
Provisions
26
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current income tax liabilities
Provisions
23
24
15
26
Total liabilities
TOTAL EQUITY AND LIABILITIES
The accompanying notes form an integral part of these consolidated financial statements.
12
ATLANTIC GRUPA d.d.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Attributable to owners of the Company
(in thousands of
HRK)
Balance at 1
January 2015
Comprehensive
income:
Net profit for the
year
Other
comprehensive
(loss)/income
Total comprehensive
income
Transaction with
owners:
Share based
payment
(Note 21)
Purchase of treasury
shares (Note 21)
Transfer
Dividends relating to
2014 (Note 21)
Balance at 31
December 2015
Comprehensive
income:
Net profit for the
year
Other
comprehensive
(loss)/income
Total comprehensive
income
Transaction with
owners:
Acquisition of noncontrolling interests
(Note 28)
Share based
payment
(Note 21)
Purchase of treasury
shares (Note 21)
Transfer
Dividends relating to
2015 (Note 21)
Balance at 31
December 2016
Share
Capital
Reserves
Retained
earnings
Total
Noncontrolling
interest
Total
1,015,870
(19,635)
756,497
1,752,732
2,332
1,755,064
-
-
242,291
242,291
232
242,523
-
(9,823)
(1,260)
(11,083)
(6)
(11,089)
-
(9,823)
241,031
231,208
226
231,434
3,123
-
-
3,123
-
3,123
(4,304)
-
-
(4,304)
-
(4,304)
-
3,194
(3,194)
-
-
-
-
-
(40,009)
(40,009)
-
(40,009)
1,014,689
(26,264)
954,325
1,942,750
2,558
1,945,308
-
-
162,800
162,800
435
163,235
-
(38,865)
(826)
(39,691)
(12)
(39,703)
-
(38,865)
161,974
123,109
423
123,532
-
-
(4,778)
(4,778)
-
(4,778)
1,160
-
-
1,160
-
1,160
(1,076)
-
-
(1,076)
-
(1,076)
-
(15,835)
15,835
-
-
-
-
-
(47,658)
(47,658)
-
(47,658)
1,014,773
(80,964)
1,079,698
2,013,507
2,981
2,016,488
The accompanying notes form an integral part of these consolidated financial statements.
13
ATLANTIC GRUPA d.d.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
Note
2016
2015
403,997
616,475
Interest paid
(82,290)
(102,705)
Income tax paid
(53,839)
(42,949)
267,868
470,821
(116,017)
(115,534)
49,260
4,470
-
3,785
(1,122)
(5,295)
(5,029)
(37,629)
Repayments of loan and deposits granted
4,162
6,161
Interest received
3,390
4,637
(65,356)
(139,405)
(1,076)
(4,304)
434,386
125,532
(451,575)
(462,186)
(all amounts expressed in thousands of HRK)
Cash flows from operating activities:
Cash generated from operations
29
Cash flows used in investing activities
Purchase of property, plant and equipment
and intangible assets
Proceeds from sale of property, plant and
equipment and non-current assets held for sale
Proceeds from sale of available-for-sale
financial assets
Acquisition of subsidiary – net of cash acquired
28
Loans granted and deposits placed
Cash flows used in financing activities
Purchase of treasury shares
21
Proceeds from borrowings, net of fees paid
Repayments of borrowings
Acquisition of interest in a subsidiary from
non-controlling interests
28
(8,438)
-
Dividends paid to Company shareholders
21
(45,012)
(40,009)
(2,646)
-
(74,361)
(380,967)
128,151
(49,551)
Exchange losses on cash and cash equivalents
(3,113)
(2,345)
Cash and cash equivalents at beginning of year
365,692
417,588
490,730
365,692
Withholding tax paid on dividend distributed within
the Group
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at end of year
20
The accompanying notes form an integral part of these consolidated financial statements.
14
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 1 – GENERAL INFORMATION
Operating as a vertically integrated multinational company, Atlantic Grupa d.d. (the Company) and its
subsidiaries (as disclosed in Note 32 “the Group”) have business activities that incorporate R&D,
production and distribution of fast moving consumer goods in Southeast Europe, the European markets
and Russia and CIS (Commonwealth of Independent States). With its modern production network, the
Group stands out as one of the leading food & beverage producers in Southeast Europe with prominent
coffee brands Grand Kafa and Barcaffe, a range of beverage brands Cockta, Donat Mg, Cedevita, a
portfolio of sweet and salted snacks brands Smoki, Chipsos, Najlepše želje and Bananica, the savoury
spread brand Argeta and gourmet brand Granny’s Secret. Additionally, the Group has a wide range of
personal care product portfolio, owns the leading Croatian producer of vitamins, minerals, supplements
and OTC drugs as well as the leading pharmacy chain in Croatia under the Farmacia brand.
Furthermore, the Group manufactures and distributes the leading European brand in sports nutrition Multipower and has a strong foothold on the Russian and CIS markets with its baby food portfolio under
the Bebi brand. With its own distribution network in Croatia, Slovenia, Serbia and Macedonia, the Group
also distributes a range of products from external partners (Unilever, Ferrero, Wrigley, Johnson &
Johnson, Duracell and others). At the beginning of 2016, the Group has started its own distribution in
Germany and Austria. The Group has manufacturing plants in Croatia, Slovenia, Serbia, Bosnia and
Herzegovina, Macedonia and Germany with firms and representative offices in 12 countries. The Group
exports its products to more than 40 markets worldwide.
The Company is domiciled in Zagreb, Miramarska 23, Croatia.
The Company’s shares are listed on the official market of the Zagreb Stock Exchange. The shareholder
structure is shown in Note 21.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all periods presented, unless
otherwise stated.
2.1
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International
Financial Reporting Standards (IFRS) which were endorsed by the European Union (EU) under the
historical cost convention, as modified by the revaluation of available-for-sale financial assets and
derivative financial instruments.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the consolidated financial statements, are
disclosed in Note 4.
(a) New and amended standards adopted by the Group
The Group has adopted the following new and amended standards for annual reporting period
commencing 1 January 2016 which were endorsed by the European Union and which are relevant for
the Group’s financial statements:
 Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16
and IAS 38
 Disclosure Initiative - Amendments to IAS 1
 Annual Improvements to IFRSs 2012-2014 Cycle comprising changes to four standards (IFRS
5, IFRS 7, IFRS 19, IAS 34)
The adoption of the improvements did not have any impact on the current period or any prior period
and it is not likely to affect future periods.
15
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1
Basis of preparation (continued)
(b) Standards, amendments and interpretations issued but not yet effective
Certain new standards and interpretations have been published that are not mandatory for 31 December
2016 reporting periods and have not been early adopted by the Group. None of these is expected to
have a significant effect on the consolidated financial statements of the Group, except for the standards
stated below. The Group plans to adopt new standards on their effective date as of and when endorsed
by the EU.

IFRS 9, Financial instruments and associated amendments to various other standards (effective
for annual periods beginning on or after 1 January 2018)
IFRS 9 addresses the classification, measurement and de-recognition of financial assets and
financial liabilities and introduces new rules for hedge accounting. In July 2014, the IASB made
further changes to the classification and measurement rules and also introduced a new impairment
model. With these amendments, IFRS 9 is now complete.
The Group has performed high-level impact assessment and expects no impact from the new
classification, measurement and de-recognition rules on its financial assets and liabilities. The
Group expects to apply simplified approach and record lifetime expected impairment losses on all
trade receivables.
The Group believes that all existing hedge relationships that are currently designated in effective
hedging relationships will still qualify for hedge accounting under IFRS 9. As IFRS 9 does not change
the general principles of how an entity accounts for effective hedges, the Group does not expect a
significant impact as a result of applying IFRS 9.

IFRS 16 “Leases” (issued in January 2016 and effective for annual periods beginning on or after 1
January 2019, early adoption is permitted only if IFRS 15 is adopted at the same time)
IFRS 16 will affect primarily lessee accounting and will result in the recognition of almost all leases
on the balance sheet. The standard removes the current distinction between operating and finance
leases and requires recognition of an asset (the right to use the leased item) and a financial liability
to pay rentals for virtually all lease contracts. An optional exemption exist for short-term and lowvalue assets.
The income statement will also be affected because the total expense is typically higher in the earlier
years of a lease and lower in later years. Additionally, operating expenses will be replaced with
interest and depreciation, so key metrics like EBITDA will change.
Operating cash flows will be higher as a cash payments for the principal portion of the lease liability
are classified within financial activities. Only the part of the payment that reflects interest will
continue to be presented as operating cash flows.
Lessor accounting will not change significantly. Some differences may arise as a result of the new
guidance on the definition of a lease. In accordance with IFRS 16, a contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
The Group is currently making detailed assessment of the impact of the new standard on its financial
statements.
16
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1

Basis of preparation (continued)
IFRS 15, ‘Revenue from contracts with customers and associated amendments to various other
standards (effective for annual periods beginning on or after 1 January 2018)
The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which
covers contracts for goods and services and IAS 11 which covers construction contracts.
The new standard is based on the principle that revenue is recognised when control of a good or
service transfers to a customer – so the notion of control replaces the existing notion of risks and
rewards.
Key changes to current practice are:
o Any bundled goods or services that are distinct must be separately recognised, and any
discounts or rebates on the contract price must generally be allocated to the separate elements;
o Revenue may be recognised earlier than under current standards if the consideration varies
for any reasons (such as for incentives, rebates, performance fees, royalties, success of an
outcome etc.) – minimum amounts must be recognised if they are not at significant risk of
reversal;
o The point at which revenue is able to be recognised may shift: some revenue which is currently
recognised at a point in time at the end of a contract may have to be recognised over the
contract term and vice versa;
o There are new specific rules on licenses, warranties, non-refundable upfront fees and,
consignment arrangements, to name a few; and
o As with any new standard, there are also increased disclosures.
Entities will have a choice of full retrospective application, or prospective application with additional
disclosures.
At this stage, the Group is not able to estimate the impact of the new rules on the Group's financial
statements. More detailed assessments of the impact will be made during 2017.
17
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2
Consolidation
(a)
Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are
de-consolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are
expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date. On an acquisitionby-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or
at the non-controlling interest’s proportionate share of the recognised amounts of identifiable acquiree’s net
assets.
Goodwill is initially measured as excess of the aggregate of the consideration transferred and the fair value
of non-controlling interest in the acquiree and acquisition-date fair value of any previous equity interest in
the acquiree over the fair value of the Group’s share of the identifiable net assets acquired. If this is lower
than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the
difference is recognised directly in profit or loss (Note 2.6).
Inter-company transactions, balances and unrealised gains on transactions between Group companies
are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Mergers
The predecessor method of accounting is used to account for the merger of related companies under
common control. The carrying value of assets and liabilities of the predecessor entity are transferred as
balances in the merged entity. On the date of the merger, inter-company transactions, balances and
unrealised gains and losses on transactions between the two entities merging are eliminated, recognizing
the carrying value of net assets merged within equity.
(c) Transactions with non-controlling interests
The Group treats transactions with non-controlling interests that do not result in loss of control as
transactions with equity owners of the Group. For purchase from non-controlling interests, the difference
between any consideration paid and the relevant share acquired of the carrying value of net assets of
the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also
recorded in equity.
(d) Disposal of subsidiary
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair
value at the date when control is lost, with the change in carrying amount recognised in profit or loss.
The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised
in other comprehensive income in respect of that entity are accounted for as if the Group had directly
disposed of the related assets or liabilities. This may mean that amounts previously recognised in other
comprehensive income are reclassified to profit or loss.
18
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Strategic Management
Council.
2.4
Foreign currencies
(a)
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment where the entity operates (‘the functional currency’). The
consolidated financial statements are presented in Croatian kuna (HRK), which is the Company’s
functional and the Group’s presentation currency.
