Should measures against the spreading of coronavirus be prolonged, and taking into account the effects of the epidemic on global consumption, it is expected that the negative effect on the profitability will increase further in the second quarter.

• Gorenje, d. o. o.

By the end of March, orders at all Hisense Gorenje factories in Velenje, Serbia and the Czech Republic have decreased by a third, and orders for April 2020 were down almost two-thirds. In May and June, the orders dropped for around 25% (compared to the same period last year). In Gorenje, d. o. o., this also means decreased need for workers in the production and related organizational units. Although Gorenje has partly become involved in state intervention measures to curb the COVID-19 epidemic and mitigate its consequences for citizens and the economy, labor costs still have a negative impact on business results, given the significantly reduced business volume.

For these unexpected and unforeseen reasons related to the COVID-19 epidemic, the employer is forced to start again the process of terminating employment contracts for about 700 workers in Gorenje, d. o. o., especially in manufacturing, as the resulting decline in orders consequently reduces the need for manufacturing workers. The reduction is proportional to both jobs directly involved in the manufacturing process (ie direct workers) as well as jobs providing support to the production process (ie indirect manufacturing workers).

• Hisense Gorenje Europe, d. o. o.

The main activity of the company is to provide sales, marketing, financial, accounting, personnel and legal services for Gorenje, d. o. o. and indirectly for the Hisense Gorenje Group in Europe. As a result of the aforementioned large decrease in orders, the scope of services provided by the employer to the contracting company Gorenje was also reduced, with the exception of regular and urgent activities such as accounting and payroll. As a result, the employer changed the working schedule, recommended the use of unused holiday leave from 2019 and the use of timebank hours. Work was continued (at the company or from home) only by those workers who at that time had urgent and time-bound tasks.

Due to the economic situation, the client (Gorenje, d. o. o.) has already proposed to HGE an annex to the service contract, i.e. reducing the volume of services ordered. Costs of HGE's business are mostly represented by labor costs, which would create a loss if the number of employees remains unchanged while the scope of services is reduced.

HGE is also not eligible for financial assistance, included in the government measures under the intervention law, since the company started operations only this year. Despite the inability to do business on the full scope, the costs of labor for the company remain unchanged, which additionally adversely affects the operating result. Due to the economic reasons outlined, HGE is also forced to decrease the number of employees by about 300, due to the reduced workload, with a reduction in the number of employees in all organizational units.

• Sales business units across Europe

The headcount reduction will also occur across Hisens sales offices in Europe, as the decease of the number of employees will need to happen in the entire Hisense Europe Group.

In reducing the number of employees, all Hisense Europe Group companies will strive to minimize redundancies by using soft methods of staff reductions, including the disinvestment of non-core companies, outsourcing, consensual leave, retirement, etc. We will also focus on sales increase, speeding up the e-commerce business and other operational adjustments to ensure the survival of the company in the expected global recession, following the coronavirus pandemic.