Bong Ljungdahl AB Interim Report January - June 2001

BONG LJUNGDAHL AB INTERIM REPORT JANUARY-JUNE 2001 · NET TURNOVER INCREASED BY 6% TO SKR 1,251 MILLION (1,176) · DISRUPTIONS IN CONNECTION WITH NOW COMPLETED RESTRUCTURING PROGRAMME AND WEAKER ECONOMIC CONDITIONS HAVE HAD SERIOUS EFFECT ON RESULTS · OPERATING PROFIT (EXCL. ITEMS AFFECTING COMPARABILITY) DECLINED TO SKR 44 MILLION (101) · PROFIT AFTER NET FINANCIAL ITEMS (EXCL. ITEMS AFFECTING COMPARABILITY) DECLINED TO SKR 10 MILLION (69) Bong is a fast growing international envelopes company. The Group has an annual turnover of some SKr 2.5 billion, approximately 1,900 employees and an annual production of some 16 billion envelopes at its factories in Sweden, Denmark, Norway, Finland, Germany, Great Britain, Ireland, Belgium, Poland and Estonia. In recent years, Bong has played an active part in the current process of restructuring in the European envelope industry and sees useful opportunities for further expansion and development. Bong is a public company and the shares are listed on Stockholmsbörsen's "O" list. MARKETS AND SALES The slackening in demand that characterised the opening months of the year accelerated and spread in geographical terms during the second quarter of 2001 in line with the deteriorating international economy. The envelope market in Europe is estimated to have declined by around 3- 5 per cent in volume during the first half of 2001 in relation to the same period in 2000. The deteriorating market conditions resulted in a relatively serious shortfall in sales in many of the Group's businesses. Particularly marked were the sales shortfalls on the markets in Sweden and Germany, which account for about 17 per cent and 19 per cent respectively of the Group's business. The British envelope market experienced a strong start to the year, but weakened during the second quarter. Sales on the British market account for 23 per cent of the Group's turnover. Apart from the cyclical slowdown, the far-reaching structuring programme carried out in connection with the integration of newly acquired units caused a sharp reduction in capacity and lower service levels, which led to a loss of market share. These effects are expected to be temporary. Market conditions in the immediate future are difficult to foresee, mainly owing to uncertainty about the coming developments in the global economy. The coming conversion to the euro in the Emu zone is, however, expected to generate a not insignificant increase in demand in the autumn of 2001. In the longer range, previous estimates of sustainable volume growth of 2-3 per cent a year on the European envelope market remain unchanged. TURNOVER AND RESULT The consolidated turnover for the reporting period increased by 6 per cent to SKr 1,251 million (1,176). Of the increase, some 5 percentage points are attributable to acquired units, 4 percentage points to price increases and 5 percentage points to currency fluctuations. For comparable units, delivery volumes have thus declined by about 8 per cent. Operating profit (excluding items affecting comparability of SKr 5 million) decreased during the January-June 2001 period by SKr 57 to SKr 44 million (101). The operating margin was 3.5 per cent (8.6). The decline in the result is attributable partly to considerably lower capacity utilisation at most of the Group's units owing to general slacker demand and partly to disturbances in connection with the extensive restructuring programme carried out in the first half of 2001. The integration of acquired companies has had a significant adverse effect on the Group's productivity and efficiency, causing a marked production shortfall. The project, which affected most of the Group's units and mainly involved the closure of four factories and the relocation of fifty or so envelope machines (equivalent to one third of the Group's total number of machines) to other premises, is now largely complete. The planned structure has now been achieved and efficiency is successively improving. The operating profit (excluding items affecting comparability) for the second quarter of 2001 declined to SKr 11 million (38). The overheating that characterised the market for fine paper during the previous year, and which led to a series of sharp price increases, has now reverted to a more balanced situation, and paper prices have stabilised. As it has not yet been possible to offset the entire cost effect by raising our own selling prices, gross margins have deteriorated by 2-3 per