(b)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange
gains and losses resulting from the settlement of these transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement.
Foreign exchange gains and losses related to borrowings are presented in the income statement within
'finance income or cost'. All other foreign exchange gains and losses are presented in the income
statement within 'other gains/(losses) – net'.
(c)
Group companies
The results and financial position of all Group entities with a functional currency different from the
presentation currency are translated into the presentation currency as follows:
(i)
assets and liabilities for each balance sheet presented are translated at the closing rate at the date
of that balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates; and
(iii) all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign
operations are taken into other comprehensive income. When a foreign operation is sold, exchange
differences that were recorded in equity are reclassified from other comprehensive income to the income
statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are
recognised in other comprehensive income.
19
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.5
Property, plant and equipment
Property, plant and equipment is included in the balance sheet at historical cost less accumulated
depreciation and provision for impairment, if required. Historical cost includes expenditure directly
attributable to the acquisition of items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other repairs and maintenance are charged to the income statement during the
financial period in which they incurred.
Land and assets not yet in use are not depreciated. Depreciation of other items of property, plant and
equipment is calculated using the straight-line method to allocate their cost to residual values over their
estimated useful lives, as follows:
Buildings
Plant and equipment
10 to 50 years
2 to 20 years
The residual value of an asset is an estimated amount that the Group would currently obtain from
disposal of the asset less estimated costs of disposal, if the asset was already of the age and in the
condition expected at the end of its useful life. The residual value of an asset is nil if the Group expects
to use the asset until the end of its physical life. The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (Note 2.7).
Gains and losses on disposals are determined by comparing the proceeds with carrying amount and
are recognised within other gains/(losses) - net in the income statement.
20
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6
Intangible assets
(a)
Goodwill
Goodwill represents the excess of the acquisition cost over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the acquisition date. Goodwill on acquisition of
subsidiaries is included in intangible assets.
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate
a potential impairment and carried at cost less accumulated impairment losses. Impairment losses on
goodwill are recognised immediately as an expense and not subsequently reversed. Gains and losses on
the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made
to those cash-generating units that are expected to benefit from synergies of the business combination in
which the goodwill arose. Goodwill is monitored at the operating segment level.
(b)
Distribution rights
Separately acquired distribution rights are shown at historical cost. Distribution rights acquired in a business
combination are recognised at fair value at the acquisition date. Product distribution rights have a finite useful
life and are carried at cost less accumulated amortization and impairment, if any. Amortization is
calculated using the straight-line method to allocate the cost of rights over their estimated useful lives
(from 1.5 to 5 years).
(c)
Brands
Brands acquired in a business combination are carried at initially determined fair value (recognised at
acquisition date) less accumulated amortization. Amortization is calculated using the straight-line method to
allocate the cost of brands over their estimated useful life (15 years).
Brands with indefinite useful lives are not amortized, but are tested annually for impairment at the cash
generating unit level.
(d) Computer software
Acquired computer software licences are capitalized on the basis of the costs incurred to acquire and bring
to use the specific software. These costs are amortized over their estimated useful lives (up to 5 years).
(e)
Licences
Licences acquired in a business combination are recognized at fair value at the acquisition date. Licences
have indefinite useful lives and are not amortised, but are tested annually for impairment at the cash
generating unit level.
21
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.7
Impairment of non-financial assets
Assets that have an indefinite useful life (such as brands, licences and goodwill) are not subject to
amortisation and are tested annually for impairment. Assets that are subject to amortisation and
depreciation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows (cashgenerating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at each reporting date.
2.8
Financial assets
The Group classifies its financial assets in the following categories: loans and receivables, available for
sale and at fair value through profit or loss. The classification depends on the purpose for which the
financial assets were acquired. Management determines the classification of its financial assets at initial
recognition and re-evaluates this designation at every reporting date.
(a)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for maturities greater than
12 months after the balance sheet date. These are classified as non-current assets. The Group's loans
and receivables comprise 'trade and other receivables', ‘deposits’ and 'cash and cash equivalents' in the
balance sheet (Notes 2.11 and 2.12).
Loans and receivables are carried at amortised cost using the effective interest method.
(b) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless management
intends to dispose the investment within 12 months of the balance sheet date. Available-for-sale
financial assets are carried at fair value, except investments in equity instruments that do not have a
quoted market price in an active market and whose fair value cannot be reliably measured,
consequently, these are carried at cost.
(c) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset
is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives
are also categorised as held for trading unless they are categorised as hedges. Assets in this category
are classified as current assets if expected to be settled within 12 months; otherwise, they are classified
as non-current.
Regular way purchases and sales of financial assets are recognised on trade-date – the date on which
the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets
carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are
expensed in the income statement. Financial assets are derecognised when the rights to receive cash
flows from the investments have expired or have been transferred and the Group has transferred
substantially all risks and rewards of ownership.
22
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8
Financial assets (continued)
Changes in the fair value of monetary securities denominated in a foreign currency and classified as
available-for-sale are analysed between translation differences resulting from changes in the amortised
cost of the security and other changes in the carrying amount of the security. Interest income and the
translation differences are recognised in the income statement, whereas other changes in carrying
amount are recognised in other comprehensive income. Changes in the fair value of other monetary
securities classified as available-for-sale and non-monetary securities classified as available-for-sale
are recognised in other comprehensive income.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset
is not active, the Group establishes fair value by using valuation techniques. These include the use of
recent arm’s length transactions and references to other instruments that are substantially the same,
discounted cash flow analysis and option pricing models, making maximum use of market inputs and
relying as little as possible on entity-specific inputs.
The Group assesses at each balance sheet date whether there is objective evidence that a financial
asset or a group of financial assets is impaired. A significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss – measured as the difference between
the acquisition cost and the current fair value, less any impairment loss on that financial asset previously
recognised in profit or loss – is reclassified from other comprehensive income to the income statement.
Impairment losses recognised in the income statement on equity instruments are not reversed through
the income statement. Impairment testing of receivables is described in Note 2.11.
2.9
Leases
The Group leases certain property, plant and equipment. Leases of property, plant and equipment,
where the Group has substantially all the risks and rewards of ownership, are classified as finance
leases. Finance leases are capitalized at the inception of the lease at the lower of fair value of the leased
property or the present value of minimum lease payments. Each lease payment is allocated between
the liability and finance charges in order to achieve a constant rate on the balance outstanding. The
interest element of the finance costs is charged to the income statement over the lease period. The
property, plant and equipment acquired under finance leases are depreciated over the shorter of the
useful life of the asset and the lease term.
Leases where the significant portion of risks and rewards of ownership are not transferred to the Group
are classified as operating leases. Payments made under operating leases are charged to the income
statement on a straight-line basis over the period of the lease.
2.10 Inventories
Inventories of raw materials and spare parts are stated at the lower of cost, determined using the
weighted average method and net realisable value. Net realisable value is the estimated selling price in
the ordinary course of business, less applicable variable selling expenses.
The cost of work-in-progress and finished goods comprises raw materials, direct labour, other direct
costs and related production overheads (based on normal operating capacity). It excludes borrowing
costs.
Trade goods are carried at selling price less applicable taxes and margins.
Where necessary, a provision is made for damaged and expired inventories.
23
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.11 Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment. A provision for
impairment of receivables is established when there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of receivables. Significant financial difficulties
of the debtor, probability that the debtor will enter bankruptcy, and default or delinquency in payments
are considered indicators that the receivable is impaired. The amount of the provision is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted
at the original effective interest rate. The amount of the provision and subsequent recoveries of amounts
previously written off are recognised in the income statement within ‘other operating expenses’.
If the collection of trade and other receivables is expected in one year or less (or in the normal operating
cycle of the business if longer), they are classified as current assets. If not, they are presented as noncurrent assets.
2.12 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term
highly liquid instruments with original maturities of three months or less (excluding bills of exchange). Bank
overdrafts are included within borrowings in current liabilities on the balance sheet.
2.13 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the
fair value of the consideration received over the par value of the shares issued is presented in the notes
as a share premium.
Where any Group company purchases the Company’s equity share capital (treasury shares), the
consideration paid, including all directly attributable incremental transaction costs, is deducted from
equity until the shares are cancelled or reissued. Where such ordinary shares are subsequently
reissued, any consideration received, net of any directly attributable incremental transaction costs and
the related income tax effects, is included in equity attributable to the Company’s equity holders.
2.14 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income statement over the period of the borrowings
using the effective interest method.
Fees paid on the establishment of the loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is
deferred until the draw-down occurs. To the extent there is no evidence that is probable that some or all
of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.
24
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.15 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income
statement, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries
operate and generate taxable income. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulations are subject to interpretation and consider
establishing provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is recognised, using liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except
where the timing of the reversal of temporary difference is controlled by the Group and it is probable that
the temporary difference will not reverse in the foreseeable future.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to
the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
2.16 Employee benefits
(a) Pension obligations and post-employment benefits
The Group makes payments to mandatory pension funds on behalf of its employees in the ordinary
course of business through salary deductions, as required by law. All contributions made to the
mandatory pension funds are recorded as salary expense when incurred. The Group has no other
pension scheme and consequently, has no other obligations in respect of employee pensions. In
addition, the Group is not obliged to provide any other post-employment benefits except for the one-off
retirement payment as prescribed by local legislation. The liability recognised in the balance sheet in
respect of one-off retirement payment is the present value of the defined benefit obligation at the end of
the reporting period. This obligation is calculated annually by independent actuaries. Actuarial gains and
losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to equity in other comprehensive income in the period in which they arise. Interest costs/income
arising from actuarial calculation are charged/credited to income statement within ‘interest expenses’.
(b) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal
retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits.
The Group recognises termination benefits when it is demonstrably committed to either: terminating the
employment of current employees according to a detailed formal plan without the possibility of
withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to
their present value.
25
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.16 Employee benefits (continued)
(c) Long-term employee benefits
The Group recognises a liability for long-term employee benefits (jubilee awards) evenly over the period
the benefit is earned based on actual years of service. The long-term employee benefit liability is
determined annually by an independent actuary, using assumptions regarding the likely number of staff
to whom the benefit will be payable, estimated benefit cost and the discount rate. Actuarial gains and
losses arising from experience adjustments and changes in actuarial assumptions are charged
immediately or credited to the income statement within ‘staff costs’. Interest costs/income arising from
actuarial calculation are charged/credited to income statement within ‘interest expense’.
(d) Share-based compensation
Key management of the Group receives remuneration in the form of share-based payment transactions,
whereby employees render services as consideration for equity instruments ('equity-settled
transactions').
The cost of equity-settled transactions with employees is measured by reference to the fair value at the
date on which they are granted. The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance and service conditions are
fulfilled, ending on the date on which relevant employees become fully entitled to the award ('the vesting
date'). The cumulative expense recognised for equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately vest. The income statement expense or credit for
a period represents the movement in cumulative expense recognised as at the beginning and end of
that period.
(e) Short-term employee benefits
The Group recognises a provision for bonuses and accumulating unused vacation entitlement days if
contractually obliged or if there is a past practice that has created a constructive obligation.
2.17 Provisions
Provisions for termination benefits and long term employee benefits, restructuring costs, warranty claims
and legal claims are recognised when: the Group has a present legal or constructive obligation as a result
of past events; it is more likely than not that an outflow of resources will be required to settle the obligation;
and the amount can be reliably estimated.
When there are number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood
of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest
expense.
26
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.18 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and
services in the ordinary course of the Group’s activities. Revenue is presented, net of value-added tax,
returns, rebates and discounts, expenses of listing the products and marketing activities that are an
integral part of contracts with customers. All other marketing activities related to marketing campaigns
that are not integral part of customer contract are presented within Marketing and promotion costs.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that
future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s
activities as described below.
(a)
Sales of products and trade goods – wholesale
The Group manufactures and sells its own products and goods of third parties in the wholesale market.
