Croatian EU Entry to Help Atlantica Gain, Tedeschi Says

Croatia’s European Union entry this year will help the biggest snack and beverage company in the former Yugoslav region shift focus to western Europe after relying on Russia and other ex-Soviet republics for growth.

Zagreb-based Atlantic Grupa d.d.’s 2012 revenue probably grew about 5 percent from 4.77 billion kuna ($846 million) in 2011, said Chief Executive Officer Emil Tedeschi in an interview at his company’s headquarters before the company reports earnings scheduled for Feb. 22. Similar growth is expected this year, he said.

Croatian companies are looking for new markets as they struggle to sell products at home and to the west because of a two-year recession and debt crisis. Atlantic Grupa (ATGRRA)’s 2012 sales were propped up by demand from the east of its products such as Argeta pates and Multipower vitamin supplements, Tedeschi said. Its shares are up 25 percent this month, outpacing the 9 percent gain in Croatia’s main stock index.

EU entry will bring “more opportunities and an extra marketing tool, as we can label our products and brands that are made in Croatia as ‘Made in the EU,’ ” Tedeschi said. “We are prepared to grow organically and expand internationally.”

Atlantic Grupa produces and distributes so-called fast- moving consumer goods in the former Yugoslav region. Its beverages, snacks, food supplements and cosmetics are manufactured in 14 plants in Croatia, Serbia, Slovenia, Bosnia- Herzegovina and Macedonia, as well as in Germany, and distributed in 40 countries.

Customs Duties

While membership in the Brussels-based bloc will make Croatian companies face new customs duties for their products entering Serbian, Bosnian and Macedonian markets, which are part of Central European Free Trade Agreement, or CEFTA, production facilities in those countries help Atlantic Grupa avoid higher costs for distributions across the Balkans, Tedeschi said.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, will probably show a “single-digit” increase over 2011’s 500.67 million kuna, he said.

“In 2012, all our product categories have performed very well, and we expect the trend to continue this year,” Tedeschi said.

Atlantic Grupa in November refinanced its long-term debt with a loan of 307 million euros ($412 million) from the European Bank for Reconstruction and Development, International Finance Corp. and four commercial banks. The average interest rate was 4.71 percent.

Loan Refinancing

“The highlight of the year was that we were able to refinance our loan, without being obliged to do that, and with interest rates below sovereign debt yield,” Tedeschi said. “We obtained a new horizon of seven years, which is the loan’s maturity, and proved that we have earned the trust of the financial community.”

Atlantic Grupa employs 4,350 people in 12 countries. Tedeschi, 45, expanded the family-owned business in 2010 to acquire Slovenia’s food and beverage maker Droga Kolinska d.d., which had production plants in Serbia and Macedonia. In 2008, it acquired Farmacia, Croatia’s biggest closely-held pharmacy chain.

The shares fell to 662 kuna at 2:19 p.m. today in Zagreb, from yesterday’s close of 664.09 kuna.

To contact the reporter on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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