Interim report january - september 2001

INTERIM REPORT january - September 2001 The Groups' profit after net financial items amounted to SEK 138 million (109). Volume increases in all business areas, although with pressure on margins. Profit improvement in business area Edible Oils. Far-reaching restructuring process for sustainable, profitable growth. MARKET AND BUSINESS CONDITIONS Raw material prices have increased in 2001, and the Swedish krona has decreased in value against both US dollar and Euro since the turn of the year. The weaker Swedish currency has improved the competitive strength of the Swedish units, which has contributed to business areas Technical Products and Edible Oils increasing their sales volumes by 6 and 4 per cent respectively despite strained market conditions. Both units have thereby also consolidated their market positions in Scandinavia, western and eastern Europe. The political unrest that has been growing all over the world since 11 September, in the wake of the terrorist attack on the USA, has had no material effects on Karlshamns operations to date. Edible Oils The beginning of 2001 saw a quiet raw material market for vegetable oils, with prices continuing their downward trend. In combination with a record soyabean crop in South America, the continuously growing stock levels and good production of palm as well as coconut oil pressed prices downwards. Raw material prices turned upwards in March, mainly due to the stronger US dollar and a growing demand for rapeseed oil for bio- diesel applications. Weather in the US and Canada was dry and hot from late June and through July, which contributed to a very turbulent raw material market with steeply rising prices. Prices have since moved downwards again, as the US weather turned out favourable for the soyabean harvest while Chinese and Indian imports of soyabeans and vegetable oils remained below normal levels. Lower than expected rapeseed harvests boosted prices for rapeseed oil in relation to other oils. Cocoa prices increased substantially in January and February due to ethnical and political disturbances, mainly in Ivory Coast. As the political situation in Ivory Coast then stabilised somewhat, with much longed-for rainfalls occurring there as well as in Ghana - those countries accounting for almost 60 per cent of total world production of cocoa beans - prices fell back somewhat. Cocoa prices are now turning upwards again, as the market expects decreasing harvests with ensuing lower stock levels. [REMOVED GRAPHICS] Technical Products The European fatty acids market displays a marginal increase in the first nine months of the year, as compared to the same period in 2000. Development in Europe differs from that in the US and Asia, where the market for fatty acids decreased by some 10 per cent due to the general business decline. The price level for fatty acids expressed in Euro has been stable, with prices adjusted upwards in the third quarter due to rising raw material prices. Glycerol prices fell steeply in the first quarter, but levelled off in the following months. Lower glycerol prices decreased contribution margins, despite the weak Swedish currency. Lower capacity utilisation in the chemical industry along with the expansion of European bio-diesel plants, in which crude glycerol is a by-product, are the main causes of the falling glycerol prices. Recession in the metalworking industry has had negative effects on technical oils, a development that growing sales volumes to other market segments did not suffice to offset in the third quarter. Feed Materials The Swedish feed material market has been stable, with pig breeding picking up again in pace with rising pork prices. Demand for beef remains weak in the wake of the BSE crisis. Demands for improved product safety along with the feed industry's growing consumption of vegetable feed fats have strengthened Karlshamns market position. OPERATIONS Operating profit The Group's operating profit increased by SEK 33 million over the same period last year, to SEK 150 million. Operating profit in the third quarter of 2001 totalled SEK 54 million (52). The Edible Oils business area's operating profit increased to SEK 114 million (75). In the second and third quarters of 2000, operating profit in the Edible Oils business area was negatively affected by items affecting comparability and provisions for bad debts amounting to SEK 31 million. Exclusive of these items, operating profit improved by SEK 8 million in the Edible Oils business area and by SEK 2 million for the Group. The Technical Products business area's operating profit was SEK 28 million (30), despite fatty acid volumes increasing by 6 per cent. Decreasing margins, mainly for glycerol, affected operating profit negatively. The Feed Materials business area's operating profit decreased by SEK 4 million to SEK 8 million, the main reasons being lower contribution margins in combination with production disturbances early in the year which had negative effects on rapeseed meal deliveries. The Group's net sales increased by approximately 5 per cent, to SEK 2,125 million. The Edible Oils Business Area (SEK million) 3 months 3 months 9 months 9 months 12 months July-Sept July-Sept Jan-Sept Jan-Sept Jan-Dec 2001 2000 2001 2000 2000 Net sales 527 520 1,570 1,574 2,121 Gross 