Sales of goods are recognised when the Group has delivered the products to the wholesaler, the wholesaler
has full discretion over the price to sell and there is no unfulfilled obligation that could affect the wholesaler’s
acceptance of the products. Delivery does not occur until the products have been shipped to the specified
location, the risks of loss have been transferred to the wholesaler and either of the following has occurred:
the wholesaler has accepted the products in accordance with the contract, the acceptance provisions have
lapsed or the Group has objective evidence that all criteria for acceptance have been satisfied.
Products are sold with volume discounts and customers have a right to return faulty products in the
wholesale market. Sales are recorded based on the price specific in the sales contracts, net of estimated
volume discounts and returns at the time of sale. Accumulated experience is used to estimate and provide
for the discounts and returns. The volume discounts are assessed based on anticipated annual purchases.
No element of financing is deemed present as the sales are made with a credit term of up to 90 days, which
is consistent with the market practice.
(b)
Sales of goods - retail
The Group operates a pharmacy and specialised stores.
Sale of goods are recognised when a group entity sells a product to the customer. Retail sales are usually
in cash or by credit card. The Group operates a customer loyalty programme, allowing customers to
accumulate points when they purchase products. The points can then be redeemed as discount on
subsequent purchase, subject to a minimum number of points being obtained. Consideration received is
allocated between the products sold and the points issued. Part of fair value of the points issued is deferred
as liability in the balance sheet and recognised as revenue when the points are redeemed.
(c)
Sales of services
Sales of services are recognised in the accounting period in which the services are rendered, by
reference to completion of the specific transaction assessed on the basis of the actual service provided
as a proportion of the total services to be provided.
(d)
Interest income
Interest income arising from fixed-term bank deposits, loans granted and interest from customers is
recognised on a time-proportion basis using the effective interest method.
27
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.19 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial
statements in the period in which dividends are approved by the Company’s shareholders.
2.20 Value added tax
The Tax Authorities require the settlement of VAT on a net basis. VAT related to sales and purchases
is recognised and disclosed in the balance sheet on a net basis. Where a provision has been made for
impairment of receivables, the impairment loss is recorded for the gross amount of the debtor, including
VAT.
2.21 Non-current assets held for sale
Non-current assets are classified as assets held for sale when their carrying value is to be recovered
principally through a sale transaction and a sale is considered highly probable. They are stated at the
lower of carrying amount and fair value less costs to sell.
2.22 Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently re-measured at their fair value. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the
item being hedged.
The Group designates derivatives as hedges of a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction (cash flow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments
and hedged items as well as its risk management objectives and strategy for undertaking various
hedging transactions. The Group also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items.
The fair value of cash flow hedge derivatives is disclosed in Note 15 and changes in cash flow hedge
reserves are disclosed in Note 22.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash
flow hedges, is recognised in other comprehensive income. The gain or loss related to the ineffective
portion is recognised immediately in the income statement within ‘other gains/(losses) – net’.
Amounts accumulated in equity are reclassified from other comprehensive income to profit or loss in the
periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of
interest rate swaps hedging variable rate borrowings is recognised in the income statement within
‘finance costs - net’. The gain or loss relating to the ineffective portion is recognised in the income
statement within ‘other gains/(losses) – net’.
When a hedging instrument expires or is sold or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred from other comprehensive income to the income statement within ‘other
gains/(losses) – net’.
28
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.23 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Accounts payable are classified as current liabilities if payment is
due within one year or less (or in the regular operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
2.24 Investment property
Investment property is carried at historical cost less accumulated depreciation and provision for
impairment. Investment property is derecognized when it either has been disposed of or when it is
permanently withdrawn from use and no future economic benefit is expected from its disposal. Transfers
are made to or from investment property only when there is a change in use. The carrying amount
approximates fair value. Investment property is held for long term rental yields and is not occupied by
the Group. Depreciation expense related to investment property amounted to HRK 43 thousand in 2016
(2015: HRK 52 thousand).
2.25 Comparatives
In order to ensure comparability, operating results of segments for the year ended 31 December 2015
have been restated according reporting logic applied in 2016.
29
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 3 – FINANCIAL RISK MANAGEMENT
3.1
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair
value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The
Group’s risk management programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group’s financial performance. The Group uses derivative
financial instruments to hedge certain risk exposures.
(a)
Market risk
(i)
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the EURO, Serbian dinar (RSD), Russian Ruble (RUB)
and to a lesser extent the British Pound (GBP) and US dollar (USD). The depreciation of the Serbian
dinar against EURO in 2016 resulted in HRK 7,284 thousand foreign currency losses from financing
activities (2015: HRK 3,226 thousand) while the apreciation of Russian ruble had a direct positive impact
on the Group’s 2016 financial activities results of HRK 18,154 thousand (2015: negative impact of HRK
10,050 thousand).
Movements in exchange rates between the above mentioned currencies and Croatian kuna (HRK) may
have an impact on the results of the Group’s future operations and future cash flow. The amounts in the
tables below represent the HRK amounts denominated in the stated currencies at the balance sheet
date for major balance sheet monetary items.
31 December 2016
(in thousands of HRK)
EUR
RSD
USD
RUB
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
420,754
233,917
(391,923)
(1,518,783)
344,634
85,909
(127,084)
(105)
23
11,431
(60,749)
(9,464)
32,964
3,372
(16,473)
-
Net balance sheet exposure
(1,256,035)
303,354
(58,759)
19,863
EUR
RSD
USD
RUB
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
411,234
130,711
(420,658)
(1,773,869)
342,703
87,382
(134,645)
(34)
56
7,449
(59,789)
(8,872)
40,787
6,204
(5,473)
-
Net balance sheet exposure
(1,652,582)
295,406
(61,156)
41,518
31 December 2015
(in thousands of HRK)
Given that the Group also has subsidiaries outside of Croatia, its shareholders equity value is exposed
to fluctuations in exchange rates. Equity changes caused by movements in foreign exchange rates are
shown as translation differences in the Group’s consolidated statement of comprehensive income.
In the event of a rise of 1% in the EUR against HRK and RSD, assuming all other variables remain
constant, the profit after tax for the year would have been HRK 7,261 thousand lower (2015: HRK 9,067
thousand lower), mainly due to the EUR denominated borrowings, and other comprehensive income
would be HRK 14,614 thousand higher (2015: HRK 14,521 thousand higher), due to the translation
differences arising on consolidation of subsidiaries whose local currency is EUR.
In the event of a rise of 1% in the RSD against HRK, assuming all other variables remain constant, the
profit after tax for the year would have been HRK 357 thousand lower (2015: HRK 185 thousand lower)
and other comprehensive income would be HRK 5,412 thousand higher (2015: HRK 4,928 thousand
higher), assuming no change in other variables.
30
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 3 – FINANCIAL RISK MANAGEMENT (continued)
3.1
Financial risk factors (continued)
(ii)
Equity securities risk
The Group is exposed to equity securities fair value and price risk with respect to investments held by
the Group classified on the consolidated balance sheet as available for sale. Equity investments
classified as available for sale are not listed. To manage its fair value and price risk arising from
investments in equity securities, the Group monitors market transactions and performance of investment
entities.
No reliable external information exists with respect to fair value. Management believes, based on internal
information, that the fair value equals or exceeds carrying value. However, due to limited information
available, management has not carried out a sensitivity analysis. At 31 December 2016, if the fair value
of the available-for-sale investment would change, with all other variables held constant, other
comprehensive income and revaluation reserves would also change by the same amount.
(iii)
Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows
are substantially independent of changes in market interest rates.
The Group’s interest rate risk arises from long-term borrowings and bonds issued. Borrowings issued at
variable rates expose the Group to cash flow interest rate risk which is partially offset by cash held at
variable interest rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk
although no borrowings are carried at fair value.
The Group analyses its interest rate changes on a regular basis. Various scenarios are simulated taking
into consideration refinancing, renewal of existing positions and alternative financing. Based on these
scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. As at 31
December 2016, if the effective interest rate on borrowings increased/decreased by 100 basis points on
an annual level (2015: 100 basis points), the profit after tax would have been lower/higher by HRK
10,872 thousand (2015: HRK 8,643 thousand), mainly as a result of increased/decreased interest
expense.
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such
interest rate swaps have the economic effect of converting borrowings with floating rates to fixed rates.
The Group raised long-term borrowings at floating rates and swapped them into fixed rates that are
lower than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps,
the Group agrees with other parties to exchange, at specified intervals (quarterly and semi-annually),
the difference between fixed contract rates and floating-rate interest amounts calculated by reference
to the agreed notional amounts.
31
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 3 – FINANCIAL RISK MANAGEMENT (continued)
3.1
(b)
Financial risk factors (continued)
Credit risk
The Group’s assets, potentially subjecting the Group to concentrations of credit risk, primarily include
cash, deposits and trade and other receivables. The Group has policies in place to ensure that sales of
products are made to customers with an appropriate credit history, within previously defined credit limits.
The Group’s credit risk is low, since receivables are dispersed among a large group of customers.
Additionally, the Group’s key customers are large retail chains, whereas dependence on these
customers is reduced by developing alternative distribution channels. The Group reduces credit risk by
implementing strict policies for receivables collection and goods delivery, as well as securing receivables
with standard security instruments (bills of exchange and promissory notes). No credit limits were
exceeded during the reporting period and management does not expect any losses from nonperformance by these counterparties. A detailed analysis and maximum exposure to credit risk is shown
in Notes 15, 16 and 18.
(c)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through
an adequate amount of committed credit facilities and the ability to meet all obligations. The Group aims
to maintain flexibility in funding by keeping committed credit lines available.
Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group
finance. Group finance monitors Group’s liquidity requirements to ensure it has sufficient cash to meet
operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities
when needed. Such forecasting takes into consideration the Group’s debt financing plans, covenant
compliance and compliance with internal balance sheet ratio targets.
Surplus cash held over and above the balance required for working capital management is invested in
interest bearing current accounts, time deposits and cash funds, i.e. instruments with appropriate
maturities or sufficient liquidity.
At 31 December 2016, the Group held cash and cash equivalents in the amount of HRK 490,730
thousand (2015: HRK 365,692 thousand) and short-term deposits in the amount of HRK 227 thousand
(2015: HRK 305 thousand). These are expected to readily generate cash inflows for managing liquidity
risk.
Trade and other payables, as well as short-term borrowings are due within 12 months after the balance
sheet date, while the long-term borrowings’ maturity is disclosed in Note 24.
32
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 3 – FINANCIAL RISK MANAGEMENT (continued)
3.1
Financial risk factors (continued)
The table below analyses financial liabilities of the Group according to contracted maturities. The
amounts disclosed in the table below represent the contractual undiscounted cash flows.
(in thousands of HRK)
Less than
1 year
Between
1-5 years
Total
1,002,893
608,462
1,527,780
1,002,893
2,136,242
31 December 2016
Trade and other payables
Borrowings (excluding finance lease)
(in thousands of HRK)
Less
than 1
year
Between
1-5 years
Total
928,651
799,461
417
5,091
1,410,337
472
928,651
2,209,798
417
5,563
31 December 2015
Trade and other payables
Borrowings (excluding finance lease)
Finance lease liabilities
Derivative financial instruments
3.2
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided
by total capital. Net debt is calculated as total borrowings (including long-term and short-term
borrowings, as shown in the consolidated balance sheet) plus derivative financial instruments less
short-term deposits and cash and cash equivalents. Total capital is calculated as equity, as shown in
the consolidated balance sheet, plus net debt.
