Year-end release 1998 for Bong Ljungdahl AB

YEAR-END RELEASE 1998 for BONG LJUNGDAHL AB * SHARPLY IMPROVED RESULT AFTER STRONG FOURTH QUARTER * YEAR'S OPERATING PROFIT MORE THAN DOUBLED TO SKR 56.2 MILLION (20.7 PRO FORMA) * PROFIT AFTER NET FINANCIAL ITEMS ROSE TO SKR 47.8 MILLION (7.7 PRO FORMA) * EARNINGS PER SHARE SKR 4.32 (EXCL. CAPITAL GAINS) * BOARD PROPOSES PAYMENT OF DIVIDEND OF SKR 2.10 PER SHARE (1.20, EQUIVALENT TO 1.80 FOR FULL YEAR) MARKETS Conditions on the Group's main markets were relatively buoyant during the fourth quarter. The slowdown that to some extent characterised the Swedish market during the early quarters was converted into an increase in the autumn. Demand in Norway and Denmark displayed continued stability, and in Finland, where the Group made its latest acquisition, the envelope market is estimated to have grown by some 5 per cent in terms of volume in 1998. Prices on the Nordic market, which accounts for almost 80 per cent of the Group's sales, showed a slightly rising trend during the year. Volume growth was good in Belgium and neighbouring markets, although competitive pressure remained intense and prices were depressed. As previously reported, the envelope market in Europe is still growing. Most of the major markets, such as Germany, England and France, report volume growth in the region of 5-7 per cent for 1998. SALES AND RESULT The Group's net turnover amounted to SKr 1,095 million (1,043 pro forma), which means that sales were unchanged for comparable units. The sales result was affected adversely by lower volumes and positively by slightly better selling prices. The operating profit increased by some SKr 35 million to SKr 56 million (21 pro forma). The considerable improvement in the result can mainly be attributed to the effects of the extensive restructuring process that began following the merger of Bongs and Ljungdahls in the previous financial year. The operating profit for the fourth quarter was SKr 24.2 million, compared with SKr 7.5 million for the same quarter in the previous year. The recently acquired Finnish business, which was consolidated with effect from October 1998, made a modest positive contribution to the result for the quarter. The profit after net financial items amounted to SKr 47.8 million (7.7 pro forma). This figure includes a non-taxable capital gain of SKr 7.0 million attributable to the sale of the labels division in January 1998. The fourth quarter profit after net financial items improved by some SKr 15 million to SKr 18.9 million (4.1 pro forma). Envelopes Sweden achieved a significant increase in its profit as the result of extensive cost reductions, and successively improving prices, despite lower volumes than last year. A decision was made in November 1998 on the far-reaching streamlining of the production structure at the facilities in Kristianstad and Nybro with the object of further strengthening the Group's competitive position and as one element in its current expansion strategy. This programme, which will involve a reduction of 40 in the work force, is expected to be fully implemented early in the second half of 1999. Envelopes Sweden's turnover amounted to SKr 496 million (541 pro forma). Envelopes Denmark continued to develop very strongly during the fourth quarter. Efficient production and a sophisticated printing section, in combination with further rationalisation, led to a greatly improved full- year result. Turnover amounted to DKr 163 million (164 pro forma). The production disturbances and delivery problems that to some extent adversely affected the situation at Envelopes Norway during the early quarters have now been resolved. Delivery capacity and the standard of service have been restored. The return to normal operating brought a successive improvement in the result, which, for the year as a whole, is well ahead of last year's. Turnover amounted to NKr 176 million (176 pro forma). The acquisition of the Finnish business was finalised at the beginning of the fourth quarter. This transaction, which is an important element in the Group's expansion strategy with its goal of achieving market leadership in Northern Europe, mainly