Published: 2019-03-18 08:30:00 CET
Baltika
Company Announcement

Additional Information about AS Baltika 2019-2020 Operational Plan and the new Member of the Management Board

At 14 March 2019, Supervisory Board of AS Baltika approved the 2019 and 2020 operational plan. The main parts of the plan are optimizing the brand portfolio and sales channels, digitalisation and changing the procurement base.

In the Mainstream segment, Monton, Mosaic and Bastion will be united under one brand from spring 2020. The leading brand in the mainstream segment will be Monton, whose value proposition will be matched to the expanded target segment and customer expectations.

In the market view, the focus will be on retail and e-channel in the Baltics, which allows to make the product development process more efficient. The store network is organized according to the new brand portfolio and focus goes on the best locations in the best centers. In the business customers` sales channel, cooperation with partners whose purchase process is in accordance with Baltika Group's product development schedule will be continued. In connection with the above, in 2019 the agreement will be terminated with the Russian franchise partner OÜ Ellipse Group.

The goal is to make business processes easier, faster and more efficient through digitalisation. Step by step, the latest digital tools are being deployed - 3D model in product development, physical sample free sales process, artificial intelligence in inventory management, and digital solutions in customer service. Focus also goes on evolving the international design and product development and on increasing sales and marketing capabilities.

Today's Baltika Group's business model is expensive and the share of fixed costs is high, which makes it difficult to respond to external factors and demand. The need to find a solution to high fixed costs and significantly reduce the operating costs is critical. Production input prices in Estonia are rising faster than consumers' willingness to pay for those products. At the same time, own production does not allow to specialize at today's sales volumes. For the reasons mentioned above, production will be dissolved in Baltika Group's Estonian production units during 2019. The sewing service will be purchased in mainly from partners in the European region. Product development, design and quality control are still carried out by Baltika Group.

With the transition to an optimized brand portfolio, significant simplification of business processes and closure of Estonian production units, Baltika Group's operating costs will be reduced by two million euros over the next 12 months.

Due to the above, Baltika will write-off assets related to production and trademarks (intangible and tangible assets) and creates allowance for impairment for the claims against Russian franchise partners in amount of 1,978 thousand euros which will be recognised in the annual report for 2018.

For implementing the above mentioned 2019–2020 operational plan, Mae Hansen will be the third member of the Management Board of AS Baltika as of 22 March 2019. Hansen has nearly 20 years of strategic management experience from three continents and seven countries - Estonia, United States, Denmark, Austria, China, India and Russia. With her help, changes have been implemented in Daimler Financial Services (Germany), Match-Maker Ventures (Austria) and WeXelrate (Austria). Hansen has worked for a long time in the finance sector - Merrill Lynch (United States), Byrne Investment Research (United States), Danske Bank (Denmark and Estonia) and FinanceEstonia (Estonia). She has been a supervisory board member of several companies. As of last year, she is a vice president of the International Advisory Board of the University of Vienna. Hansen has a university degree from both the United States and Europe, most recently the Global Executive MBA from Vienna University (Austria) and Carlson School of Management (USA). Over the past 3 years, Mae Hansen has been an entrepreneur assisting small and large companies across Europe on diverse strategic matter. In addition, she has been a supervisory board member of different companies and institutions (e.g. Vienna University of Economics and Business,  Estonian Co-Operative Bank).

Mae Hansen is a partner in New Seven OÜ and she holds 37.48% of shares in the company. Mae Hansen does not hold any shares of AS Baltika.

   

Maigi Pärnik-Pernik

Member of the Management Board

maigi.parnik@baltikagroup.com