Report on operations for the three months ended March 31

Report on operations for the three months ended March 31, 1999 * Meto proposed to be spun off. * Esselte becomes a focused office products company. * Sales including acquisitions of office products up 24% * Income before tax SEK 134 m., up 2% on comparable basis. Esselte is a world-leading provider of solutions for improved office productivity and efficiency. In this report Esselte´s shareholding in Meto is reported as a financial asset in the balance sheet. When Meto is dividended to the Esselte´s shareholders in June 1999, Esselte´s equity will be reduced accordingly. For further information on Meto, see Meto´s separately distributed press release on first quarter operations. Sales Sales of the Esselte Group in the first three months of 1999 totalled SEK 3,037 m. Based on comparable exchange rates and excluding Meto and Nielsen & Bainbridge sales increased by 23%. The increase is attributed to sales of the acquired Leitz and CoStar businesses. For comparable units sales decreased by 5%. Softness in demand was experienced in almost all markets and all business areas with exceptions of the Nordic and Eastern Europe regions. In the overall market Esselte has maintained its market shares. Earnings Income before Tax was SEK 134 m. (238). The comparison figure for the first quarter 1998 includes Meto and the divested Nielsen & Bainbridge. Excluding the Operating Income of those two entities Income before Tax grew by 2%. The weak sales development has negatively impacted the Operating Margin through underabsorp-tion of fixed costs. This has to some extent been offset by savings from the rationalisa-tion programmes. Financial items and taxes Net financial items were positive, SEK 14 m. (-3). The non-recurring positive effect of early terminations of currency hedges due to divestment of Nielsen & Bainbridge and the de-merger of Meto was SEK 40 m. Taxes were 43% of Income beforeTax. Cash flow The Cash Flow from Operations was SEK 1.275 m. (65) including SEK 989 m. from the demerger of Meto. Excluding acquisitions/-divestments the Cash Flow from Operations was SEK 237 m. compared to SEK 1,024 m. for the full year 1998. Restructuring activities The integration of Leitz is continuing according to plan. During the first 100 days after the acquisition, programs, activities and time schedules as well as management commitment have been established. About one third of the identified synergies of SEK 220 m. will be realised in 1999. The rationalisation program launched in December 1997 is developing according to plan. During second half of 1999 the annual cost reduction level of SEK 87 m. is planned to be reached. As a consequence of the de-merger of Meto, Esselte´s corporate management and the top management of Esselte Office Products will be amalgamated into one entity based in London. As from July 1, 1999, Esselte´s CEO Jan Kvarnström, CFO Mats Lönnqvist and General Counsel Carl Odelberg will be based in the Esselte Head Office in London. Robert K.Scribner, the former President of Esselte Office Products is leaving the company. Business Areas Filing and Document Management This area represented 61 percent of Esselte´s sales in January-March. Total sales were SEK 1,861 m. (1,406). Products from Leitz contributed with sales of SEK 508 m. in 1999. Excluding currency effects and acquisitions and divestments the decrease was 1% mainly due to weak demand in the United States, France and Germany. The Leitz and Esselte lines are being combined and streamlined. Margins are stabilizing in this highly competitive category. Identification Labeling The Identification Labeling area with its global brand Dymo, accounted for 10% of Esselte´s sales in the quarter. The sales were SEK 293 m. (264). The increase is due to incremental sales of newly introduced products, the Dymo PC Labelwriter and the Dymo Letratag labeler. The global rolling launch of Dymo Letratag, the first Dymo tool aimed directly at the consumer market, is under way. Sales in the Netherlands, the pilot market, are exceeding expectations. Presentation Solutions This business represented 5% of Esselte´s sales in January-March. The sales grew (excluding currency effects) by 5% to SEK 139 m. (133). The main drivers of the growth were products such as presentation folders and portfolios as well as market share gains. Computer Products This product area was 7% of Esselte´s total sales during the quarter. Sales decreased to SEK 200 m. (240). The divestment of the fax paper business accounts for half of the de-crease. The balance of the decrease repre-sents one major customer lost in the US. The restructuring of Computer Products area includes concentrating on the Curtis line of computer accessories and divestment of paper based non-core products. Desktop Organization The product area represented 9% of total Esselte sales in the quarter. The sales grew to SEK 269 m. (124). Products from Leitz accounted for SEK 158 m. The Esselte and Leitz lines are beeing merged and a pan-european launch being planned. This report has not been examined by the Company´s auditors. Next report Interim report for the first six months of 1999 will be released July 22. Stockholm April 21, 1999 Jan Kvarnström CEO For further information: Bengt Wikander, Senior Vice President Corporate Communications, Phone: +46-8 545 21 904 or 046-708 92 24 31 (mobile). ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/04/21/19990421BIT00610/bit0001.xls Appendix http://www.bit.se/bitonline/1999/04/21/19990421BIT00610/bit0002.DOC http://www.bit.se/bitonline/1999/04/21/19990421BIT00610/bit0003.pdf