Interim report january - september 1998

Interim report, January - September 1998 Earnings after financial items and minority interest amounted to SEK 276 million (349). The third quarter accounted for SEK 130 million (127). Earnings per share after full tax stood at SEK 6.47 (8.28). Shareholders' equity per share amounted to SEK 70.51 (65.16). The forecast of whole-year earnings after financial items and minority interest on a par with last year (SEK 511 million) remains unchanged. The Group's inflow of orders amounted to SEK 6,716 million (6,274), which for the current structure of the Group, after adjustment for the effects of exchange rate movements, is on a par with the corresponding period last year. Invoiced sales rose to SEK 6,205 million (5,636). Adjusted for the effects of exchange rate movements, this was a rise of approximately 9 percent. Of this figure, company acquisitions accounted for 8 percentage points. Operating earnings amounted to SEK 320 million (389), which is equivalent to an operating margin of 5.2 percent (6.9). Earnings after financial items were SEK 250 million (343), equivalent to a profit margin of 4.0 percent (6.1). Group earnings after financial items and minority interest amounted to SEK 276 million (349). The third quarter accounted for SEK 130 million (127). The decline during the nine-month period is mainly attributable to Cardo Rail's earnings trend during the first half of the year. For the third quarter, Cardo Rail reported better earnings than for the corresponding period last year. Earnings per share after full tax for the period amounted to SEK 6.47 (8.28). The return on capital employed amounted to 13.8 percent (22.3) for the twelve- month period ended September 30. The return on shareholders' equity during the same period was 14.3 percent (24.1). The change in return on capital employed is attributable both to the lower operating earnings and to company acquisitions carried through. Invoiced sales and operating earnings by business area Invoiced sales Operating earnings January-September Whole January- Whole Year year September MSEK 1998 1997 1997 1998 1997 1997 1) 2) Cardo Door 2,581 2,085 3,004 219 200 353 Cardo Pump 1,786 1,753 2,491 166 179 290 3) Cardo Rail 1,838 1,798 2,488 -32 27 -41 4) Other items - - - -33 -17 -35 6,205 5,636 7,983 320 389 567 Financial items -70 -46 -63 Earnings after financial items 250 343 504 Minority interest in earnings after 26 6 7 financial items Earnings after financial items and 276 349 511 minority interest 1) Of which Normstahl SEK 423 million. 2) Excluding the effects of the Normstahl acquisition, operating earnings amounted to SEK 206 million (200). 3) Operating earnings have been charged with provisions of a one-off nature amounting to SEK 70 million in respect of warranty matters relating to certain deliveries completed during previous years. 4) Made up of operating earnings for the parent company, other central units and Group adjustments. Cardo Door Cardo Door is one of the world's largest manufacturers of industrial doors and one of Europe's largest manufacturers of residential garage doors. The product range also embraces special-purpose doors used, for example, in aircraft hangars, rapid-action rolling doors, door-operating equipment with attendant automation as well as complete dock loading systems. Cardo Door's trademarks for industrial doors are Crawford, Clever, Faltec, Alsta and Allhabo. Residential garage doors are marketed under the Normstahl, Crawford and Car-In trademarks. Invoiced sales rose to SEK 2,581 million (2,085). Company acquisitions accounted for most of the increase. Exchange rate movements had only a marginal effect on invoicing compared to last year. Operating earnings rose to SEK 219 million (200). Excluding the effects of the Normstahl acquisition, earnings amounted to SEK 206 million (200). The German company Normstahl, which is one of Europe's largest manufacturers of residential garage doors, was acquired at the turn of the year. This company normally experiences strong seasonal variations and generates its entire earnings during the second half of the year. Normstahl's operating earnings for the nine-month period were on a par with those for the corresponding period last year. Demand for industrial doors remained poor in the German market, while the market in France showed signs of an upturn during the third quarter, albeit from a low level. In Norway and Denmark, the markets developed well during the period, but demand is expected to slacken in the near future. In Finland, the positive trend is expected to continue. Demand remains strong in Spain and in eastern Europe, particularly Poland. Sales of rapid-action doors and of dock loading systems were good during the period, and sales of residential garage doors rose sharply as a consequence of the acquisition of Normstahl. In France, a merger of Cardo Door's sales companies - market leaders Clever and Crawford - is under way in order to create a more efficient organization with a complete range of products. Earlier in the year, all sales of residential garage doors in Germany were concentrated to Normstahl. In Austria, Normstahl's and Crawford's operations for both industrial and residential garage doors were merged on October 1. A number of major orders were received during the third quarter. In France, the food group LIDL bought 164 industrial doors, the supermarket chain Informarche 84 industrial doors, 76 dock loading units and 14 rapid-action doors, and the transport company TAT Express 76 dock loading units for its terminal in Paris. The Italian vehicle testing authority bought a further 190 electrically operated industrial doors. Cardo Pump Cardo Pump is one of Europe's largest manufacturers of centrifugal pumps, mixers and aerators used in municipal water management, the process industry and the construction sector and is also a global leader in the manufacture of sophisticated measuring instruments used in pulp and paper production. The products are marketed primarily under the trademarks ABS, Pumpex and Lorentzen & Wettre. Invoiced sales amounted to SEK 1,786 million (1,753). The rise is a result of exchange rate movements and company acquisitions/sales. Invoicing and the inflow of orders for Cardo Pump's biggest segment, water supply and wastewater, continued to rise during the third quarter. Owing to some improvement in the second quarter, deliveries in the heating, ventilation and sanitation sector rose somewhat during the period. Sales continued to be adversely affected by the poor demand for products for the pulp and paper industry. Operating earnings amounted to SEK 166 