Bong Ljungdahl AB Interim Report, January - March 2001

INTERIM REPORT, JANUARY - MARCH 2001 * NET SALES INCREASED BY 7% TO SKr 673 MILLION (629) * REDUCED PRODUCTION RESULTING FROM RESTRUCTURING OF ACQUIRED UNITS AND A WEAKENING ON SOME MARKETS HAVE ADVERSE EFFECT ON PROFIT * OPERATING PROFIT (EXCL. ITEMS DISTURBING COMPARABILITY) DECREASED TO SKr 32 (63) * PROFIT AFTER NET FINANCIAL ITEMS (EXCL. ITEMS DISTURBING COMPARABILITY) DECREASED TO SKr 15 MILLION (46) Bong is a rapidly growing, international envelope company. The Group has annual sales of some SKr 2.5 billion, approximately 1900 employees and an output of some 16 billion envelopes per year at its units in Sweden, Denmark, Norway, Finland, Germany, Great Britain, Ireland, Belgium, Poland and Estonia. In recent years, Bong has played an active role in the current process of restructuring in the European envelope industry, where it sees worthwhile opportunities for further expansion. Bong is a public company and its share is listed on Stockholmsbörsen's Attract 40 list. MARKET AND SALES Demand on several of the Group's important markets weakened in the first quarter. In Sweden, which accounts for some 17% of the Group's turnover, activity on the market has been exceptionally low. The slowdown, which is considered the result of cyclical activity and which was particularly evident during the second half of the quarter, has resulted in clearly flagging sales. The trend now seems to be flattening out, the second quarter having displayed an early tendency towards a healthy strong order intake. There has been relatively strong demand on the markets in Norway and Finland and the Group's Norwegian unit has greatly consolidated its position, partly through the acquisition of Norsk Konvolutt at the end of last year. Market developments in Denmark have been weak. Despite a tendency towards a general slowdown, orders and sales on the German market have been stable compared with the same period last year. Demand on the British envelope market was relatively good at the start of the year, but weakened as the quarter came to a close. Order and sales on the British market, for comparable units, declined during the first quarter, this being wholly attributable to Rexam Envelopes, acquired in September 2000, and largely the result of a conscious strategy to steer sales towards the product and customer segments for which the production resources are best suited. Sales on the British market account for some 23% of the Group's turnover. TURNOVER AND RESULT The Group has been adversely affected by weakening markets in Britain, Denmark and, in particular, Sweden. The quarter's consolidated turnover increased by 7% to SKr 673 million (629). Of this, about 5% are attributable to acquired units, 5% to price increases and 3% to currency fluctuations. Volumes have therefore dropped by 6%. The Group's operating profit for the first quarter (excluding items disturbing comparability of 4.5 MSEK) declined by SKr 31 million to SKr 32 million (63), with a profit margin of 4.8 per cent (10,0). The extensive programme of change, which has been implemented during the first three months and which was designed to co-ordinate and integrate the newly acquired units, has meant considerable disruptions in production. This and the subsequent reduction in production have had a serious effect on the profit, estimated to about 15 MSEK. A large amount of production volume has been purchased externally in order to meet customer commitments during the transition period, and this has also had a negative effect on margins. The most extensive parts of the programme are now complete. Productivity and efficiency are gradually improving and are expected to reach planned levels in the second quarter. The overheating which characterised the market for fine paper last year and which led to a series of substantial price increases has now cooled off, creating a more balanced situation with paper prices stabilising. It has not