Year End Report for Althin Medical AB

YEAR END REPORT FOR ALTHIN MEDICAL AB January - December 1998 March 5 1999 Group Sales decreased with 3 percent to SEK 1.007,8m (1.037,6) Operating income totaled SEK -73,2m (11,2) Income after net financial items was SEK -99,0m (-2,8) Improved Operating cashflow from SEK -171,2m to SEK 1,1m, a change of SEK 172,3m Operating gross margin was improved during the fourth quarter, 33,3% compared to 27,4% in average for the year Sales Sales for the period totaled SEK 1.007,8m (1.037,6). During the year the trading operations related to non-dialysis products was sold. Sales in the divested trading operations totaled SEK 41,2m (87,2). Excluding changes in exchange rates and the divested trading operations, SEK 34,4m, sales decreased with SEK 18,2m or 1,8%. The decrease in volume during the year is due to the deterioration of the Asian market and quality problems which have had an effect on the sales in Americas. Sales have decreased with 27% in Asia and 2% in Americas while sales in Europe has increased with 8%. Profits Operating income totaled SEK -73,2m (11,2) and income after net financial items was SEK -99,0 (-2,8). The major reasons for the weak result is overcapacity in the production due to the large investments made in 1997, quality costs and delays in deliveries due to disturbances in the production in both Ronneby and Miami. Also, as the customer structure is changing especially the American market is experiencing a strong pressure from the market on the price. The financial result includes a profit of SEK 11,0m from the sale of real estate, of SEK 25,2m from the sale of trading operations related to non- dialysis products, a grant from NUTEK of SEK 3,6m, various receipts from sales of rights of SEK 5,2m and restructuring costs of SEK 31,5m. Altogether these items have had a positive effect on the year end report with net SEK 14,1m. The restructuring costs are primarily due to: Relocation of the Portland factory to Miami Reorganization of US operations Quality assurance projects in the USA Consulting costs Start-up costs in Ronneby Move of production facilities from Ronneby to Miami Depreciation increased from SEK 35,5m to SEK 47,2m and financial net increased from SEK -14,0m to SEK -25,8m. The gross result during the fourth quarter has improved compared to earlier reported quarters due to measures taken during the year. Action plan A strategic plan was implemented during the second quarter of 1998. This Group-wide program encompasses a reorganization in the US, system improvements in management and control systems, capital budgeting, logistics and production areas. As a step toward improving the company's profits, the Board of Directors decided in September to consolidate the production of the various product lines. Manufacturing of machines is being concentrated in Miami Lakes, USA and manufacturing of dialyzers will in it's entirety gradually be located in Ronneby, Sweden. As an effect of this decision the Group has reduced the number of employees with 120 from September 1998 to year end. The number of employees is expected to gradually decrease as the dialyzer production is being concentrated in Ronneby. The action plan has also implied that considerable efforts have been made to further improve the quality of machines and dialyzers. These efforts are expected to have a positive effect on both sales and quality costs during 1999. Our action plans during 1998 had a positive effect on the liquidity. Liquid assets including unutilized credit commitments was improved from SEK 67m after the first quarter 1998 to SEK 144m at year end, in spite of the loss during the year. The restructuring program and the rationalization actions started to have an effect on the gross result during the fourth quarter 1998. Actions taken during 1998 to reduce the capital tied up in accounts receivable and inventory has resulted in a decrease with SEK 87,4m in the period. We expect a continuous decrease of the capital during 1999, which will contribute to a positive cash flow and an improved result. Investments Investments totaled SEK 40,3m (80,4). The investments during the year is mainly due to production equipment. Product development Our new membrane Althane@ - P.S. is now in clinical test and will, provided that the tests are successful and the authorities concerned give their approval, be sold in limited quantities during the fall of 1999. After the introduction further development will take place together with our customers to optimize the product. In the same way pursue the development of our dialysis machines and new options to be able to individualize and optimize the treatment for each patient. Financial Position At