Thousands fear for jobs as Balkan retail giant in crisis

ZAGREB: From cashiers and farmers to drivers and travel agents, tens of thousands of people are fearful for their jobs linked to the Balkans’ biggest food producer and retailer, as it struggles with crushing debt.

The financial woes of Croatian group Agrokor have dominated headlines in recent weeks after global agencies began slashing its credit rating.

That has rattled Agrokor’s 60,000 employees in the region, two-thirds of whom are in Croatia making it the country’s largest employer.

Agrokor’s debts were estimated in September at six billion euros ( US$ 6.3 billion) – an alarming sum for a company whose revenue of 6.7 billion euros accounts for 15 per cent of Croatia’s gross domestic product (GDP).

The group’s leading business is the supermarket chain Konzum, but it has acquired a wide range of companies including in agriculture, food production, tourism and distribution.

Also anxiously watching developments are Agrokor’s small suppliers, who after months of waiting for payments now wonder if they will be paid at all -and to whom they will sell in the future.

“It is hard to continue production without money, but it is also difficult to enter a new market,” said Zvonimir Belic, a leading regional tomato producer who currently sells around a third of his goods to Agrokor.

“It’s not only about saving Agrokor, but about saving Croatian firms. We are running out of time... Decisions need to be taken,” Belic said.

The impact goes beyond the Balkan country of 4.2 million people.

Agrokor has businesses in neighbouring Bosnia, Serbia and Slovenia, while its network of suppliers means tens of thousands more are affected in a region where unemployment runs high.

“I am afraid that Agrokor will be a very difficult issue in Serbia too,” Serbian Prime Minister Aleksandar Vucic said this week in Bosnia, where he discussed the crisis with his Croatian counterpart Andrej Plenkovic.

Analysts say Agrokor, whose main creditors are Russian stateowned banks Sberbank and VTB, accumulated debt through aggressive expansion and expensive borrowing – a snowball that eventually turned into an avalanche.

In January, Agrokor withdrew from a loan deal with international creditors, triggering a surge in its bond yields.

Some companies within the group had their accounts frozen due to unpaid state taxes and obligations towards suppliers.

“Financing was short-term, under unfavourable conditions... while expansion was too fast on very fragile financing sources,” economic analyst Luka Brkic told AFP.

Owned by Croatian businessman Ivica Todoric, Agrokor is almost as important as tourism to Croatia, which emerged from a six-year recession in 2015 and is one of the European Union’s poorest-performing economies.

“A collapse of Agrokor would lead Croatia into recession, push it back into 2008,” warned Vladimir Nisevic, editor-in- chief of the Poslovni dnevnik business newspaper.

Croatia’s Chamber of Agriculture has urged the government to make suppliers’ payments a priority issue, warning of the threat of farm closures and a “further exodus from rural areas”.

Faced with a company that may be too big to fail, Croatia’s parliament on Thursday adopted an emergency law aimed at saving troubled giant firms like Agrokor and shielding the country’s economy through a restructuring process.

Opposition lawmakers argued however that the law would not protect employees and small suppliers but rather management.

Separately, Agrokor and its board of creditors have signed a “standstill agreement” freezing its repayment of debts to banks, while naming an independent expert as chief restructuring officer.

“There is no guarantee we will succeed,” restructuring expert Antonio Alvarez told reporters Monday, describing the situation as ‘pretty acute’.

Trade unions echoed his view, saying members were contacting them daily with fears about their wages and future.

“Easter and the tourist season are approaching. If that is missed, it would be impossible to compensate for,” commercial union leader Zlatica Stulic told AFP.

Todoric, 66, who rarely makes media appearances and is known locally as ‘The Boss’, has not made any public comments on the crisis himself.

The entrepreneur started in the flower business in the 1970s and founded Agrokor just before communist Yugoslavia fell apart in the 1990s, leading to the privatisation of state- owned companies.

Todoric was initially seen as a role model who helped Croatia’s post-war economy recover with his successful business empire.

He became one of the wealthiest and most influential men in the Balkans, but critics accuse him of abusing his monopoly position and becoming untouchable.

Todoric’s employees now say they are scared.

“Eventually us ordinary folks will pay for all this, in one way or another,” said Josipa, a cashier in a Konzum store in Zagreb, who didn’t want to give her full name. — AFP