involved the acquisition of the envelope business formerly conducted through Walki Kuori, Finland's leading envelope manufacturer. The acquisition brings into the Group annual sales of some SKr 200 million and a market share in Finland of almost 60 per cent. A change process intended to co-ordinate the Finnish business with Bong Ljungdahl's existing activities is now being put into effect. An important aspect of the integration is the transfer of speciality products made from sheet to the Nybro factory. This measure will lead to a reduction of around 50 in the work force at the Finnish unit. The cost of restructuring, estimated at around SKr 10 million, was taken to reserve in the acquisition balance. The acquisition in Finland brought goodwill of some SKr 42 million onto the books; this will be depreciated over twenty years. Envelope Belgium's result weakened slightly during the fourth quarter, largely due to even stiffer price competition. The result for the year as a whole was positive and better than last year's, although it has not yet reached a satisfactory level. Turnover amounted to BFr 683 million (621). Envelope Poland's turnover continued to rise at a double-digit rate to reach approximately 12 million zloty. The profitability of the Polish envelope business is still relatively good. The result of the Binders division, which is integrated with the envelope units in Sweden and Poland, was better than in the previous year and is once again making a positive contribution to the consolidated result. Turnover amounted to SKr 65 million (62). DIVESTMENT As already reported, the Group's labels division, Nova Print, was divested as of January 1, 1998. This transaction, which is one stage in the Group's strategy of focusing the business on envelopes, generated a capital gain of SKr 7 million. LIQUID FUNDS, FINANCING, ETC Closing liquid funds amounted to SKr 36 million (Dec 31, 1997: 32). Net loan liabilities increased by some SKr 31 million during the year to SKr 317 million (286). The increase is largely the net effect of the acquisition of the Finnish business and the divestment of the labels division. The closing equity ratio was 38 per cent (38) and the debt-equity ratio was 0.78 (0.76). CAPITAL EXPENDITURE The Group's net capital expenditure amounted to SKr 70 million and mainly related to machinery at the envelope units. These investments represent a general technical upgrading, and are already leading to productivity improvements during the current year, although they have not yet had their full effect. EMPLOYEES The average number of employees in the Group amounted to 1,078, a reduction of 76 for comparable units compared with the previous financial year (May-December 1997). PARENT COMPANY The envelope and binder units in Kristianstad and certain central functions are included within the parent company, Bong Ljungdahl AB. The profit after net financial items amounted to SKr 21.9 million (3.9). DIVIDEND The Board has decided to recommend the Annual General Meeting to resolve in favour of paying a dividend of SKr 2.10 per share for 1998. (SKr 1.20 for the abridged financial year May-December 1997, equivalent to SKr 1.80 for twelve months.) The proposal is based on the Board's decision to adopt a somewhat altered, and more market oriented dividend policy, the main implications of which are that the dividend, taking into account Bong Ljungdahl's financial position and development potential, should correspond on average over a period of years to around one-third of the profit after tax (formerly one- quarter after tax). OUTLOOK The Group's profitability has steadily improved as the effect of the structuring measures taken has shown through. During the final quarter of 1998, the programme that was agreed in connection with the merger of Bongs and Ljungdahls in1997 more or less had its full effect. The full-year effects of this will make a positive contribution to the result in 1999. In addition, further rationalisation measures are being taken and the recently completed acquisition in Finland will also have a full effect. In combination with the generally positive trend on the market, these factors mean that the outlook