PricewaterhouseCoopers, the auditors hired by Agrokor, are urgently attempting to ascertain where a newly found 3.7 billion kuna debt came from, cited in the newest financial report regarding the concern. The sources of this currently undefined debt are the focus of auditors.
On Friday, a source connected to Agrokor briefly stated “There is still no answer to where this debt comes from and how it came about. At this moment, it would be like looking into a crystal ball. The issue is being handled by auditors,” Jutarnji List reported on May 13, 2017.
Still, the general impression from circles close to Agrokor and financial experts, is that the financial gap of around half a billion euros can probably be explained with a new round of non-payments to suppliers, as well as in the way these debts were recorded. In the last trimester of the previous year and the first trimester of this year, Agrokor already had serious issues in operations. Despite that, goods were (mostly) delivered to companies concerned, especially Konzum.
“If Agrokor had problems in those trimesters, then its debt to suppliers increased, since goods kept coming in. It is possible, therefore, that this is a rapid growth of debt to suppliers. The question is also how this was recorded in their accounting books,” said our source, who emphasises that these are currently only presumptions.
Financial circles also believe these are debts created by the concern of Ivica Todorić to suppliers in those trimesters.
“This seems to be the failure to record commitments, which opens up a line of other questions. Above all, who are the creditors whom Agrokor owes, and then the question of what guarantees that debt in the assets of the company,” said a source from financial circles.
However, some experts point out the mysterious sum of 3.7 billion kuna does not necessarily mean financial accounts were forged or the concern has new debt.
“In principle, I believe these are not new commitments. I feel the case is poor interpretation of financial reports, but I also cannot claim there are no undiscovered commitments and that financial reports so far have been accurate,” said Danko Sučević, an expert in crisis management in Infokorp.
''Still,'' Sučević added, ''the reported 40.4 billion kuna debt does not include Mercator debts. Ramljak misspoke as he implied the 3.7 billion kuna was something hidden, which by accounting rules does not have to be so. In the report published by Agrokor on Thursday, regarding the period until the end of March, when the total commitments of the Agrokor ‘expanded group’ without Mercator amounted to 40.4 billion kuna, there is no precise definition of what it pertains to. The term “other commitments,” can mean a broad palette of various commitments,''
“Under ‘'other commitments'’ there can be taxes, contributions, maybe even guarantees, but also commitments to owners. But this does not mean they were hidden, not established, but that those who handed in reports to Ramljak did not specify the commitments, and maybe just because they used a standard form to report them,” explained Sučević.
What the commitments are and if they are correctly presented will be found in the end by PwC auditors. Until then, the wider public can only roughly guess what it’s all about. But one thing is certain: previous Agrokor financial reports need to be read with a large dose of caution.
Besides the issue of where this 3.7 billion kuna debt comes from, business circles are increasingly asking how that financial gap will be filled. Some of our sources point out the government said several times that it does not intend to save the failing empire of Ivica Todorić with taxpayers’ money, but our source from financial circles feels that such a solution is now quite realistic.
“Agrokor needs to primarily concede this debt to creditors and register it properly, and then deal with the way to repay it. But in this atmosphere of mistrust it will have a hard time getting a bank loan for it. The question is also what the collateral for such a loan would be. I am afraid there is no other way than for the state to step in. This does not necessarily have to be done at the expense of taxpayers, it can go through Croatian Bank for Renovation and Development or the European Investment Bank,” our source stated.
On the other hand, sources close to the new leadership of Agrokor say the new financial gaps will be filled depending on how many bank loans the concern will be able to negotiate, and much will depend on the spending of tourists.
“If Konzum has a good summer and a turnover of near maximum, then there will be no need for the government to intervene,” said our source.