162 127 483 412 525 contribution Operating profit 43 41 114 75 6 The Edible Oils business area's operating profit increased by SEK 39 million to SEK 114 million over the same period in 2000. Exclusive of items affecting comparability and provisions for bad debts, operating profits improved by SEK 8 million. The profit increase was mainly attributable to growing sales volumes in all product segments. All in all volumes rose by 4 percent, with the largest growth achieved in the Nordic countries, in western and eastern Europe. The Technical Products Business Area (SEK million) 3 months 3 months 9 months 9 months 12 months July-Sept July-Sept Jan-Sept Jan-Sept Jan-Dec 2001 2000 2001 2000 2000 Net sales 91 89 296 265 355 Gross 33 34 106 104 138 contribution Operating profit 8 10 28 30 39 The Technical Products business area's operating profit amounted to SEK 28 million (30). In product segments Fatty Acids and Glycerol, operating profits decreased by SEK 2 million in the third quarter despite growing volumes. These products are mainly used by the technical industry and are thus strongly affected by the general economic trend in the chemical industry. The gradually falling prices of glycerol did not affect the first quarter of 2001, as most of these deliveries were based on contracts signed late in 2000. The price decrease for glycerol levelled off in the second quarter, to stabilise in the third quarter. Product segment technical oils is now beginning to feel the effects of the recession, in particular in the motor industry. The Feed Materials Business Area (SEK million) 3 months 3 months 9 months 9 months 12 months July-Sept July-Sept Jan-Sept Jan-Sept Jan-Dec 2001 2000 2001 2000 2000 Net sales 82 57 259 181 252 Gross 23 19 70 71 96 contribution Operating profit 3 1 8 12 18 Operating profit in the Feed Materials business area totalled SEK 8 million (12). Contribution margins were lower in the first and second quarters of 2001 than in the same periods last year, which contributed to the weakening profitability. The price of rapeseed meal fell notably around the turn of the year, which caused losses in the rapeseed meal stocks. The Nordic feed market remained stable, despite the combined effects of BSE and Foot and Mouth Disease. Sales of feed fats have increased in 2001, with Karlshamns securing additional market shares on the Nordic market as customers are giving more and more priority to product safety. Stronger contribution margins in the third quarter account for the profit improvement on the same period of the previous year. Karlshamns has now fully covered this year's need for rapeseed, which vouches for further profit improvements in the fourth quarter. THE KARLSHAMNS GROUP Profit after net financial items The Group's profit after net financial items amounted to SEK 138 million (109). Consolidated net financial items decreased by SEK 4 million to SEK -12 million. Net borrowings were an average SEK 85 million higher in the first nine months of 2001 than in the corresponding period 2000. Capital expenditure The Group's direct investments in fixed assets amounted to SEK 82 million (59) in the first nine months of 2001. Direct investments for the full year 2000 totalled SEK 117 million. Working capital The Group's working capital as at 30 September 2001 amounted to SEK 468 million (432). The increase in working capital was mainly caused by higher rapeseed stocks. Financial position The Group's shareholders equity as at 30 September 2001 amounted to SEK 820 million (829). Total assets amounted to SEK 1,725 million (1,533). The equity/assets ratio was 47 per cent (54). The Group's net debt as of 30 September 2001 was SEK 326 million (197). Personnel The Group's average number of employees in first nine months of the year was 746 (756). The number of employees in the Group as at 30 September 2001 was 770 (772). Key ratios Return on equity during the preceding twelve-month period was 6 per cent (13). Return on equity for the full year 2000 was 4 per cent. Return on net operating assets during the preceding twelve-month period was 8 per cent (14). Equity per share decreased to SEK 39.03 (39.48). Development Process 2001 On the basis of Karlshamns vegetable raw materials, leading technological expertise and unique knowhow in combination with positive driving forces in our immediate surroundings, the Group has now launched a forceful development programme aiming at accelerated profitable growth. The focus of the programme is on the three key concepts of strategy, profitability and speed. Accounting and valuation principles As of this year, the Group applies the following, new recommendations issued by the Swedish Financial Accounting Standards Council: RR 9 Income taxes, RR 11 Revenue, RR 12 Tangible fixed assets and RR 18 Operating profit per share. In all other aspects the accounting principles applied in the Annual Accounts 2000 remain in force. Comparative figures for year 2000 have been restated accordingly. Karlshamn 18 October 2001 [REMOVED GRAPHICS] Jerker Hartwall President For further information, phone: +46 454-826 03 / 705-757110 These interim figures have not been audited. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/18/20011018BIT00560/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/10/18/20011018BIT00560/bit0001.pdf The full report