for 1999 is considered to be bright. We therefore expect a further improvement in the results. ANNUAL GENERAL MEETING The Annual General Meeting will be held at the Yllan Trade Fair Centre in Kristianstad at 6.00 p.m. on May 6, 1999. Kristianstad, February 25, 1999 BONG LJUNGDAHL AB (publ) Board Further information may be obtained from Lennart Pihl, Managing Director and Group Chief Executive, Bong Ljungdahl AB. Telephone: switchboard +46- 44- 20 70 00, direct no. +46-44-20 70 50 mobile +46-70-594 68 66 Financial reports: Thursday, May 6, 1999 Interim report January- March 1999/Annual General Meeting Thursday, August 12, 1999 Interim report January- June 1999 Thursday, October 28, 1999 Interim report January-September 1999 BONG LJUNGDAHL GROUP 1998 1) 2) SUMMARY INCOME STATEMENT Jan-Dec 1998 Jan-Dec 1997 May-Dec 1997 Million Swedish kronor Net turnover 1,095.3 1,042.8 766.9 Operating costs -1,039.1 -1,022.1 -752.9 Operating profit 56.2 20.7 14.0 Capital gains on sale of 7.0 - - subsidiary Net financial items -15.4 -13.0 -11.0 Profit after net 47.8 7.7 3.0 financial items Tax -7.5 -5.2 -2.2 Net profit for the year 40.3 2.5 0.8 1) The consolidated income statement for January- December 1997 is stated on a pro forma basis including the Ljungdahls Group and excluding the Labels Division (Nova Print). 2) For the abridged financial year May- December 1997 (8 months) Ljungdahls is included as of June 1, 1997, and the Labels Division is included for the entire period. SUMMARY BALANCE SHEET December 31, 1998 December 31, 1997 Million Swedish kronor Fixed assets 628.3 540.8 Receivables 198.4 225.6 Inventories 200.7 195.6 Liquid funds 36.1 32.3 Total assets 1,063.5 994.3 Equity 405.2 374.7 Interest-bearing provisions 78.2 75.3 Interest-free provisions 77.6 81.3 Interest-bearing liabilities 282.5 243.3 Interest-free liabilities 220.0 219.7 Total liabilities and equities 1,063.5 994.3 Jan-Dec 1998 May-Dec 1997 KEY RATIOS Kronor per share 3 Earnings after tax at standard rate 4.16/4.87 ) 0.30 3 " after full tax 4.23/5.70 ) 0.10 Equity 58.80 53.60 RATIOS Operating margin 5.1% 1.8% 3 Profit margin 3.7%/4.4% ) 0.4% 3 Return on equity 7%/9% ) 1% Return on capital employed 9% 4% Debt-equity ratio 0.78 0.76 Equity ratio 38% 38% Capital employed SKr million 763.1 693.2 Net interest bearing debt, SKr 317.3 286.2 million Average number of shares (for Jan- 7,066,721 6,553,257 Dec 1998 after full conversion) 3 ) Including capital gains on sale of Labels Division (Nova Print) QUARTERLY COMPARISONS: GROUP Pro forma including Ljungdahls and excluding Labels Division Million 4/1998 3/1998 2/1998 1/1998 4/1997 3/1997 2/1997 1/1997 Swedish kronor Net turnover 336.4 228.4 255.3 275.3 272.8 225.9 268.3 275.8 Operating -312.2 -217.6 -247.0 -262.4 -265.3 -220.6 -268.8 -267.4 costs Operating 24.2 10.8 8.3 12.9 7.5 5.3 -0.5 8.4 profit/loss Capital gains on - - - 7.0 - - - - sale of subsidiary Net -5.3 -3.6 -2.6 -3.9 -3.4 -3.2 -3.1 -3.3 financial items Profit/loss after net 18.9 7.2 5.7 16.0 4.1 2.1 -3.6 5.1 financial items TURNOVER AND RESULT BY DIVISION Net turnover Profit/loss Jan-Dec Jan-Dec May-Dec Jan-Dec Jan-Dec May-Dec Million Swedish 1998 1997* 1997** 1998 1997* 1997** kronor Envelopes 1,030.2 980.5 589.9 65.8 29.5 19.7 Files 64.7 62.3 37.7 1.8 -0.6 -1.6 Labels - - 139.3 - - 3.3 Central Group 0.5 - - -11.4 -8.2 -7.3 Total 1,095.4 1,042.8 766.9 56.2 20.7 14.1 Capital gains 7.0 - - Net financial -15.4 -13.0 -11.0 items Profit after net financial items 47.8 7.7 3.1 * Pro form including Ljungdahls and excluding Labels Division. ** For the abridged financial year May- December 1997, including Ljungdahls as of June 1, 1997 and the now divested label divisions for the entire period CASH FLOW ANALYSIS: GROUP Million Swedish kronor January-December 1998 Operating profit 56.3 Net financial items -15.4 Tax paid -8.2 Depreciation 59.6 92.3 Change in working capital -2.9 Cash flow from operations 89.4 Capital expenditure, etc -77.4 Acquisitions/divestments, etc -49.9 Cash flow after investments, etc -37.9 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/25/20000314BIT00240/bit0001.doc http://www.bit.se/bitonline/1999/02/25/20000314BIT00240/bit0002.pdf