million (179). In the water management field, Cardo Pump had continued success in Spain and Italy in particular. Service activities developed very positively in Austria and Britain, with an increase in the number of service and maintenance contracts for municipal pump stations. The new series of dry-pit wastewater pumps introduced during the first quarter has continued to meet with success in the market, and orders include a number from Norway for a total of around 20 complete pump stations. Cardo Rail Cardo Rail is one of the world's largest manufacturers of hi-tech and safety- related systems for rail vehicles. The principal product is brake systems. Marketing is conducted under the trademark SAB WABCO, but also under the BSI, Davies & Metcalfe, Gutehoffnungshütte Radsatz and Tebel trademarks. Since January 1997, Cardo Rail consists of Cardo BSI Rail AB, in which Cardo has a 60-percent holding and Thyssen Guss holds 40 percent, and the wholly- owned train door manufacturer Tebel. The inflow of orders amounted to SEK 2,063 million (2,190) during the period, which adjusted for the effects of exchange rate movements and company acquisitions, is a fall of about 6 percent. However, the inflow of orders for own-manufactured products was 3 percent higher than for the corresponding period last year. During the third quarter, agreements signed included a two- year contract with FS, the Italian state railway company, regarding the supply of spare parts for brake equipment. In Germany, a number of important orders were received for wheels from companies such as Deutsche Bahn and Adtranz. Invoiced sales amounted to SEK 1,838 million (1,798). Exchange rate movements and company acquisitions had only a marginal effect on invoicing compared to last year. Operating earnings were SEK -32 million (27). The fall in earnings during the period is due to a too high level of costs and to disruption of production in the units affected by the restructuring process currently in progress. As a result of this, Cardo Rail's earnings were charged with provisions amounting to SEK 35 million during the second quarter. These provisions remained unchanged at September 30. During the third quarter, earnings improved and amounted to SEK 10 million (-8). A restructuring program was begun during the second half of 1997. The measures are intended to refine product and production structure and involve a reduction in the number of production sites and a cut in personnel by 10-15 percent. The measures decided upon during 1997 included the close-down of one production unit in Germany and one in France. At the beginning of the third quarter, negotiations were initiated with staff organizations regarding the close-down of a production unit in Britain. These negotiations have now been completed, and a phasing out of operations has begun. This is expected to be complete by the end of March 1999. Agreement has also been reached regarding further staff cuts in countries such as Germany. At the same time, measures are under way to make material supply and administration more efficient and to control marketing and sales efforts more selectively. The aim is for the planned measures to take effect over a period of not quite one year and lead to considerable improvements in earnings in the future. All measures are covered by the restructuring provision amounting to SEK 180 million established in connection with the formation of Cardo BSI Rail AB. Of this provision, SEK 76 million had been utilized at September 30 1998. Liquidity and financing At September 30, the Group's liquid assets stood at SEK 334 million (262) compared with SEK 272 million at the beginning of the year. In addition, there are unutilized credit facilities of approximately SEK 2.4 billion (1.8). Net interest bearing debt at September 30 amounted to SEK 1,576 million (1,030) compared with SEK 1,498 million at the beginning of the year. Cash flow generated by operations amounted to SEK 438 million (349) before tax. The corresponding figure after tax was SEK 237 million (146). The Group's investments, excluding company acquisitions, stood at SEK 143 million (120). Shareholders' equity amounted to SEK 2,115 million (1,955), which is equivalent to SEK 70.51 (65.16) per share. The Group's equity ratio at September 30 was 34.7 percent (38.6). Personnel The number of employees in the Group at September 30 was 7,497 (7,252). Call options for leading officers 44 leading officers at Cardo have subscribed for call options in Cardo on market terms and with L E Lundbergföretagen AB as the issuer of the options. In total, L E Lundbergföretagen AB has granted 405,000 call options to these persons. On September 18, between 2,000 and 30,000 options per person were allotted. Each option carries the right to acquire one share in Cardo AB at the exercise price of SEK 172 during the period August 1 - September 30 2003. Handelsbanken Markets has estimated a market value for the options. The price, which is based on the average share price of SEK 148 over the period September 7 - 16 1998, was established at SEK 20 per option. Forecast 1998 The previous forecast of whole-year earnings after financial items and minority interest on a par with last year (SEK 511 million) remains unchanged. Malmö, Sweden, November 11 1998 Cardo AB (publ) Kjell Svensson President and CEO Enclos 1. Consolidated income statement and ed: balance sheet in brief 2. Invoiced sales and operating earnings by business area 3. Group review 4. Parent company income statement and balance sheet in brief This report has not been subjected to special examination by the Company's auditors. Cardo's report on operations for the whole of 1998 will be published on Thursday, February 18 1999. For further information, please contact: Kjell Svensson, President and CEO, phone +46 40 35 04 53, +46 40 35 04 00 Sven-Erik Persson, Executive Vice President, phone +46 40 35 04 50, +46 40 35 04 00 Christer Roskvist, Head of Public Relations, phone +46 40 35 04 25, +46 40 35 04 00 Cardo is an international engineering group with a turnover of approximately SEK 8 billion in 1997. Cardo holds a strong position in the markets for industrial doors, residential garage doors, centrifugal pumps and rail-vehicle brake systems. Cardo has subsidiaries in about 30 countries with the focal point resting in western Europe, and roughly 7,500 employees. The head office is in Malmö, Sweden. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1998/11/11/19981111BIT00090/bit0001.doc http://www.bit.se/bitonline/1998/11/11/19981111BIT00090/bit0002.pdf http://www.bit.se/bitonline/1998/11/11/19981111BIT00090/bit0003.xls Tables and figures