Alignment of the organisation and new outlook for full-year 2008 profit
Company Announcement No. 177, 2008 H+H International A/S Dampfærgevej 27-29, 4th Floor 2100 Copenhagen Ø Denmark Telephone: +45 35 27 02 00 www.HplusH.com 29 October 2008 Alignment of the organisation and new outlook for full-year 2008 profit before tax A major alignment of the organisation has been initiated to ensure that the cost structure for 2009 matches the current level of activity. The adjustments to the organisation relate primarily to the Western European and Nordic markets. In the Eastern European markets, the new activities in Russia, Poland and the Czech Republic are expected to contribute positively to profit for 2009. The full effect of the upgrading of the factories in Poland (Gorzkowice) and the Czech Republic (Most) will be felt in 2009, with each factory having an annual manufacturing capacity of around 300,000 m3. Furthermore, the new factory near St Petersburg is expected to be fully operational by the middle of the first half of 2009. Organisational adjustments were implemented at the UK factories earlier in the year, with reductions in the number of production shifts and temporary closure of one factory. Moreover, adjustment of staff numbers has been initiated in the Western European and Nordic markets, both at factory level and in relation to the administration and management of the H+H Group. Excluding the company's activities in the Eastern European segment and new sales initiatives in the Western European markets, including Benelux, fixed costs for 2009, including all payroll costs and excluding depreciation and financial income and expenses, are expected to be cut by approx. 20% compared with the cost level at the start of 2008. H+H still considers that geographical expansion in new markets offers great potential. However, the development in sales in the Group's principal markets in the course of 2008 has led to a temporary halt to all new, expansionary investment initiatives. The investment level for 2008 is expected to total around DKK 600 million as previously announced, primarily for the construction of the new factory near St Petersburg and factory upgrades in Poland and the Czech Republic. For 2009 and 2010, the Group's overall annual investments can be kept at the DKK 50 million level. Total non-recurring costs in 2008 for reduction of staff numbers will be in the region of DKK 35 million, DKK 25 million of which was not included in the full-year profit outlook expressed in the interim financial report for the first half of 2008. Furthermore, as a result of lower sales, in particular, in the markets in the UK, Poland and Germany, outlook for full-year profit before tax has been lowered by a further DKK 25 million. The outlook for full-year 2008 profit before tax is consequently revised to profit before tax at around breakeven, compared with the previously forecast outlook of profit before tax in the region of DKK 40-60 million, as expressed in the interim financial report for the first half of 2008. For the UK segment, a loss before tax in the region of DKK 25 million is now forecast, compared with previously DKK 15 million. For the segment Germany, Denmark and Benelux, profit before tax is now expected to be around DKK 15 million, compared with the previously forecast DKK 40 million. For the Eastern European segment, profit before tax in the DKK 35 million region is expected, compared with the previously forecast DKK 45 million. Lastly, a result at around breakeven is expected for the Nordic segment, compared with the previously forecast profit before tax of DKK 5 million. Anders C. Karlsson Chairman of the Supervisory Board Hans Gormsen CEO For additional information please contact: Hans Gormsen, CEO, or Martin Busk Andersen, CFO, on telephone +45 35 27 02 00 This is a translation of the company's announcement in Danish. In case of inconsistency between the Danish text and this English translation, the Danish text shall prevail.