cent. As previously announced, the items affecting comparability of SKr 5 million relate to the cost of the cancelled acquisition of the Stronghold Group and the share issue planned to finance it. The profit after net financial items (excluding items affecting comparability) amounted to SKr 10 million (69) for the period, and earnings per share after tax and full dilution (excluding items affecting comparability) were SKr 0.68 (4.93). The second quarter result after net financial items was a loss of SKr 6 million (profit 23, excluding items affecting comparability). ACQUISITIONS In January 2001, Bong completed, through its Polish subsidiary, the agreed acquisition of the envelope business of Bording Polska. Bording Polska distributes and prints envelopes for the Polish market and has an annual turnover of some SKr 5 million. The acquisition is now being co- ordinated with the Group's existing business in Poland and strengthens the Group's position on the fast-expanding Polish envelope market. LIQUID FUNDS AND FINANCING The Group's closing liquid funds amounted to SKr 72 million (Dec 31st 2000: 70). The negative cash flow absorbed by operating activities for the period was SKr 6 million (positive 82), which is mainly attributable to the poorer result and to the effect on liquid funds of the now completed structuring measures. The net financial debt was SKr 1,126 million at June 30th 2001 (Dec. 31, 2000: 1,017). After adjustment for currency effects, this represents an increase of SKr 77 million in relation to the end of last year. A dividend of SKr 26 million was paid during the second quarter. Closing equity amounted to SKr 675 million (Dec. 31st 2000: 675). The closing equity ratio was 27.4 per cent (Dec. 31st 2000: 28.8) and the net debt/equity ratio was 1.67 (Dec. 31st 2000: 1.51). FIXED CAPITAL EXPENDITURE Excluding company acquisitions, capital expenditure during the period amounted to SKr 45 million (62) and represents a planned adjustment to a markedly lower level in relation to the past few years. Investments during the period were mainly in machinery at the envelope factories. EMPLOYEES The average number of employees for the period was 1,890 (1,877), of which acquired units accounted for an increase of 125. PARENT COMPANY The parent company's business consists of the management of operating subsidiary companies, and the provision of Group management functions. The result for the period after net financial items was a loss of SKr 17 million (loss 13). PROSPECTS Extensive disruptions in connection with the restructuring programme, coupled with a cyclical sales shortfall, had a serious adverse effect on the consolidated result for the first half of 2001. We expect the weak economic conditions to persist and have a further effect on sales volumes during the second half of the year. The result for 2001 as a whole is therefore expected to be considerably lower than last year's. The Group's strong position on the European envelope market, the effects of the now completed restructuring measures, and the potential offered by the further consolidation of the European envelope industry, mean on aggregate that Bong's prospects of achieving long-term growth in its sales and earnings are bright. Kristianstad, August 17th 2001 Lennart Pihl Managing Director and Group CEO This interim report is made up in accordance with the Swedish Financial Accounting Standards Council's Recommendation RR20 Interim reports. The same accounting principles have been applied as for the latest final accounts. AUDITORS' EXAMINATION We have carried out a general examination of this interim report in accordance with the recommendation issued by the Association of Swedish Authorised Accountants (FAR). A general examination is rather more limited than an audit. Nothing has emerged to indicate that this interim report does not satisfy the requirements of the Stock Exchange Act and the Annual Reports Act. Kristianstad, August 17th 2001 Anders Lundin Göran Tidström Authorised public accountant Authorised public accountant Further information may be obtained from Bong Ljungdahl AB's MD and CEO, Lennart Pihl on +46 44 20 70 00 (exchange), +46 44 20 70 50 (direct), or +46 70 594 68 66, (mobile) Next financial reports Interim report January - September 2001 November 2nd 2001 Year-end release February, 2002 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/17/20010817BIT00420/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/08/17/20010817BIT00420/bit0002.pdf The full report