33
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 3 – FINANCIAL RISK MANAGEMENT (continued)
3.2
Capital risk management (continued)
The gearing ratios were as follows:
2016
2015
(in thousands of HRK)
Total borrowings (Note 24)
2,011,144
2,051,212
(18,139)
(7,165)
Less: Short-term deposits and Cash and cash equivalents
(Note 18 and 20)
(490,957)
(365,997)
Net debt
1,502,048
1,678,050
Total equity
2,016,488
1,945,308
Total capital
3,518,536
3,623,358
43%
46%
Derivative financial instruments (Note 15)
Gearing ratio
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Comparing to previous year, gearing ratio decreased primarily as a result of decrease in total
borrowings.
3.3
Fair value estimation
All financial instruments for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
-
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs).
The fair value of financial instruments traded in active markets is based on quoted market prices at the
balance sheet date. A market is regarded as active if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an arm’s length basis.
The fair value of financial instruments that are not traded in an active market (for example, over-thecounter derivatives) is determined by using valuation techniques. These valuation techniques maximise
the use of observable market data where it is available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included
in level 3.
34
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 3 – FINANCIAL RISK MANAGEMENT (continued)
3.3
Fair value estimation (continued)
Specific valuation techniques used to value financial instruments include:
- Quoted market prices or dealer quotes for similar instruments.
- The fair value of interest rate swaps is calculated as the present value of the estimated future cash
flows based on observable yield curves.
- The fair value of forward foreign exchange contracts is determined using forward exchange rates at
the balance sheet date, with the resulting value discounted back to present value.
- Other techniques, such as discounted cash flow analysis, are used to determine fair value for the
remaining financial instruments.
The fair value of derivative financial instruments and of available-for-sale financial instruments is
determined based on specific valuation techniques (level 3).
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, rarely equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are outlined below.
(a) Deferred income tax asset recognition
The net deferred tax asset represents income taxes recoverable through future deductions from taxable
profits and is recorded on the balance sheet. Deferred income tax assets are recorded to the extent that
realisation of the related tax benefit is probable. In determining future taxable profits and the amount of
tax benefits that are probable in the future, management makes judgements and applies estimation
based on previous years taxable profits and expectations of future income that are believed to be
reasonable under the existing circumstances (Note 25).
(b) Expected useful lives of brands
Expected useful lives of brands is considered to be indefinite unless there are circumstances that would
indicate they should be limited to a certain period. The Group considers such indicators at each reporting
period. In 2016, based on industry data analysis and historical experience, the Group has changed its
accounting estimate related to Grand Kafa brand from indefinite to definite useful life and as a
consequence, starting from 2016 this brand is amortized over a period of 15 years. Change in
accounting estimate resulted in additional HRK 8,859 thousand amortization expense recorded in
income statement for the period ended 31 December 2016.
(c) Impairment of goodwill and intangible assets with indefinite useful lives
Goodwill and intangible assets with indefinite useful lives are tested annually for impairment as stated
in Note 2.7. Intangible assets with indefinite useful lives are tested for impairment on an individual asset
basis whereas goodwill is tested based on the operating segment to which it is allocated.
Goodwill and intangible assets with indefinite lives have been allocated to cash generating units within
operating segments as follows:
(i)
Licences
Operating segment
(in thousands of HRK)
SBU Pharma and Personal Care
35
2016
2015
161,345
161,345
158,082
158,082
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES (continued)
(c) Impairment test for goodwill and intangible assets with indefinite useful lives (continued)
(ii)
Brands
Operating segment
(in thousands of HRK)
2016
2015
SBU Beverages
SBU Coffee
SBU Snacks
SBU Savoury Spreads
BU Gourmet
BU Baby food
66,032
102,854
137,278
242,801
3,131
28,621
580,717
72,510
239,599
139,678
245,284
3,211
28,915
729,197
2016
2015
90,121
61,103
206,304
126,908
196,155
7,978
21,930
34,648
49,662
25,409
5,775
825,993
91,119
62,665
213,066
128,244
198,848
12,352
22,154
35,516
50,907
26,045
5,919
846,835
(iii)
Goodwill
Operating segment
(in thousands of HRK)
SBU Beverages
SBU Coffee
SBU Snacks
SBU Savoury Spreads
SBU Pharma and Personal Care
BU Gourmet
BU Baby food
SDU Croatia
SDU Serbia
DU Slovenia
DU Macedonia
The recoverable amount of cash generating units is determined based on value-in-use calculations.
These calculations use cash flow projections from financial forecasts approved by the management,
covering a seven-year period.
Value in use calculations for goodwill were determined based on the following assumptions:
Operating segment
SBU Beverages
SBU Coffee
SBU Snacks
SBU Savoury Spreads
SBU Pharma and Personal Care
BU Baby food
SDU Croatia
SDU Serbia
DU Slovenia
DU Macedonia
After-tax
discount rate
2016
After-tax
discount rate
2015
7.2%
8.0%
9.1%
8.2%
7.3%
8.6%
7.2%
9.1%
5.1%
10.1%
7.5%
8.0%
8.9%
8.4%
8.0%
9.5%
7.7%
9.2%
5.7%
10.3%
36
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES (continued)
(c) Impairment test for goodwill and intangible assets with indefinite useful lives (continued)
The Growth rate assumptions were based on historical data and management’s expectations for market
development. Terminal growth rate is 2% for all Operating segments and individual asset impairment
tests and it is based on management’s expectations for market development (2015: 2%). Compared to
2015, after-tax discount rates in 2016 are lower across segments, based on changed market conditions
- primarily lower risk-free rates based on reduced sovereign yields across markets.
The Royalty rate assumptions used for impairment tests of brands and licences are based on
independent valuator’s researches:
Barcaffe
Grand Kafa
Najlepše želje
Bananica
Smoki
Argeta
Donat
Cockta
Bebi
Bakina tajna
Licences
2016
2015
5.0%
6.0%
5.0%
7.0%
8.0%
8.0%
5.0%
3.0%
3.0%
4.5%
5.0%
5.0%
6.0%
5.0%
7.0%
8.0%
8.0%
5.0%
3.0%
3.0%
4.5%
Based on impairment tests performed at the balance sheet date, an impairment loss of HRK 10,397
thousand was recognised (2015: HRK 13,795 thousand) in respect of impairment of intangible assets
with indefinite useful lives.
The sensitivity analysis of key assumptions used in the impairment testing showed that a discount rate
increase by 100 basis points would result on average in a 15.0% decrease of the recoverable amount
of cash generating units (2015: 15.2%). Despite the decrease, the net recoverable amount of cash
generating units would still exceed the carrying value.
37
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 5 – SEGMENT INFORMATION
The business model of the Group is organized through six strategic business units which have been
joined by business unit Baby Food and business unit Gourmet.
The distribution business is organized in two main zones:
- Zone East covering markets of Croatia, Serbia, Slovenia, Macedonia, The Commonwealth of
Independent States (CIS) and Baltic countries, Kosovo, Bulgaria and Romania and
- Zone West covering markets of DACH, Benelux, Mediterranean, Africa, Northwest Europe, Central
Europe and overseas countries.
Based on such organizational model, following segments are established:
 SBU Beverages,
 SBU Coffee,
 SBU Snacks,
 SBU Savoury Spreads,
 SBU Sports and Functional Food,
 SBU Pharma and Personal Care
 BU Gourmet
 BU Baby Food
 SDU Croatia,
 SDU Serbia,
SBU – Strategic business unit
BU – Business unit
 DU Slovenia
SDU – Strategic distribution unit
 DU Macedonia
DU – Distribution unit
 SDR HoReCa,
SDR – Strategic distribution region
DR – Distribution region
 SDR CIS & Baltic,
DACH – Germany, Austria & Switzerland
 SDR Zone West,
The Strategic Management Council is responsible for strategic and operational issues. For more
efficient management of individual strategic business and strategic distribution units, the organization
unites similar business activities or products, shared markets or channels, together.
Due to the fact that SDR HoReCa, SDR CIS & Baltic, BU Baby Food, BU Gourmet and DU Macedonia
do not meet quantitative thresholds required by IFRS 8 for reportable segments, they are reported within
Other segments. The Other segments category comprises also of non-allocable business activities
(headquarters and support functions in Serbia, Slovenia and Macedonia) which are excluded from the
reportable operating segments.
The Strategic Management Council monitors the operating results of its business units separately for
the purpose of making decisions about resource allocation and performance assessment. Segment
performance is evaluated based on EBITDA (earnings before interest taxes, depreciation, amortisation
and impairment) and operating profit or loss. Group financing and income taxes are managed on the
Group level and are not allocated to operating segments.
Sales of individual SBUs represent in market sales made to third parties (either directly through SBUs
and BUs or through SDUs and DUs). SDU and DU sales includes sales of own products also reported
as SBU sales. This double presentation of own product sales is eliminated in the “Reconciliation” line.
For the purpose of segmental profit calculation, sales between operating segments are carried out at
arm's length.
38
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 5 – SEGMENT INFORMATION (continued)
2016
2015
SBU Beverages
SBU Coffee
SBU Snacks
SBU Savoury Spreads
SBU Sports and Functional Food
SBU Pharma and Personal Care
637,185
1,063,927
651,275
543,031
449,347
538,853
642,236
1,073,474
631,553
496,560
768,463
511,277
SDU Croatia
SDR Zone West
SDU Serbia
DU Slovenia
969,611
504,540
1,101,050
754,403
948,906
522,055
1,175,100
761,868
Other segments
762,982
821,707
(2,869,938)
(2,947,887)
5,106,266
5,405,312
Sales revenues
(in thousands of HRK)
Reconciliation
Total
Operating results
(in thousands of HRK)
For the year ending 31 December 2016
Depreciation,
Amortization
EBITDA
EBIT
and
Impairment
SBU Beverages
SBU Coffee
SBU Snacks
SBU Savoury Spreads
SBU Sports and Functional Food
SBU Pharma and Personal Care
161,834
227,934
116,425
119,751
(20,696)
45,699
(42,182)
(24,026)
(13,060)
(15,110)
(9,636)
(9,847)
119,652
203,908
103,365
104,641
(30,332)
35,852
SDU Croatia
SDR Zone West
SDU Serbia
DU Slovenia
10,316
(55,314)
19,759
42,715
(8,485)
(917)
(2,304)
(4,029)
1,831
(56,231)
17,455
38,686
Other segments
(194,055)
(36,984)
(231,039)
474,368
(166,580)
307,788
Total
39
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 5 – SEGMENT INFORMATION (continued)
Operating results
(in thousands of HRK)
For the year ending 31 December 2015
Depreciation,
Amortization
EBITDA
EBIT
and
Impairment
SBU Beverages
SBU Coffee
SBU Snacks
SBU Savoury Spreads
SBU Sports and Functional Food
SBU Pharma and Personal Care
151,802
211,236
99,703
121,752
(32,816)
43,460
(39,077)
(22,520)
(22,250)
(16,052)
(9,333)
(12,690)
112,725
188,716
77,453
105,700
(42,149)
30,770
SDU Croatia
SDR Zone West
SDU Serbia
DU Slovenia
21,073
10,582
30,104
41,879
(6,275)
(593)
(2,734)
(4,157)
14,798
9,989
27,370
37,722
Other segments
(131,499)
(27,616)
(159,115)
567,276
(163,297)
403,979
Total
Geographical information
The total of non-current assets other than financial instruments, deferred income tax assets and trade
and other receivables is located as follows:
2016
2015
(in thousands of HRK)
Serbia
Slovenia
Croatia
Other
Total geographically allocated non-current assets
40
931,450
983,958
751,237
172,890
969,944
962,849
764,432
185,880
2,839,535
2,883,105
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 5 – SEGMENT INFORMATION (continued)
2016
2015
(in thousands
of HRK)
%
(in thousands
of HRK)
%
Croatia
Serbia
Slovenia
Bosnia and Herzegovina
Macedonia, Montenegro, Kosovo
Germany, Italy, United Kingdom
Russia and CIS countries
Other markets
1,470,978
1,183,684
857,671
396,600
343,424
308,329
186,498
359,082
28.8
23.2
16.8
7.8
6.7
6.0
3.7
7.0
1,408,968
1,256,268
855,040
381,733
325,165
396,752
237,115
544,271
26.1
23.2
15.8
7.1
6.0
7.3
4.4
10.1
Total sales by markets
5,106,266
100.0
5,405,312
100.0
Sales by markets
Sales by geographical segments is determined by geographical location of the customer.
