ANNUAL REPORT 2008 - Gorenje Group

49
3.4 PURCHASING
Raw material markets underwent enormous changes, marked by two price trends occurring in different
periods of the year. In the first part of the year, the prices of raw materials continued to rise
steeply, attaining historic levels in July: oil, copper, aluminium, steel sheet, iron ore, etc.. In the second
half of the year, record oil prices and the financial crisis led to a slowdown of global economic
growth, recession in developed economies, a decline in demand, and highly increased stocks.
The prices of raw materials plunged by the end of the year (oil 70%, non-ferrous metals 60%, plastics
35%, steel sheet 40%, etc.) and in December reached their lowest level since 2003. The drop in
prices was also enhanced by the strengthening of the dollar and the withdrawal of investors from
commodity exchanges.
On a yearly level, all major international comparative indexes of raw materials monitoring price fluctuations
in commodity markets fell drastically. In spite of this, the prices of raw materials were still
higher than those before the beginning of their six-year period of prosperity, and even above average
historical levels.
The unpredictability of raw material markets increased substantially, along with daily fluctuations in
raw material prices on stock exchanges and exchange rates.
• In the area of purchasing, we weathered the situation by carefully monitoring
and promptly detecting market influences, and by hedging against risks.
• In the first half of the year, we managed to avoid the steep rise in prices by forward
buying of listed raw materials through our suppliers, and in the second half
of the year by selectively responding to the trend of falling raw material prices.
• The aggressive demands of the steel industry for reviewing concluded annual
agreements with the intention of laying the burden of more expensive metallurgical
raw materials on buyers were not accepted. The subsequent decrease in
steel sheet prices in spot markets that followed the erosion of demand for steel
proved that this decision had been well chosen.
• The delays in reaching agreements on the purchase of plastic masses proved to
be even more effective, as the prices of all plastic materials gradually began to
decline in response to the sharp fall in the prices of crude oil and petrochemical
base materials.
• In line with the set goals, the development and increase in the volume of supply
sources were continued in Asia, other dollar areas, and in the countries of
South-western Europe.
• Considerable attention was and is being given to strengthening relations with
our strategic partners and achieving our joint goal of overall cost savings (innovations,
optimization of components and processes).