The current report on the state of the Agrokor group states that PwC has informed the extraordinary administration in writing about accounting irregularities identified during the audit, which “may indicate potential illegal activities”.
These include concealing received loans and/or credits, as well as operating expenses and interest costs presented as receivables from the owner. PwC also pointed out the improper classification of assets and reserves, the incorrect representation of loans as equity, and the incorrect representation of loans given as cash and cash equivalents.
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Specifically, 3.9 billion kuna of liabilities from loans were not reported or were misrepresented, 2.3 billion of operational and financial costs for the period from 2010 to 2015, and 2.1 billion kuna of misrepresented cash and cash equivalents, which was corrected in the 2015 report. It was also established that previously unreported loans and receivables amounted to 2 billion kuna.
The State Attorney’s Office of the Republic of Croatia (DORH) did not wish to comment on the Agrokor case and the criminal complaint filed against responsible individuals by the extraordinary commissioner Ante Ramljak on Monday.
Additionally, it was determined that the so-called equity method was improperly used in Agrokor d.d. from 2006 to 2011, resulting in a correction of the value of shares amounting to 3.5 billion kuna, meaning that revenues were overestimated by that amount.
As part of the presentation, extraordinary commissioner Ante Ramljak explained that owner Ivica Todorić had entered into an Agreement with Agrokor d.d. regulating costs related to the initial public offering (IPO) of the company and/or part of the Agrokor company, which according to that agreement relate to the costs of various advisors and other costs associated with the mentioned transaction.
Unforeseen IPO
The mentioned agreement stipulated that Ivica Todorić would reimburse the aforementioned costs in the event that the IPO occurs, otherwise, the costs would be borne by Agrokor.
The Agreement on the termination of the Agreement on bearing possible negative effects of the IPO of Agrokor d.d., which had a realization deadline of December 30, 2018, dated December 14, 2016, between Ivica Todorić and Agrokor d.d., states that “based on the analysis of all available data and the fact that the realization of the project in question will not occur (…) the parties terminate the Agreement as of December 14, 2016”.
This Termination Agreement explicitly confirms that Agrokor d.d. and Ivica Todorić agreed on December 14, 2016, that the IPO of Agrokor “will not occur” and that all costs allegedly related to this project, which had not been reported or recorded from 2010 to 2015, became an expense in 2016. The audit established that only part of these costs relates to the IPO.
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Regarding the non-reporting or incorrect classification of liabilities, it was determined that the total unreported loans amounted to 2.9 billion kuna and incorrectly classified liabilities (from the Adris loan) amounted to one billion kuna, resulting in unreported and/or incorrectly classified liabilities from loans totaling 3.9 billion kuna.
The improper classification of loans given and deposits as cash or cash equivalents resulted in 2.6 billion kuna being presented as cash instead of 573 million kuna, or 2.1 billion kuna more.
Valuation adjustments were also made – on intangible assets amounting to 1.5 billion kuna in 2015 (related to Konzum Sarajevo) and 2.1 billion kuna in 2016 (mostly Mercator brand); on inventories amounting to 2.8 billion kuna in 2015 and 2.1 billion kuna in 2016; on loans and receivables amounting to 0.4 billion kuna in 2015 and 1.9 billion kuna in 2016.
Criminal Complaint Filed, Forensic Experts Engaged
Ramljak emphasized that the findings presented today do not have a direct impact on the operational business of Agrokor companies in 2017, which the extraordinary administration stabilized from April to June this year, and after a successfully completed season, the operations of these companies are stable.
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Ramljak also stated that the extraordinary administration engaged a reputable international company specializing in forensics, which will investigate the identified irregularities and examine where the difference in money actually went.
Ramljak confirmed that he has taken steps prescribed by law today, and in response to a journalist’s inquiry, he confirmed that he has filed a criminal complaint.
