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Equity Squibs: Mercator Group 9M13 results - sales decline accelerated in Q32013




Hypo Alpe-Adria-Bank


13 Nov 2013





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Mercator Group (MELR) posted narrowed (-20.1% yoy) pre-tax loss of EUR17.6m in 9M13 thanks to administrative expenses cutting (-7.9% yoy) and lower net financial loss (-24.8%). The top-line decline accelerated in Q32013 and resulted in 9M13 drop of 3.6% yoy hurt by deteriorated performance on both domestic (-3.9%) and foreign (-3.3%) markets. This subdued top-line performance reflects aggravated macro backdrop on MELR’s main markets as the weaker purchasing power forces consumers to buy cheaper products and prefer private labels. In detail, revenues at home continued to fall on the back of increased VAT rate and depressed sale of home product program and apparel program. On the other hand, deteriorated foreign market sales were hit by lower revenues in Croatia (partially on closures of retail units by 20.386 m2), as well as an exit from Albania and Bulgaria last year. Serbia was only market where company succeeds to increase sales by 3.2% yoy mainly on wings of 7 new retail units. On profits, despite intensified admin costs reductions, EBITDA slumped 13.8% while EBIT where hit harder (-41.2% yoy). Furthermore, the management’s efforts to improve leverage position resulted in EUR13.8m lower net debt of EUR994m compared to 2012-end. However, MELR’s composition of financial liabilities by maturity has worsened, which is depicted in significantly lower share of long term financial liabilities in total financial liabilities (38.4% vs 54.2% 2012-end). In the meantime, company has reached agreement in principle with its lenders steering committee, consisting of six creditor banks, on the key terms of a long term debt restructuring. Management expects to achieve a successful completion of the debt restructuring by the end of year.

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