Report on operations for the three months ended March 31, 2000

Report on operations for the three months ended March 31, 2000. * Significant gross margin improvement to 28.5% (25.9). * Operating income increased by 33% to SEK 160 million (120). * Continued strong sales growth for Dymo, 15% in the first quarter. * Total sales declined by 4.0% due to divestments and product line rationalisation. Sales Total sales for the first three months amounted to SEK 2 915 million (3 037). The decline was the result of divestments and discontinuation of businesses, products and contracts not belonging to Esselte's core activities or not meeting the profitability criteria. The two largest core product categories, Filing & Document Management and Identification Labelling grew by 1.0% and 15.0% respectively. Sales in the US were at all time high, while Germany recorded a very weak January followed by sales pick-ups in February and March. The weak January sales in Germany were a combined effect of stockpiling in December by our customers and a change in fiscal year for the former Leitz-entities affecting rebate- and incentive programs. As a result sales shifted from January 2000 to December 1999. Markets with solid sales growth over 25% were Poland, Turkey, Mexico, Hungary, Portugal and the Czech Republic. Markets with planned sales decreases were UK and Sweden, while sales in Denmark decreased due to a soft market. The wide range of new products launched by Esselte at the Paper World Fair in Frankfurt in January (the world's largest office products fair) did not impact sales in the first quarter. The gross margin on sales improved for the sixth consecutive quarter, by 2.6 percentage points versus the first quarter 1999. The improvement was achieved in spite of increasing rebate programs to customers. Operating income The improved gross profit and the effects of cost reduction measures together contributed to a 33% increase in operating income to SEK 160 million (120). Important contributors to the improvement are the closures of the sites in Hannover, Germany and Colmar, France during 1999. Major savings in selling and administrative expenses have decreased the operating expenses compared to the burn rate during the second half of 1999. Part of the savings are offset by increased spending in marketing and R&D in the Dymo division and in Esselte's web iniatives. On balance the operating expenses excluding restructuring items are 3% below the fourth quarter 1999. In the operating income the capital gain from the divestment of International Typeface Corporation is included with SEK 18 million. The operating income after goodwill amortization of SEK 39 million but excluding the capital gain corresponds to an operating margin of 4.9% (4.0%). Due to the seasonality of Esselte's sales with higher sales in the first and fourth quarters and lower sales in the second and third quarters, the operating margin normally are higher in the first quarter than in the second and third quarter. Income before tax Income before tax was in line with last year, SEK 133 million (134). The net financial expenses for the quarter include SEK 20 million non- recurring hedge gains. In the first quarter of 1999 similar hedge gains of SEK 40 million were included. Cash flow The cash flow from operations was positive at SEK 75 million (286). Working capital increases affected the cash flow negatively with SEK 177 million. The gross capital expenditure of SEK 46 million was mainly in machinery and equipment, and was partly offset by divestments. Product categories Filing & Document Management Sales for the first quarter grew to SEK 1 744 million (1 728). The sales of products under the Pendaflex brand in the US were very strong. The Filing & Document Management category represents 60% of Esselte's total sales. Identification Labelling Esselte's identification labelling products are sold under the Dymo brand. Sales continued to grow in the first quarter by 15% to SEK 353 million (307). The drivers of the growth were the Dymo Letratag and the PC Labelwriter. At Paper World a new Dymo label maker-range for professional use was succesfully launched. Dymo is Esselte's second largest business with 12% of total sales. Since the beginning of this year it is organised as a separate product division in order to fuel further profitable growth. Workspace The main brand for workspace products (staplers, perforators, moulded plastics) is Leitz. The global workspace business is organised as a product division to drive future growth. Three new innovative product lines for corporate and home office use were introduced at the Paper World fair. Workspace's largest market is Germany. The soft January in Germany is the main reason for the sales decline of Workspace in the first quarter to SEK 215 million (235). The Workspace sales are 7% of the total Esselte sales. Development categories The two development categories are Binding & Lamination and Curtis Computer Products. Within the yet small category of Binding & Lamination a new competitive product range was presented at Paper World. Sales in the category increased, primarily in lamination. Curtis has continued to focus on restoring profitability. As a result of the efforts a major customer contract was terminated in the first quarter 1999, which is the reason for the reported sales decline of the Development categories to SEK 119 million (135). The Development categories are 4% of Esselte's total sales. Other products Among Other products Esselte includes sales of separate businesses such as Bensons, Monti, Letraset and Tarifold. Sales declined to SEK 484 million (632). Eight divestments in 1999 and 2000 explain SEK 89 million of the decrease. Organic decreases due to declining markets in graphic products and printer listing paper explain the remainder. New incentive program The Esselte board has decided on a long term incentive program for approximately 40 senior executives and key persons. The bonus program is linked to the Esselte B share price performance until February 1, 2003. The bonus comes into play at a share price of SEK 85 and is capped at a share price of SEK 280. At its maximum level the total cost for the program is below SEK 270 million corresponding to approximately 2.2% of the increased market capitalisation of Esselte above current levels. Esselte is the leading provider of office supplies world-wide. A global group with annual sales exceeding 11bn SEK, subsidiaries in 31 countries, selling office products in over 100 countries and employing over 7,000 people. Esselte brings innovation, efficiency and style to the way people work in the office and at home. Our principal brands are: Dymo; Pendaflex; Leitz and Curtis. Esselte AB is listed on the Stockholm and London stock exchanges. To learn more about Esselte, visit our website at www.esselte.com. For further information please contact: Anders Igel, CEO +44 1895 878711 or +46 70 5191378 Mats Lönnqvist, CFO+46 70 5915563 From Sweden, alternatively 020 021 4796 Attachments: Tables, 2 pages ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/04/26/20000426BIT01440/bit0001.doc http://www.bit.se/bitonline/2000/04/26/20000426BIT01440/bit0002.pdf http://www.bit.se/bitonline/2000/04/26/20000426BIT01440/bit0003.xls Tables