2016
Analysis of revenue by category
(in thousands
of HRK)
Sales by type of products
Own brands
Principal brands
Pharmacy
Private label
Total sales by type of products
2015
%
(in thousands
of HRK)
%
3,460,489
1,091,007
363,937
190,833
66.9
21.1
7.0
3.7
3,493,571
1,102,538
336,424
472,779
64.1
20.2
6.2
8.7
5,106,266
98.7
5,405,312
99.2
Other income /i/
68,273
1.3
45,643
0.8
Total revenues
5,174,539
100.0
5,450,955
100.0
/i/ Other income mainly comprise of interest income, rental income and income from the reversal of
unused provisions. Additionally, in 2016 the amount of HRK 13,987 thousand relate to income from
refund of concessions overpaid in years 2005-2015.
41
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 6 – STAFF COSTS
2016
2015
(in thousands of HRK)
Gross salaries /i/
Public transport
Termination benefits
Share options granted (Note 21)
Other staff costs /ii/
707,401
17,002
2,614
4,995
68,851
682,950
17,031
3,394
1,498
62,906
800,863
767,779
At 31 December 2016, the average employees number was 5,439 (2015: 5,285).
/i/
Pension contributions that the Group calculated for payment to mandatory pension funds for the
year ended 31 December 2016 amounted to HRK 115,124 thousand (2015: HRK 104,516
thousand).
/ii/
Other staff costs include bonuses, education expenses, accruals for unused vacation days and
jubilee awards.
NOTE 7 – MARKETING AND PROMOTION COSTS
2016
2015
(in thousands of HRK)
Marketing and promotion costs - external
Marketing and promotion costs - related parties (Note 30)
Sponsorships and donations
42
301,563
13,020
40,756
282,541
13,966
36,266
355,339
332,773
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 8 – OTHER OPERATING COSTS
2016
2015
(in thousands of HRK)
Transportation costs
Maintenance
Rentals (Note 27)
Non-production material
Provision for impairment of inventories (Note 19)
Intellectual services
Travel expense and daily allowances
Entertainment
Fuel
Taxes and contributions not related to operating results
Non-production services
Telecommunication services
Bank charges
Provision for impairment of trade receivables (Note 18)
Provision for impairment of other receivables (Note 18)
Production services
Supervisory Board fees
Royalties
Collection of receivables previously provided for (Note 18)
Other – related parties (Note 30)
Other
139,069
105,327
111,634
28,600
27,851
24,172
21,905
21,832
17,450
16,639
15,490
13,080
8,840
21,290
588
6,030
1,624
283
(3,845)
2,393
50,522
132,688
97,474
96,572
27,772
27,571
21,186
18,675
17,106
18,360
17,218
14,390
12,353
9,770
20,603
381
8,362
1,513
1,520
(12,589)
2,532
37,265
630,774
570,722
2016
2015
NOTE 9 – OTHER GAINS/(LOSSES) – NET
(in thousands of HRK)
Gain on sale of property, plant and equipment
Gain on sale of available-for-sale financial assets
Fair value gains on financial assets
Gain on sale of tea business
Foreign exchange gains/(losses) – net
Other gains/(losses) – net
43
764
12,124
4,306
941
1,005
7,523
42,257
23,782
(5,418)
(5,163)
18,135
63,986
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 10 – FINANCE COSTS – NET
2016
2015
(in thousands of HRK)
Finance income
Foreign exchange gains on borrowings
Finance costs
Foreign exchange loss on borrowings
Interest expense on bank borrowings
Interest expense on bonds
Interest expense on provisions for employee benefits
Interest expense on borrowings – related parties (Note 30)
Finance costs - net
44
41,378
41,378
84,287
84,287
(21,760)
(68,095)
(9,241)
(971)
(44,954)
(93,506)
(39,038)
(8,373)
(1,218)
(57,035)
(145,021)
(199,170)
(103,643)
(114,883)
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 11 – INCOME TAX
2016
2015
(in thousands of HRK)
Current income tax
Deferred tax (Note 25)
51,962
(11,052)
47,947
(1,374)
40,910
46,573
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the
weighted average tax rate applicable to profits of the consolidated entities as follows:
2016
2015
(in thousands of HRK)
Profit before taxation
Income tax calculated at domestic tax rates applicable
to profits in the respective countries
Tax effects of:
Adjustments in respect of prior years
204,145
289,096
27,126
54,099
4
(32)
Income not subject to tax
(6,476)
(10,171)
Expenses not deductible for tax purposes
33,781
24,485
(10,009)
(9,391)
Utilisation of previously unrecognized tax losses
(2,967)
(12,809)
Tax losses for which no deferred tax assets were recognised
10,504
1,766
4,011
2,933
(10,705)
-
3,702
21
Origination and reversal of temporary tax differences
(8,061)
(4,328)
Tax expense
40,910
46,573
Effect of utilized tax incentives
Effect of utilized tax losses
Effect of recognized tax losses
Effect of tax rate change
The weighted average effective tax rate was 20.0% (2015: 16.1%). The increase compared to the
previous year primarily arises from a different level of tax loss utilization.
The Tax Authority performed two tax inspections in the Group’s subsidiaries. In February 2015, the
Ministry of Finance, Tax Authority issued a tax resolution for one of the subsidiaries. Currently, legal
proceedings are under way in this case before the Administrative Court which decided to suspend the
enforcement until the proceedings before the Administrative Court are finalised. Management is of the
view that it has a strong case against the Tax Authority in this matter. In January 2016, the Ministry of
Finance, Tax Authorities issued a tax resolution for the second subsidiary. Currently, a tax appeal has
been submitted to the second-instance body of the Ministry of Finance. At this moment, it is uncertain
whether any liability will be imposed on the Group.
In both cases described above, the Management considers these events as contingent liabilities. The
most likely outcome is that they will not result in outflows of economic benefits for the Group. However,
based on the complexity of the litigation, there are uncertainties relating to the amount and timing. The
maximum exposure that the Group could be expected to settle, if the legal proceedings would be
unfavourable, amounts to HRK 32,600 thousand.
45
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 12 – EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the
Company by the weighted average number of ordinary shares in issue during the year, excluding
ordinary shares purchased by the Company and held as treasury shares.
Net profit attributable to shareholders of the Company
(in thousands of HRK)
Weighted average number of ordinary shares in issue
Basic earnings per share (in HRK)
2016
2015
162,800
242,291
3,334,105
48.83
3,334,053
72.67
Diluted earnings per share
Diluted earnings per share are the same as basic earnings per share since there were no convertible
potentially dilutive ordinary shares.
46
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 13 – PROPERTY, PLANT AND EQUIPMENT
Land
Buildings
Plant and
equipment
Assets not
yet in use
Total
At 31 December 2014
Cost
Accumulated depreciation
Net book amount
93,448
93,448
790,011
(379,883)
410,128
1,700,614
(1,219,509)
481,105
114,608
114,608
2,698,681
(1,599,392)
1,099,289
At 1 January 2015
Opening net book amount
Additions
Transfer
Disposals
Depreciation
Transfer to assets held for sale
Transfer to investment property
Acquisition of subsidiary
Foreign exchange differences
Closing net book amount
93,448
731
(420)
3,412
(329)
96,842
410,128
61,898
(1,785)
(23,673)
(1,406)
(13)
25,731
(1,822)
469,058
481,105
106,983
(1,660)
(107,474)
4,914
(2,608)
481,260
114,608
92,212
(169,612)
(802)
36,406
1,099,289
92,212
(3,445)
(131,147)
(1,406)
(433)
34,057
(5,561)
1,083,566
At 31 December 2015
Cost
Accumulated depreciation
Net book amount
96,842
96,842
862,741
(393,683)
469,058
1,768,925
(1,287,665)
481,260
36,406
36,406
2,764,914
(1,681,348)
1,083,566
At 1 January 2016
Opening net book amount
Additions
Transfer
Disposals
Depreciation
Impairment charge
Transfer from assets held for sale
Transfer from investment property
Foreign exchange differences
Closing net book amount
96,842
61
(420)
13,294
420
(784)
109,413
469,058
15,771
(12)
(21,939)
(8,929)
31,819
13
(5,429)
480,352
481,260
77,490
(3,071)
(100,270)
(6,556)
448,853
36,406
99,846
(93,322)
(135)
(101)
617
130
43,441
1,083,566
99,846
(3,638)
(122,209)
(9,030)
45,730
433
(12,639)
1,082,059
At 31 December 2016
Cost
Accumulated depreciation
Net book amount
109,413
109,413
1,028,532
(548,180)
480,352
1,783,929
(1,335,076)
448,853
43,441
43,441
2,965,315
(1,883,256)
1,082,059
(in thousands of HRK)
Property, plant and equipment with a net book value of HRK 260,632 thousand as at 31 December 2016
(2015: HRK 248,952 thousand), have been pledged as collateral for borrowings (Note 24).
47
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 13a – NON-CURRENT ASSETS HELD FOR SALE
2016
2015
(in thousands of HRK)
Opening net book amount
Additions
Disposals
Classified as held for sale during the year
Transfer to property, plant and equipment during the year
Impairment charge
Foreign exchange differences
Closing net book amount
99,196
192
(45,825)
(45,730)
(1,518)
(628)
99,874
1,406
(1,770)
(314)
5,687
99,196
During 2016, the Group has sold part of non-current assets held for sale owned by Droga Kolinska d.d..
The remaining assets owned by Droga Kolinska were reclassified to property, plant and equipment, due
to the non-fulfilment of criteria for recognition as non-current assets held for sale.
The outstanding balance of non-current assets held for sale on 31 December 2016 relate to the property
of Atlantic Trade Zagreb d.o.o. An active program to complete the sale plan is in place.
As at 31 December 2016, the Group has no non-current assets held for sale pledged as collateral for
borrowings (2015: HRK 87,733), (Note 24).
48
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 14 – INTANGIBLE ASSETS
(in thousands of HRK)
At 31 December 2014
Cost
Accumulated amortisation
and impairment
Net book amount
At 1 January 2015
Opening net book amount
Foreign exchange
differences
Additions
Acquisition of subsidiary
Amortisation
Impairment charge /i/
Closing net book amount
At 31 December 2015
Cost
Accumulated amortisation
and impairment
Net book amount
At 1 January 2016
Opening net book amount
Foreign exchange
differences
Effect of tax rate change
Additions
Acquisition of subsidiary
Amortisation
Impairment charge /i/
Closing net book amount
At 31 December 2016
Cost
Accumulated amortisation
and impairment
Net book amount
Goodwill
Licences
Brands
Rights
Software
Total
839,412
204,437
812,466
16,066
134,848
2,007,229
-
(44,014)
(45,632)
(2,410)
(110,655)
(202,711)
839,412
160,423
766,834
13,656
24,193
1,804,518
839,412
160,423
766,834
13,656
24,193
1,804,518
(4,929)
-
(3,813)
(55)
545
(8,252)
12,352
846,835
288
(2,629)
158,082
3,224
(3,688)
(11,166)
751,391
837
(3,192)
11,246
14,850
302
(9,653)
30,237
15,687
16,166
(16,533)
(13,795)
1,797,791
846,835
204,725
811,655
16,851
144,391
2,024,457
-
(46,643)
(60,264)
(5,605)
(114,154)
(226,666)
846,835
158,082
751,391
11,246
30,237
1,797,791
846,835
158,082
751,391
11,246
30,237
1,797,791
(14,020)
-
(10,622)
(124)
(92)
(24,858)
(3,524)
768
(4,066)
825,993
3,841
(578)
161,345
244
(12,505)
(5,753)
722,755
49
(3,165)
8,006
15,686
(7,713)
38,118
(3,524)
15,979
4,609
(23,383)
(10,397)
1,756,217
825,993
208,566
800,397
16,730
158,114
2,009,800
-
(47,221)
(77,642)
(8,724)
(119,996)
(253,583)
825,993
161,345
722,755
8,006
38,118
1,756,217
The disclosure on goodwill and intangible assets with indefinite useful lives impairment test is provided
in Note 4 c).
