Slovenian retailer Mercator has warned of rising raw materials costs and “profound recession” in many of its key markets after swinging to a net loss in the first half of 2012.

For the six months to the end of June, Mercator reported net losses of EUR16.5m (US$20.7m), versus profits of EUR18.5m in the same period of 2011. Its move into the red comes amid challenging market conditions. EBITDA dropped 27% to EUR64.2m.

Of its native market, Mercator said: “Household consumption is low and consumer confidence has suffered another blow in the recent months.” It added: “The drop in confidence in the entire eurozone resulted in the rise of year-on-year prices of fuels and unprocessed food.”

Despite problems at the bottom line, Mercator reported a 1% increase in net sales for the half-year period, to EUR1.4bn. Sales fell by 1.6% in Slovenia, but rose by 4.9% in the firm’s international business, partly helped by the acquisition of Drvopromet in Bosnia and Herzegovina.