Agrokor audit reveals €440mn in undisclosed liabilities

Agrokor audit reveals €440mn in undisclosed liabilities
By Carmen Simion in Bucharest October 10, 2017

The extraordinarily management of Croatian food and retail giant Agrokor has “taken steps as stipulated by the law” after overstated revenues and other accounting irregularities were revealed in an audit of the group. 

Agrokor, Croatia’s largest company and one of the largest employers in the SEE region, is undergoing restructuring after a debt crisis pushed it to the brink of collapse earlier this year. As it became clear that Agrokor would be unable to make upcoming debt repayments, the Croatian government stepped in to appoint emergency management at the group.

The audit report, released on October 9, also showed that Agrokor Group’s net loss in 2016 amounted to HRK11bn (€1.46bn) last year. The company’s liabilities amounted to €56.3bn in 2016.

Last week, Agrokor announced that the audit had showed the net loss of the main companies in the Agrokor group amounted to HRK3.3bn last year.

“In producing and auditing the financial statements of the Agrokor Group for the year 2016 the following key accounting irregularities were found: undisclosed liabilities in the amount of HRK 3.9bn, undisclosed operating and financial expenses for the period from 2010 to 2015 in the amount of HRK 2.2bn and inappropriate classification of HRK 2.1bn of cash and cash equivalents,” the report showed.

“The third key finding presented today refers to the inadequate usage of the so-called equity method at Agrokor d.d. in the period from 2006 to 2011, resulting in a equity value adjustment in the amount of HRK3.5bn, i.e. overstated revenues in previous periods,” according to a statement posted on the company’s website.

The audit also showed that the group posted a net loss of HRK3.6bn in 2015, compared to a net profit of HRK1.2bn reported earlier.

The company's extraordinary commissioner Ante Ramljak pointed out that the findings presented in the report have had no direct impact on the operations of Agrokor Group companies this year, which were stabilised by the extraordinary administration between April and June, and that after a successful season the operating businesses of these companies were stable.

PwC, which performed the audit, has informed the extraordinary administration about the accounting irregularities found during the audit which may point at potential illegal activities, and that the extraordinary commissioner has taken steps as stipulated by the law, the statement added. No further information on the steps taken was revealed. 

Meanwhile, the owner of the troubled group, Ivica Todoric, said on his blog that he wants to file criminal charges against Ramljak. Todoric accused the government of using the Lex Agrokor bill to steal his company and the emergency management of deceiving the prosecutors with inaccurate and incomplete data. Todoric claims Ramljak was aware of all these actions.

Last week, the deputy CEO of Russia’s Sberbank, Maksim Poletaev, said in an interview with Russian news agency Interfax, quoted by Total Croatia News, that Agrokor owes Sberbank around €1.1bn.

Back in August, Sberbank initiated arbitration proceedings against Agrokor and 11 guarantors in respect of €450mn lent to Agrokor Group by Sberbank which the Russian bank claimed should be repaid as a result of the Croatian extraordinary administration proceedings.