/i/ The basis for impairment charge is explained in Note 4 c).
Intangible assets with a net book value of HRK 639,240 thousand as at 31 December 2016 (2015: HRK
665,732 thousand) have been pledged as collateral for borrowings (Note 24).
49
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 15 – FINANCIAL INSTRUMENTS BY CATEGORY
The accounting policies for financial instruments have been applied to the line items below:
2016
2015
(in thousands of HRK)
Loans and receivables
Trade and other receivables
Short-term deposits
Cash and cash equivalents
1,261,409
227
490,730
1,752,366
1,212,288
305
365,692
1,578,285
915
959
18,139
12,728
Total financial assets
1,771,420
1,591,972
Total current
Total non-current
1,711,403
60,017
1,507,318
84,654
2,011,144
1,002,571
3,013,715
2,050,795
927,506
2,978,301
Finance leases
Finance leases
-
417
Derivatives used for hedging
Derivative financial instruments
-
5,563
7,018
4,581
Total financial liabilities
3,020,733
2,988,862
Total current
Total non-current
1,591,432
1,429,301
1,675,774
1,313,088
Available-for-sale financial assets
Available-for-sale financial assets
Derivatives used for hedging
Derivative financial instruments
Other financial liabilities
Borrowings
Trade and other payables
Financial liabilities at fair value through profit or loss
Contingent consideration
50
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 16 – CREDIT QUALITY OF FINANCIAL ASSETS
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference
to external credit ratings (if available) or to historical information on counterparty default rates.
As at 31 December 2016, financial assets classified as trade and other receivables and short-term
deposits that are not past due amounted to HRK 1,051,595 thousand (2015: HRK 1,054,087 thousand).
These receivables relate to existing customers with no defaults in the past.
External credit ratings about counterparty default rates for cash and cash equivalents are as follows:
Credit rating
2016
2015
(in thousands of HRK)
A-1/Stable (Standard &Poor’s)
A-1/Negative (Standard &Poor’s)
A-2/Stable (Standard &Poor’s)
A-2/Negative (Standard &Poor’s)
A-3/Stable (Standard &Poor’s)
B/Positive (Standard &Poor’s)
B/Stable (Standard &Poor’s)
BA2 /Negative (Moody’s)
Petty cash and other banks
1,419
4,535
24,767
143,529
194,963
5,036
2,188
101,900
12,393
490,730
2,213
5,557
10,162
143,881
161,377
6,468
5,365
23,724
6,945
365,692
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference
to external credit ratings (if available) or to historical information about counterparty default rates:
2016
2015
(in thousands of HRK)
Trade receivables
Counterparties with external credit rating (Moody's)
B2
Counterparties without external credit rating*
Group 1
Group 2
Group 3
Total unimpaired trade receivables
51
271,730
271,730
254,260
254,260
68,930
438,596
165,551
673,077
19,632
479,683
170,975
670,290
944,807
924,550
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 16 – CREDIT QUALITY OF FINANCIAL ASSETS (continued)
2016
2015
(in thousands of HRK)
Other receivables
Counterparties without external credit rating*
Group 2
38,366
52,638
Total unimpaired other receivables
38,366
52,638
2016
2015
(in thousands of HRK)
Loans and long-term deposits
Counterparties without external credit rating*
Group 1
Group 2
Group 3
5,163
53,360
9,672
3,591
55,441
17,562
68,195
76,594
2016
2015
(in thousands of HRK)
Short-term deposits
A-3/Stable
Group 2
105
122
171
134
227
305
* Counterparties without external credit rating
 Group 1 – new customers/related parties (less than 12 months)
 Group 2 – existing customers/related parties (more than 12 months) with no defaults in the past
 Group 3 – existing customers/related parties (more than 12 months) with some defaults in the past.
All defaults were fully recovered.
None of the financial assets that are fully performing has been renegotiated in the last year.
NOTE 17 – AVAILABLE-FOR-SALE FINANCIAL ASSETS
Investments in available-for-sale financial assets relate to unlisted equity instruments and are carried at
cost since they do not have a quoted market price and fair value cannot be reliably measured.
During 2016 and 2015, there were no impairment provisions on available-for-sale financial assets.
52
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 18 – TRADE AND OTHER RECEIVABLES
2016
2015
(in thousands of HRK)
Non-current receivables
Loans receivable and deposits /i/
Other non-current receivables
Current receivables
Trade receivables /ii/
Loans receivable and deposits /i/
Other receivables /iii/
Short-term deposits /iv/
Financial assets
Category: Trade and other receivables
Loans and deposits
Trade receivables
Other receivables
Short-term deposits
50,838
8,264
59,102
59,513
24,182
83,695
1,154,848
17,357
128,363
1,300,568
1,083,056
17,081
92,177
1,192,314
227
305
1,359,897
1,276,314
2016
2015
(in thousands of HRK)
68,195
1,154,848
38,366
227
76,594
1,083,056
52,638
305
1,261,636
1,212,593
2016
2015
/i/ Loans receivable and deposits are as follows:
(in thousands of HRK)
Non-current receivables
Operating lease deposits
Loans
Current portion
Current receivables
Loans – related parties (Note 30)
Loans
Current portion of non-current receivables
The fair value of loans and deposits approximates the carrying amounts.
53
2,348
57,534
(9,044)
50,838
2,323
69,272
(12,082)
59,513
1,350
6,963
9,044
1,210
3,789
12,082
17,357
17,081
68,195
76,594
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 18 – TRADE AND OTHER RECEIVABLES (continued)
/ii/ Trade receivables are as follows:
2016
2015
(in thousands of HRK)
Gross trade receivables
Trade receivables – related parties (Note 30)
Provision for trade receivables
1,164,789
95,804
(105,745)
1,089,043
90,761
(96,748)
1,154,848
1,083,056
2016
2015
/iii/ Other receivables are as follows:
(in thousands of HRK)
Receivables from government institutions
Outstanding advances
Factoring receivables
Prepaid expenses
Interest receivable
Receivables from sale of tea business
Receivables from the sale of available-for-sale financial assets
Other receivables – related parties (Note 30)
Other
44,683
5,078
12,844
200
24,700
1,168
39,690
37,716
2,603
9,001
9,879
137
3,800
86
28,955
128,363
92,177
Due to uncertainty in collection, other receivables of HRK 588 thousand were impaired (2015: HRK 381
thousand), (Note 8).
/iv/ Accrued interest up to the balance sheet date is recorded within other income.
As of 31 December 2016, trade receivables in the amount of HRK 105,745 thousand (2015: HRK 96,748
thousand) were impaired and provided for. The individually impaired receivables relate to customers
that are in unexpected difficult economic situations. The ageing of these receivables is as follows:
2016
2015
(in thousands of HRK)
Up to 3 months
3 to 6 months
Over 6 months
54
4,584
6,828
94,333
4,321
766
91,661
105,745
96,748
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 18 – TRADE AND OTHER RECEIVABLES (continued)
As at 31 December 2016, trade receivables in the amount of HRK 210,041 thousand (2015: HRK
158,506 thousand) were past due but not impaired. These relate to a number of independent customers
for whom there is no recent history of default.
2016
2015
(in thousands of HRK)
Up to 3 months
3 to 6 months
Over 6 months
173,526
32,644
3,871
133,584
14,288
10,634
210,041
158,506
The carrying amounts of the Group’s financial assets are denominated in the following currencies:
2016
2015
(in thousands of HRK)
EUR
HRK
RSD
Other
420,754
386,968
344,634
109,280
411,234
343,649
342,703
115,007
1,261,636
1,212,593
Movements on the provision for impairment of trade receivables are as follows:
2016
2015
(in thousands of HRK)
As at 1 January
Acquisition of subsidiary
Provision for receivables impairment (Note 8)
Collected amounts reversed (Note 8)
Receivables written off
Exchange differences
As at 31 December
96,748
21,290
(3,845)
(7,906)
(542)
140,472
2,667
20,603
(12,589)
(53,790)
(615)
105,745
96,748
The maximum exposure to credit risk at the reporting date is the carrying value of each class of
receivable mentioned above.
55
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 19 – INVENTORIES
2016
2015
(in thousands of HRK)
Raw materials and supplies
Work in progress
Finished goods
Trade goods
169,559
22,008
234,376
197,375
179,544
18,472
219,013
186,462
623,318
603,491
As of 31 December 2016, inventories of HRK 27,851 thousand (2015: HRK 27,571 thousand) were
impaired and fully provided for, due to the adjustment to net realisable value (Note 8).
NOTE 20 – CASH AND CASH EQUIVALENTS
2016
2015
(in thousands of HRK)
Current account and cash on hand
Foreign currency account
Deposits up to three months /i/
/i/
139,909
326,290
24,531
97,569
219,457
48,666
490,730
365,692
Accrued interest up to the balance sheet date is recorded within other income.
Cash and cash equivalents are denominated in the following currencies:
2016
2015
(in thousands of HRK)
EUR
HRK
RSD
Other
56
233,917
134,140
85,909
36,764
130,711
97,689
87,382
49,910
490,730
365,692
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 21 – SHARE CAPITAL
Number of
shares
Ordinary
shares
Share
premium
Treasury
shares
Total
(in thousands of HRK)
1 January 2015
3,334,223
133,372
882,576
(78)
1,015,870
(4,743)
-
-
(4,304)
(4,304)
4,593
-
(1,061)
4,184
3,123
3,334,073
133,372
881,515
(198)
1,014,689
(1,300)
-
-
(1,076)
(1,076)
1,422
-
(26)
1,186
1,160
3,334,195
133,372
881,489
(88)
1,014,773
Purchase of treasury shares
Share based payments
31 December 2015
Purchase of treasury shares
Share based payments
31 December 2016
All shares issued are ordinary shares, including all relevant rights. All shares have the right to vote at
the Company's General Assembly, as well as the right to dividend payment.
The founder and majority owner of the Company is Mr Emil Tedeschi, President of the Management
Board and Chief Executive Officer. Mr Tedeschi is the ultimate controlling party of the Group.
The ownership structure of the Company is as follows:
31 December 2016
Number of
%
shares
Emil Tedeschi
31 December 2015
Number of
shares
%
1,673,819
50.20
1,673,819
50.20
Raiffeisen Obligatory pension fund
322,729
9.68
325,759
9.77
AZ Obligatory pension fund
286,372
8.59
130,439
3.91
Erste Plavi Obligatory pension fund
202,328
6.07
198,178
5.94
Lada Tedeschi Fiorio
193,156
5.79
193,156
5.79
38,753
1.16
38,331
1.15
617,038
18.51
774,391
23.23
105
0.00
227
0.01
3,334,300
100.00
3,334,300
100.00
Management of the Company
Other shareholders
Treasury shares
Total
Dividend distribution
According to the decision of the Company's General Assembly from 16 June 2016, the distribution of
dividend in the amount of HRK 13.50 per share, or HRK 45,012 thousand in total was approved.
Dividend was paid in July 2016.
In 2015 the distribution of dividend in the amount of HRK 12.00 per share, or HRK 40,009 thousand in
total was approved. Dividend was paid in July 2015.
57
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 21 – SHARE CAPITAL (continued)
Share based payments
According to the Company’s share option programme, shares are granted to Management Board
members and to top management.
