May 10, 2018 / 11:13 AM / 8 months ago

Gorenje first-quarter profit jumps amid takeover talk

LJUBLJANA (Reuters) - Slovenian household appliances maker Gorenje GORE.LJ on Thursday reported an increase in first-quarter net profit on the back of a rise in sales of higher margin products.

The company, the target of a bid by China’s Hisense Electric (600060.SS), said first-quarter group net profit reached 2.5 million euros (2.2 million pounds), an increase of 23.5 percent compared with the same period of 2017.

Total sales fell by 3.3 percent to 295.6 million euros, partly because sales were boosted in 2017 by the sale of a non-core business.

“With further growth in markets outside Europe, we are mitigating our reliance on the mature European markets and improving our sales structure by stepping up the share of premium brands and appliances,” the company said.

Goranje’s shares surged 65.4 percent to 11.25 euros before the results were released, partly because of bid speculation.

The blue-chip SBI index .SBITOP rose 3.53 percent.

Chinese household appliances maker Hisense Electric has offered 12 euros a share for Gorenje, valuing it at about 293 million euros. Gorenje has said it has received three offers.

Another Chinese appliances maker Haier 11689.HK had offered about 10 euros per share and was considering increasing its offer, according to daily newspaper Finance, which cited unofficial sources.

“I do not think the shares are going to go much higher before the takeover unless another company makes an even better bid,” Iztok Trobec from Dezelna Banka told Reuters.

Gorenje, one of the largest Slovenian exporters, said last year it was seeking a strategic partner to increase cost efficiency and strengthen the brand.

Hisense and Haier, which have both performed due diligence in Gorenje over the past weeks, were not available for immediate comment.

Reporting by Marja Novak; editing by Jason Neely and Jane Merriman

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