yet been possible for the Group to compensate the whole cost effect by increasing its own prices, which is why the gross margins have deteriorated. In accordance with the previous announcement, negotiations on the acquisition of the Dutch envelope group Stronghold were terminated in March 2001 and the Board withdrew its previous decision on the new share issue associated with this acquisition. The cost of this discontinued project was some SKr 5 million, and is stated as an item disturbing comparability for the period. Profit after net financial items (excluding items disturbing comparability) amounted to SKr 15 million (46) and earnings per share after tax and full dilution (excluding items disturbing comparability) were SKr 1.21 (3.58). ACQUISITION In January 2001, Bong completed an agreement, through its Polish subsidiary, on the acquisition of the envelope operations of Bording Polska. Bording Polska distributes and prints envelopes to the Polish market and has a turnover of some SKr 5 million. The acquisition is now being co-ordinated into the Group's existing operations in Poland and strengthens the position on the rapidly growing Polish envelope market. CASH FLOW, LIQUID FUNDS AND FINANCING The consolidated cash flow from operating activities was 35 MSEK (58). Closing liquid funds amounted to SKr 72 million (70 at December 31, 2000). The net debt was SKr 1,038 million (1,017 at December 31, 2000) which, after adjustment for currency effects, means a decrease of SKr 11 million from the turn of the year. At the end of the period, equity amounted to SKr 695 million (675 at December 31, 2000). The closing equity ratio was 29 per cent (29 at December 31, 2000) and the debt-equity ratio was 1.49 (1.51 at December 31, 2000). CAPITAL EXPENDITURE Net capital expenditure for the period, excluding that associated with company acquisitions, amounted to SKr 24 million (25) and represents, as planned, an adjustment to a much lower level, relatively speaking, than has been the case in the past few years. EMPLOYEES The average number of employees for the period was 1,902 (1,873), of which acquired units accounted for an increase of 125. PROSPECTS Given the weak sales trend and production disruptions associated with the restructuring work carried out at the start of the year has an adverse effect on the result. Bong's strong position on the growing European market, together with expected synergy gains in the acquired units, mean, however, that the conditions for long-term sales and profit growth are good. Kristianstad, May 9th 2001 Lennart Pihl Managing Director and Group CEO This interim report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation RR20: Interim reports. The same accounting principles have been used as for the latest annual report. This interim report has not been subject to specific examination by the company's auditors. Further information may be obtained from Bong Ljungdahl AB's MD and CEO, Lennart Pihl on +46 44 20 70 50 (direct), or +46 70 594 68 66, (mobile) Next financial reports: Sixth-monthly report January - June 2001 August 17th 2001 Interim report January - September 2001 November 2nd 2001 Year-end release February, 2002 CONSOLIDATED PROFIT AND Jan-Mar April 2000-Jan-Dec LOSS ACCOUNT SUMMARY 2001 2000 Mar 2001 2000 (MSEK) 3 3 12 months 12 months months months Net turnover 673,2 628,8 2 391,2 2 346,8 Cost of sold products -531,1 -465,2 -1 859,3 -1 793,5 Gross profit 142,1 163,6 531,9 553,3 Selling costs -52,4 -54,0 -190,7 -192,3 Administrative costs -46,6 -39,5 -166,6 -159,5 Other operating income 1,1 2,9 6,9 8,7 Other operating costs -6,0 -4,0 -9,2 -7,2 Items disturbing -4,5 - 39,4 43,9 comparability Operating profit before 33,7 69,0 211,7 246,9 depr. of goodwill Depreciation of goodwill -6,1 -6,1 -22,5 -22,5 Operating profit 27,6 62,9 189,2 224,4 Net financial items -16,7 -17,2 -64,2 -64,6 Profit before tax 10,9 45,7 125,0 159,8 Tax -3,6 -14,5 -39,5 -50,3 Profit after tax 7,3 31,2 85,5 109,5 SUMMARY