One part of the share grant is subject to the Group achieving its operating profit target growth and subject
to individual performance achievements. The other part is conditional on the employee completing two
or more years of service (the vesting period). Furthermore, part of the programme is designated for the
extraordinary performance on special projects.
Under the programme, 4,294 new shares have been granted in 2016 (2015: 1,331 shares) relating to
the achievement of operating profit target growth, individual performance achievements and completing
of necessary period of service.
The fair value of equity-settled share based payment transactions amounted to HRK 5,791 thousand
(2015: HRK 2,079 thousand). Of that amount, HRK 4,995 thousand (2015: HRK 1,498 thousand) has
been reported as staff costs (Note 6), relating to 3,818 shares for which vesting conditions were met in
2016 (2015: 996 shares) and HRK 796 thousand was deferred, relating to shares for which vesting
conditions will be met in the next two years (476 shares, 2015: 335 shares).
The fair value of the shares granted is determined as of the grant date at the estimated market price of
the share of HRK 937.89 (2015: HRK 805.22).
In 2016 Management Board members and top management have received 1,422 shares relating to
shares granted in 2013.
In 2015 Management Board members and top management have received 4,593 shares in total. Out of
this number, 3,650 shares related to award for the extraordinary performance on special projects subject
to specific restrictions which include restriction to trade the shares within 5 years from the grant date
and vesting condition which includes 5 years of service within the Group. The fair value of one share at
the award grant date amounted to HRK 630.00 and it has been determined based on external valuation
report, taking into consideration trading restriction of the shares as described above. The rest of shares
related to shares granted in 2014 and 2013.
NOTE 22 – RESERVES
Reserves /i/
Translation
reserves /ii/
Cash flow hedge
reserve /ii/
Total
At 1 January 2015
5,971
(29,974)
4,368
(19,635)
Foreign exchange differences
Transfer to retained earnings
Cash flow hedge
3,194
-
(7,771)
-
(2,052)
(7,771)
3,194
(2,052)
At 31 December 2015
9,165
(37,745)
2,316
(26,264)
(15,835)
-
(47,565)
-
8,700
(47,565)
(15,835)
8,700
(6,670)
(85,310)
11,016
(80,964)
(in thousands of HRK)
Foreign exchange differences
Transfer to retained earnings
Cash flow hedge
At 31 December 2016
/i/ Reserves mainly comprise statutory reserves recorded in accordance with the Company’s Articles of
Association. These reserves are distributable.
/ii/ Movements represent amounts attributable to the owners of the Company only.
58
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 23 – TRADE AND OTHER PAYABLES
2016
2015
(in thousands of HRK)
Trade payables
Trade payables – related parties (Note 30)
Other payables
794,021
3,906
276,069
797,560
5,645
185,349
1,073,996
988,554
2016
2015
Other payables recorded as at 31 December are as follows:
(in thousands of HRK)
Gross salaries payable
Liabilities to state institutions
Accrued expenses
Vacation accrual
Liabilities to related parties in relation to borrowings (Note 30)
Termination benefits payable
Deferred income
Dividend payable
Other
49,155
21,559
101,038
17,887
44,954
390
7,288
185
33,613
49,771
9,618
75,494
15,864
514
8,359
146
25,583
276,069
185,349
Financial liabilities are denominated in the following currencies:
2016
2015
(in thousands of HRK)
EUR
HRK
RSD
Other
59
391,923
396,068
127,084
87,818
420,658
293,199
134,645
80,149
1,002,893
928,651
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 24 – BORROWINGS
2016
2015
(in thousands of HRK)
Long-term borrowings:
Financial institutions /i/
Related parties /ii/ (Note 30)
Bonds /iii/
1,223,031
199,574
279,041
1,030,139
-
Long-term debt
1,422,605
1,309,180
588,415
124
-
331,480
293,598
116,537
417
588,539
742,032
2,011,144
2,051,212
Short-term borrowings:
Financial institutions /i/
Related parties /ii/ (Note 30)
Bonds /iii/
Finance lease
/i/ The loan package of EUR 307 million was granted in November 2012 by the European Bank for
Reconstruction and Development (EBRD), the International Finance Corporation (IFC),
Raiffeisenbank Austria Zagreb and Zagrebačka banka. The arrangement was structured as such
that the EBRD arranged a loan of EUR 232 million, the IFC participated in the package with a loan
of EUR 50 million, while the remaining EUR 25 million were ensured by local commercial banks. The
funds from the contracted package were primarily used for restructuring of the Group’s balance sheet
(EUR 272 million), an additional uncommitted energy efficiency line (EUR 10 million, out of which
EUR 5 million was used in 2014) and a working capital line (EUR 25 million).
Additional EUR 10 million loan agreement was signed with EBRD in September 2014, to finance the
construction of the energy bars production plant in Nova Gradiška.
In April 2016, the Group signed agreements with the European Bank for Reconstruction and
Development (EBRD) and the International Finance Corporation (IFC) related to the total credit
package outstanding (EUR 191.5 million) and defined more favourable financial terms and prolonged
the maturity of loans by two years, until 2021.
As at 31 December 2016, EUR 4.8 million of the committed line was unused (31 December 2015:
EUR 16.6 million).
/ii/ Borrowings from EBRD in 2015 were disclosed separately since this financial institution owned more
than 5% of shares of the Company as at 31 December 2015 and had a presence in the Supervisory
Board and was therefore considered as a related party.
/iii/ In June 2016, Atlantic Grupa issued corporate Bonds in the amount of HRK 200 million at the price
of 99.954% with a coupon of 3.125% per annum with semi-annual payment of interest and final
redemption on 17 June 2021. The purpose of these Bonds is financing working capital and refinance
of bonds issued in December 2006 which matured on 20 September 2016.
Borrowings from financial institutions are secured by pledges over property, plant and equipment
(Notes 13 and 13a), intangible assets (Note 14) and shares of subsidiaries (Atlantic Trade d.o.o.
Zagreb, Droga Kolinska d.d., Grand Prom d.o.o. Serbia and Soko Štark d.o.o.). Furthermore, issued
bonds and part of borrowings from financial institutions are subject to covenant clauses, whereby the
Group is required to meet certain key performance indicators such as total net debt cover, interest
cover, cash flow cover and maximum capital expenditures. At the balance sheet date, all covenant
clauses were met or a waiver from the banks was obtained.
60
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 24 – BORROWINGS (continued)
The exposure of the Group’s borrowings to interest rate changes and the contractual re-pricing dates at
the balance sheet date are as follows:
2016
2015
(in thousands of HRK)
Fixed interest rate
Up to 3 months
3 to 6 months
219,211
1,074,305
717,628
144,457
1,129,189
777,566
2,011,144
2,051,212
2016
2015
The maturity of long-term borrowings is as follows:
(in thousands of HRK)
Between 1 and 2 years
Between 2 and 5 years
244,142
1,178,463
516,490
792,690
1,422,605
1,309,180
The average effective annual interest rate related to borrowings from financial institutions at the balance
sheet date was 2.53% (2015: 3.65%). The effective annual interest rate related to bonds at the balance
sheet date was 4.84% (2015: 7.28%).
The carrying amounts and fair value of long-term borrowings as at 31 December 2016 were as follows:
Carrying
amounts
Fair value
(in thousands of HRK)
Long-term borrowings
Financial institutions
Bonds
1,223,031
1,223,031
199,574
204,167
1,422,605
1,427,198
The fair values of borrowings from banks and financial institutions were based on cash flows discounted
using a rate of 2.53% (2015: 3.80%).
The fair value of long-term borrowings as at 31 December 2015 approximated the carrying amounts.
The carrying value of borrowings and bonds is translated from the following currencies:
2016
2015
(in thousands of HRK)
HRK
EUR
USD
Other
61
482,792
1,518,783
9,464
105
268,261
1,773,869
8,872
210
2,011,144
2,051,212
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 25 – DEFERRED INCOME TAX
2016
2015
(in thousands of HRK)
Deferred tax assets:
- Deferred tax assets to be recovered after 12 months
- Deferred tax assets to be recovered within 12 months
Deferred tax liabilities:
- Deferred tax liabilities to be recovered after 12 months
- Deferred tax liabilities to be recovered within 12 months
Deferred tax liabilities - net
32,227
15,066
47,293
23,232
13,834
37,066
(167,248)
(4,563)
(171,811)
(173,521)
(3,156)
(176,677)
(124,518)
(139,611)
Deferred tax assets are recognized for tax loss carry forwards and tax credits to the extent that
realization of the related tax benefit through future taxable profits of the related Group entities is
probable.
The Group did not recognize deferred income tax assets of HRK 50,827 thousand (2015: HRK 63,069
thousand) in respect of losses that arose in its subsidiaries that can be carried forward against future
taxable income. Deferred tax assets have not been recognized in respect of these losses as it is not
certain that future taxable profit will be available for utilization of the temporary differences. Losses
amounting to HRK 252,142 thousand (2015: HRK 296,439 thousand) expire over the next five years,
while the losses in the amount of HRK 60,727 thousand (2015: HRK 18,908 thousand) do not expire.
Deferred tax assets
(in thousands of HRK)
Tax
losses
Provisions
Other
Total
5,347
6,450
29,427
41,224
1,002
1,209
(4,603)
(2,392)
-
77
(923)
(846)
(180)
(30)
(710)
(920)
6,169
7,706
23,191
37,066
8,715
483
347
9,545
-
96
(593)
(497)
948
(63)
294
1,179
15,832
8,222
23,239
47,293
At 1 January 2015
(Charged)/credited to the income statement
(Note 11)
(Charged)/credited to other comprehensive
income
Exchange differences
At 31 December 2015
Credited to the income statement
(Note 11)
(Charged)/credited to other comprehensive
income
Exchange differences
At 31 December 2016
62
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 25 – DEFERRED INCOME TAX (continued)
Deferred tax liabilities
(in thousands of HRK)
At 1 January 2015
Charged/(credited) to the income statement
(Note 11)
(Charged)/credited to other comprehensive
income
Acquisition of subsidiary
Exchange differences
At 31 December 2015
Charged/(credited) to the income statement
(Note 11)
(Charged)/credited to other comprehensive
income
Effect of tax rate change
Acquisition of subsidiary
Exchange differences
At 31 December 2016
Fair
value
gains
Fair value
uplifts of
assets
acquired in
business
combinations
Other
Total
3,913
174,974
2,268
181,155
-
(2,223)
(1,543)
(3,766)
(1,729)
-
-
(1,729)
(13)
477
(696)
1,230
19
1,707
(690)
2,171
172,532
1,974
176,677
-
(418)
(1,089)
(1,507)
1,196
-
-
1,196
(19)
(3,524)
768
(1,713)
(67)
(3,524)
768
(1,799)
3,348
167,645
818
171,811
Other
provisions
Total
NOTE 26 – PROVISIONS
(in thousands of HRK)
Employee
benefits
Legal
proceedings
Warranties
At 31 December 2015
62,938
29,867
2,658
11,298
106,761
Analysis of total provisions:
Non-current
32,397
Current
30,541
20,575
9,292
2,658
1,503
9,795
54,475
52,286
At 1 January 2016
62,938
29,867
2,658
11,298
106,761
39,271
(27,127)
8,859
(4,494)
1,238
(2,625)
189
(4,305)
49,557
(38,551)
(4,448)
(2,455)
-
(4,446)
(11,349)
971
(488)
(233)
(29)
(142)
971
(892)
71,117
31,544
1,242
2,594
106,497
Analysis of total provisions:
Non-current
33,982
Current
37,135
22,598
8,946
1,242
1,456
1,138
58,036
48,461
Additions
Used during year
Unused amounts
reversed
Interest expense
Exchange differences
At 31 December 2016
63
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 26 – PROVISIONS (continued)
Legal proceedings
In the ordinary course of business, the Group is defendant and plaintiff in pending legal proceedings. In
Management’s opinion, the outcome of these legal proceedings will not give rise to any significant loss
beyond the amounts provided at 31 December 2016.