year end the equity ratio was 33 percent compared to 39 percent previous year. The net financial liabilities increased from SEK 389m to SEK 399m. Approved lines of credit from credit institution amounted to approximately SEK 543m at year end, which is unchanged compared to previous year. Liquid assets including the unutilized portion of approved lines of credit amounted to SEK 144m (118) at year end. Number of employees During 1998 the number of employees was 854 in average compared to 869 previous year. At year end 1998 the number of employees was 793 compared to 835 at year end 1997. The decrease in numbers of employees is related to the restructuring of production and the cost reduction program that was implemented during the year. Cash flow Cash flow has improved from SEK -171,2 to SEK 1,1m, a change of SEK 172,3m. Parent company The business of Althin Medical AB concerns production of dialyzers and Altracart, the Group's management functions and an international sales division. The Company's production facility as the Group's head office is situated in Ronneby, Sweden. Board of Directors The Board of Directors of Althin Medical consists of six members including the Chief Executive Officer and a deputy member, all elected at the shareholder' s meeting. Group Executives participate in the Board meetings submitting reports. When the annual report is being presented the Groups auditors account for their observations from the revision. The Board of Directors had nine meetings during 1998. The distribution of work and responsibility between the Board of Directors and the Chief Executive Officer is regulated by a program for the Board of Directors and an instruction for the Chief Executive Officer. Dividend For the financial year 1998 no dividend is proposed by the Board of Directors. Shareholders' meeting The shareholder' s meeting will take place in Ronneby, Sweden, on Tuesday May 11, 1999 at 16.00CET. The Annual Report for 1998 will be distributed during week 16 and will be available at the head office in Ronneby. Forecast for 1999 For 1999 a considerable improvement of the result is expected compared to 1998. 1999 will however be a year of recovery, consolidation and secure of the ongoing restructuring programs. Stockholm March 5, 1999 ALTHIN MEDICAL AB Board of Directors Future reports from Althin Medical AB Interim report January - March 1999 May 11, 1999 Interim report January - June 1999 August 27, 1999 Interim report January - September 1999 November 15, 1999 For further information, please contact; Anders Althin +46 709 370253 or Thomas Nörby +46 708 505145 INCOME STATEMENT SEK m 1998 1997 Sales 1007,8 1.037,6 Cost of goods sold -731,2 -683,0 Gross profit 276,6 354,6 Sales costs -160,6 -155,4 Administration costs -139,1 -139,3 Research & Development -50,1 -48,7 costs Operating income -73,2 11,2 Net financial items -25,8 -14,0 Income after financial -99,0 -2,8 items Taxes 4,1 2,5 Net income for the year -94,9 -0,3 QUARTERLY INFORMATION IN SUMMARY 1998 I II III IV Total Invoiced sales 255 269 236 248 1008 Gross profit 67 67 60 83 277 Operating income -40 3 -20 -16 -73 1997 I II III IV Total Invoiced sales 251 250 256 281 1.038 Gross profit 95 94 84 82 355 Operating income 14 12 16 -31 11 BALANCE SHEET SEK m 1998 1997 Assets Intangible fixed assets 62,8 60,5 Material assets 214,1 224,6 Other fixed assets 15,9 14,6 Fixed assets 292,8 299,7 Inventory 244,0 294,7 Accounts receivable 271,5 308,2 Other short-term 60,9 75,7 receivables Short-term operating assets 576,4 678,6 Operating assets 869,2 978,3 Financial assets 67,8 33,6 Total assets 937,0 1.011, 9 Liabilities and Equity Capital stock 24,9 24,9 Restricted reserve 272,9 265,3 Restricted equity 297,8 290,2 Nonrestricted reserve 106,2 104,9 Net loss -94,9 -0,3 Nonrestricted equity 11,3 104,6 Equity 309,1 394,8 Provision 1,4 1,2 Financial liabilities 466,9 421,3 Short-term operating 159,6 194,6 liabilities Total liabilities and 937,0 1.011,9 equity ANALYSIS OF CASH FLOW IN SUMMARY SEK m 1998 1997 Operating result -73,2 11,2 Depreciation according to plan 47,2 35,5 Change in working capital 67,4 -137,5 Investments -40,3 -80,4 Operating cash flow after 1,1 -171,2 investments KEY INDICATORS 1998 1997 Operating margin, % -7,3 1,1 Profit margin, % -9,8 -0,3 Investments in long-term operating 40,3 80,4 assets Equity total assets ratio, % 33,0 39,0 Net debt-equity ratio (times) 1,3 1,0 Return on capital employed, % -13,3 -0,4 Earnings per share (SEK) -15,3 -0,1 Shareholder's equity per share 49,7 63,5 (SEK) Number of shares (thousands) 6218 6218 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/03/05/19990305BIT00300/bit0001.doc http://www.bit.se/bitonline/1999/03/05/19990305BIT00300/bit0002.pdf