CONSOLIDATE 31 Mar 31 Mar 31 Dec BALANCE SHEET (MSEK) 2001 2000 2000 Assets Goodwill 449,4 403,4 442,7 Other fixed assets 1 1 1 099,4 005,8 067,6 Inventories 396,1 328,1 395,4 Receivables 415,9 382,4 365,4 Liquid funds 72,1 72,5 70,3 Total assets 2 2 2 432,9 192,2 341,4 Equity and liabilities Equity 695,0 591,0 674,5 Interest-bearing 76,4 75,8 74,9 provisions Interest-free provisions 179,3 208,7 176,7 Interest-bearing 1 986,8 1 liabilities 053,8 031,5 Interest-free liabilities 428,4 329,9 383,8 Total liabilities and 2 2 2 equity 432,9 192,2 341,4 KEY RATIOS Jan-March April Jan- 2000- Dec 2001 2000 March 2000 2001 Earnings per share after standard tax and full conversion excluding items disturbing 1,21 3,58 6,35 8,75 comparability, SEK D:o incl. items disturbing 0,84 3,58 9,82 12,56 comparability, SEK Earnings per share after tax but before full conversion excl. items disturbing 1,22 3,62 6,42 8,82 comparability, SEK D:o incl. items disturbing 0,85 3,62 9,90 12,68 comparability, SEK Equity after full conversion, 80,41 68,79 - 78,07 SEK D:o before full conversion 80,31 68,52 - 77,95 Operating margin before 1 5,7 11,0 7,2 8,7 depreciation of goodwill, % ) Operating margin, % 1 4,8 10,0 6,3 7,7 ) Profit margin, % 1 2,3 7,3 3,6 4,9 ) Return on equity, % 1 - - 8,6 12,2 ) Return on capital employed, % 1 - - 8,8 10,7 ) Equity ratio, % 29 27 - 29 Net debt-equity ratio, x 1,49 1,64 - 1,51 Interest covering ratio, x 1 1,9 3,7 2,3 2,7 ) Capital employed, MSEK 1 1 - 1 825,2 653,6 780,9 Net interest-bearing debt, 1 970,6 - 1 MSEK 037,9 016,5 Number of shares at end of 8 653 8 624 8 653 591 8 652 period 591 791 991 Average number of shares 8 726 8 726 8 726 691 8 726 after full conversion 691 691 691 Average number of shares 8 653 8 624 8 638 506 8 631 before full conversion 158 791 493 CHANGES OF EQUITY IN Jan-March Jan- Dec THE GROUP (MSEK) 2001 2000 2000 Opening balance for the 674,5 433,7 433,7 period New share issue - 137,4 137,4 Conversion 0,1 - 2,6 Dividend to shareholders - - -22,4 Translation differences 13,1 -11,3 13,8 Profit for the period 7,3 31,2 109,4 Closing balance fo the 695,0 591,0 674,5 period CONSOLIDATED CASH FLOW Jan-March Jan- Dec ANALYSIS (MSEK) 2001 2000 2000 Operating activities Operating profit 27,6 62,9 224,4 Depreciation 35,2 33,2 127,7 Financial items -16,7 -13,7 -61,1 Tax paid -8,6 -14,0 -12,6 Other items not affecting -13,6 2,6 -82,3 liquidity Cash flow from operating activities before change in working 23,9 71,0 196,1 capital Change in working capital 11,5 -12,7 -42,2 Cash flow from operating 35,4 58,3 153,9 activities Capital expenditure Acquisitions/divestments -24,1 -25,2 28,4 of fixed assets Company acquisitions -2,2 -301,3 -419,4 Cash flow from capital -26,3 -326,5 -391,0 expenditure Financing activities Change in interest-bearing -9,9 316,8 298,1 loans Dividend to shareholders - - -22,4 Cash flow from financing -9,9 316,8 275,7 activities Cash flow for the period -0,8 48,6 38,6 QUARTERLY COMPARISONS, GROUP (MSEK) 1/200 4/200 3/200 2/200 1/200 4/199 3/199 2/199 1/199 1 0 0 0 0 9 9 9 9 Net turnover 673,2 644,0 526,4 547,6 628,8 316,6 265,5 302,6 338,2 Operating costs - - - - - - - - - 635,0 594,2 485,1 504,7 559,8 290,2 249,0 278,2 305,8 Operating profit before depreciation of 38,2 49,8 41,3 42,9 69,0 26,4 16,5 24,4 32,4 goodwill Depreciation of -6,1 -5,4 -6,1 -4,9 -6,1 -1,8 -2,0 -1,8 -1,9 goodwill Operating profit before items 32,1 44,4 35,2 38,0 62,9 24,6 14,5 22,6 30,5 disturbing comp. Items -4,5 - 32,8 11,1 - - - - - disturbing comp. Operating 27,6 44,4 68,0 49,1 62,9 24,6 14,5 22,6 30,5 profit Net financial -16,7 -15,1 -17,2 -15,1 -17,2 -4,6 -3,7 -4,2 -4,7 items Profit after 10,9 29,3 50,8 34,0 45,7 20,0 10,8 18,4 25,8 net fin.items Profit after net financial items, excl.items disturbing 15,4 29,3 18,0 22,9 45,7 20,0 10,8 18,4 25,8 comparability ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/09/20010509BIT00770/bit0001.doc http://www.bit.se/bitonline/2001/05/09/20010509BIT00770/bit0002.pdf