Employee benefits
This provision comprises estimated long-term employee benefits relating to one-off retirement benefits
and jubilee awards, as defined by the collective bargaining agreement and bonuses to employees. The
non-current portion of the provision relates to estimated acquired rights to termination benefits and
jubilee awards that will be paid after 31 December 2017. The current amount of employee benefits
includes annual bonuses to employees and part of jubilee awards and termination benefits in the amount
of HRK 2,204 thousand that will be paid out within the following year from the balance sheet date.
NOTE 27 – COMMITMENTS
Capital expenditure contracted at 31 December 2016 but not yet incurred amounted to HRK 14,867
thousand (2015: HRK 23,855 thousand) for property, plant and equipment and HRK 1,058 thousand for
intangible assets (2015: HRK 3,741 thousand).
The Group leases various outlets, offices and warehouses under non-cancellable operating lease
agreements. The lease terms are between three and ten years and the majority of lease agreements
are renewable at the end of the lease period at market rate.
The Group also leases various property, plant and equipment under cancellable operating lease
agreements. The Group is required to give three to six months’ notice for the termination of these
agreements.
The lease rentals charged to the income statement during the year is disclosed in Note 8.
The future aggregate minimum lease payments under non-cancellable operating leases for equipment,
vehicles and business premises are as follows:
2016
2015
(in thousands of HRK)
Not later than 1 year
Later than 1 year and not later than 5 years
Over 5 years
64
47,091
105,794
1,721
44,869
102,531
1,665
154,606
149,065
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 28 – BUSINESS COMBINATIONS
/i/ At the beginning of 2015, the Group acquired 100% interest and obtained control over the company
Foodland d.o.o. Serbia, whose main activity is the production of healthy food from selected ingredients
with the recognizable brand “Bakina tajna”.
Details of the net assets acquired, goodwill and purchase consideration are as follows:
Net assets acquired:
Fair value recognised on
acquisition
(in thousands of HRK)
Property, plant and equipment (Note 13)
Brand (Note 14)
Software (Note 14)
Inventories
Trade and other receivables
Cash and cash equivalents
Borrowings
Trade and other payables
Provisions
Deferred tax liability (Note 25)
34,057
3,224
284
10,832
16,312
1,194
(41,757)
(22,982)
(1,003)
(1,707)
Total identifiable net assets acquired
Add: goodwill (Note 14)
(1,546)
12,352
Net assets acquired
10,806
Purchase consideration:
(in thousands of HRK)
Cash paid
Contingent consideration
6,225
4,581
Total purchase consideration
10,806
Cash flow on acquisition:
(in thousands of HRK)
Net cash acquired with the subsidiary
Cash paid
1,194
(6,225)
Net cash flow on acquisition
(5,031)
As part of the acquisition agreement, a contingent consideration has been agreed. Additional cash
payments to the previous owner of Foodland d.o.o. will be made if sales targets in following three years
are achieved. As at reporting date, the fair value of the contingent consideration was determined based
on discounted cash flows taking into account the probability of meeting performance targets.
As at 31 December 2016, the total amount of the contingent consideration is non-current and is classified
as Other non-current liabilities (HRK 3,401 thousand, 2015: HRK 3,436 thousand). As at 31 December
2015, the current part of contingent consideration (HRK 1,145 thousand) was classified as Trade and
other payables. In 2016, a part of contingent consideration in the amount of HRK 1,122 thousand was
paid.
Foodland d.o.o. contributed HRK 42,624 thousand of revenues and HRK 6,182 thousand of loss to the
Group for the period from 1 January to 31 December 2015.
65
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 28 – BUSINESS COMBINATIONS (continued)
/ii/ In September 2015, the Group acquired 100% interest and obtained control over the company
Salubritas d.o.o., Split, Croatia. Upon acquisition, the acquired company was merged to the subsidiary
Farmacia - specijalizirana prodavaonica d.o.o.
The fair value of the identifiable assets and liabilities as at the date of acquisition were:
Fair value recognised on
acquisition
(in thousands of HRK)
Licences (Note 14)
Software (Note 14)
Trade and other payables
288
18
(42)
Total identifiable net assets acquired
Add: goodwill (Note 14)
264
nil
Net assets acquired
264
Cash flow on acquisition:
(in thousands of HRK)
Net cash acquired with the subsidiary
Cash paid
(264)
Net cash flow on acquisition
(264)
There would have been no effect on the consolidated financial statements had the acquisition taken
place at the beginning of 2015, since the company acquired had no operations and was acquired solely
for the purpose of obtaining the licence to open the specialized shop.
66
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 28 – BUSINESS COMBINATIONS (continued)
/iii/ In March 2016, the Group acquired 100% interest and obtained control over the company Nalet
Medicus d.o.o., Zagreb, Croatia. Upon acquisition, the acquired company was merged to the subsidiary
Farmacia - specijalizirana prodavaonica d.o.o.
The fair value of the identifiable assets and liabilities as at the date of acquisition were:
Fair value recognised on
acquisition
(in thousands of HRK)
Licences (Note 14)
Deferred tax liability (Note 25)
3,841
(768)
Total identifiable net assets acquired
Add: goodwill (Note 14)
3,073
768
Net assets acquired
3,841
Purchase consideration:
(in thousands of HRK)
Contingent consideration
Cash paid
3,841
-
Net cash flow on acquisition
3,841
There would have been no effect on the consolidated financial statements had the acquisition taken
place at the beginning of 2016, since the company acquired had no operations and was acquired solely
for the purpose of obtaining the licence to open the specialized shop.
/iv/ During the year ended 31 December 2016, the Group has paid an additional amount of HRK 8,438
thousand to the non-controlling interest of the subsidiary Soko Štark d.o.o. in accordance with the
resolution of the Supreme Cassation Court in Belgrade. The nominal value of HRK 4,778 thousand was
recorded as a transaction with the non-controlling interest within equity attributable to the owners, while
the rest of the amount paid that related to penalty interest and court expenses was charged to the
income statement.
67
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 29 – CASH GENERATED FROM OPERATIONS
Note
2016
2015
163,235
242,523
40,910
46,573
166,580
163,297
(764)
(1,005)
9
-
(7,523)
9
-
(23,782)
49,730
48,555
(16,051)
41,676
Net profit
Income tax
Depreciation, amortization and impairment
Gain on sale of property, plant and equipment
Gain on sale of available-for-sale financial
assets
Gain on sale of tea business
11
13, 13a,
14, 2.24
9
Provision for current assets
Foreign exchange differences - net
(Decrease)/ increase in provision for risks and
charges - net
Fair value gains on financial assets
26
(264)
26,174
9
(12,124)
(42,257)
Share based payment
21
1,160
3,123
(4,188)
(4,637)
123,261
105,664
1,454
5,591
(47,678)
(39,049)
(111,668)
(38,153)
50,404
89,705
403,997
616,475
Interest income
Interest expense
10
Other non-cash items, net
Changes in working capital:
Increase in inventories
Increase in current receivables
Increase in current payables
Cash generated from operations
68
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 30 – RELATED PARTY TRANSACTIONS
The Group enters into transactions with related parties – significant shareholders and entities owned or
controlled by the ultimate controlling party (‘other entities’). In 2015 the European Bank for
Reconstruction and Development (EBRD) was considered a related party, since this financial institution
owned more than 5% of shares of the Company as at 31 December 2015 and had a presence in the
Supervisory Board.
Related party transactions that relate to balances as at 31 December 2016 and as at 31 December 2015
and transactions recognized for the years then ended, are as follows:
(all amounts expressed in thousands of HRK)
Note
2016
2015
RECEIVABLES
Current receivables
Other entities
18
98,322
92,057
LIABILITIES
Borrowings
Shareholders
24
-
1,323,737
Trade and other payables
Shareholders
Other entities
23
23
44,954
3,906
48,860
5,645
5,645
471,724
465,682
733
1,277
13,020
13,966
2,393
2,532
44,954
57,035
140
11,000
REVENUES
Sales revenues
Other entities
Other revenues
Other entities
EXPENSES
Marketing and promotion costs
Other entities
Other operating costs
Other entities
Finance cost - net
Shareholder
7
8
10
Purchases of property, plant and equipment
Other entities
Management board compensation
In 2016 members of the Management Board received total gross amount of HRK 17,778 thousand
relating to salaries, bonuses and supervisory board compensation in respect of operating companies
(2015: HRK 15,970 thousand).
NOTE 31 – AUDITORS’ FEES
PricewaterhouseCoopers d.o.o., the auditor of the Group’s financial statements has rendered services
in the amount of HRK 4,463 thousand (2015: HRK 3,942 thousand). These services relate to the audits
and reviews of the financial statements, consultancy services and agreed upon procedures in relation
to financial covenants calculation.
69
ATLANTIC GRUPA d.d.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
NOTE 32 – SUBSIDIARIES
The Group is comprised of the Company and the following subsidiaries in which the Company has an
ownership interest above 50% and exercises control:
2016
2015
Cedevita d.o.o., Croatia
100%
100%
Neva d.o.o., Croatia
100%
100%
Atlantic Trade d.o.o., Croatia
100%
100%
100%
100%
100%
100%
100%
100%
- Argeta d.o.o., Bosnia and Herzegovina
100%
100%
- o.o.o. Atlantic Brands, Russia
100%
100%
100%
100%
- Unikomerc d.o.o., Serbia
100%
100%
- Grand Prom d.o.o., Bosnia and Herzegovina
100%
100%
- Droga Kolinska d.o.o.e.l., Macedonia
100%
100%
- Atlantic Brands d.o.o., Serbia
100%
100%
- Atlantic Trade d.o.o., Slovenia
100%
100%
- Droga Kolinska d.d.,Slovenia
- Soko Štark d.o.o., Serbia
- Foodland d.o.o., Serbia
- Grand Prom d.o.o., Serbia
- Atlantic Trade d.o.o., Macedonia
75%
75%
- Bionatura bidon vode d.o.o., Croatia
100%
100%
- Atlantic Multipower d.o.o., Croatia
100%
100%
100%
100%
- Atlantic Pharmacentar d.o.o., Croatia
100%
100%
- ZU Ljekarne Farmacia, Croatia
100%
100%
- Farmacia - specijalizirana prodavaonica d.o.o., Croatia
100%
100%
Montana Plus d.o.o., Croatia
100%
100%
Hopen Investments, BV, Netherlands
100%
100%
100%
100%
100%
100%
100%
100%
- Atlantic Multipower Srl, Italy
100%
100%
- Atlantic Multipower Iberica, Spain
100%
100%
- AKTIVKOST Handelsgesellschaft mbH, Germany
100%
100%
- Atlantic Management GmbH, Germany
100%
100%
Atlantic Brands GmbH, Germany
100%
100%
Atlantic Brands GmbH, Austria
100%
100%
Fidifarm d.o.o., Croatia
- Atlantic Multipower GmbH & CO OHG, Germany
- Atlantic Multipower UK Ltd, Great Britain
- Sport Direct Ltd, Great Britain
NOTE 33 – EVENTS AFTER BALANCE SHEET DATE
Trade and other receivables disclosed in Note 18 include receivables in the amount of HRK 354.894
thousand related to a customer which started, after the balance sheet date, a process of potential
restructuring and change of business model. At the moment of financial statements approval, the
process has just started and potential effects (if any) are uncertain, but management expects
outstanding receivables will be fully collected.
70
ATLANTIC GRUPA Plc.
Miramarska 23
10000 Zagreb, Croatia
Information desk
tel. +385 1 2413 900
fax. +385 1 2413 901
mail.grupa@atlanticgrupa.com
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