January - June 2001

January - June 2001 The Groups' profit after net financial items amounted to SEK 88 million (59). Profit improvement in business area Edible Oils. Growing volumes in business areas Edible Oils (7%) and Technical Products (11%). Far-reaching restructuring process focusing on strategy, profitability and speed. MARKET AND BUSINESS CONDITIONS Raw material prices have increased in 2001, while the Swedish krona has decreased in value against both US dollar and Euro. The weaker Swedish currency improved the competitive strength of the Swedish units, which contributed to business areas Technical Products and Edible Oils increasing their sales volumes by 11 and 7 per cent respectively, strengthening their positions in Scandinavia, western and eastern Europe despite strained market conditions. In the past year Karlshamns operations were affected, to various degrees, by the current situation in Europe caused by BSE and the Foot and Mouth Disease (FMD). On the aggregate level, however, consolidated operating profit were only marginally affected. 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. The first estimates from the US indicated another record crop of soyabeans. 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. 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 has now 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 decreased. Technical Products The European fatty acids market displays a marginal increase in the first half of the year, as compared to the first half of 2000. Development in Europe differs from that in the US, 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. Glycerol prices fell steeply in the first quarter, but levelled off in the next three 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 engineering industry has had negative effects on technical oils, a development which has been offset by growing sales volumes to other market segments. Feed Materials BSE caused a ban on animal fat in feed products in France and Germany. This stimulated demand for vegetable feed fats in the autumn of 2000, a demand which subsequently fell again due to the Foot and Mouth Disease. Demands for improved product safety within the feed industry has strengthened Karlshamns market position. OPERATIONS Operating profit The Group's operating profit increased by SEK 31 million to SEK 96 million compared to the same period last year. Operating profit in the second quarter of 2001 totalled SEK 49 million (20), an increase of SEK 2 million compared to the first quarter. The Edible Oils business area's operating profit increased to SEK 71 million (34). In the second quarter of 2000, operating profit in the Edible Oils business area were negatively affected by extraordinary items and provisions for bad debts amounting to SEK 27 million. Exclusive of these items operating profit improved by SEK 10 million in the Edible Oils business area and by SEK 4 million for the Group.The Technical Products business area's operating profit was in line with last year, SEK 20 million, although fatty acid volumes increased by 11 per cent. Decreasing margins, mainly for glycerol, affected operating profit negatively. The Feed Materials business area's operating profit decreased by SEK 6 million to SEK 5 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 1,425 million. Lower raw material prices than in the first half of 2000 limited the effect on turnover of these volume increases, however. The Edible Oils Business Area (SEK million) 3 3 6 6 12 months months months months months Apr - Apr - Jan - Jan - Jan - Jun Jun Jun Jun Dec 2001 2000 2001 2000 2000 Net sales 511 527 1,043 1,054 2,121 Gross contribution 157 137 321 285 525 Operating profit 35 3 71 34 6 The Edible Oils business area's operating profit increased by SEK 37 million to SEK 71 million over the same period in 2000. Exclusive of extraordinary items and provisions for bad debts, operating profits improved by SEK 10 million. The improvement was mainly attributable to growing sales volumes in all product segments. All in all, volumes rose by 7 percent, the largest relative increase accounted for by Pharma & Cosmetics (Lipids for Care) and standard products. In absolute figures, though, the largest increase was generated by formulated fats in the bakery and dairy industries. The largest volume growth was achieved in the Nordic countries, in western and eastern Europe. The Technical Products Business Area (SEK million) 3 3 6 6 12 mon months months months months ths Apr Apr - Jan - Jan - Jan - - Jun Jun Jun Dec Jun 200 2000 2001 2000 2000 1 Net sales 98 87 205 176 355 Gross contribution 38 37 73 70 138 Operating profit 11 12 20 20 39 The Technical Products business area's operating profit remained on last year's level, or SEK 20 million. In product segments Fatty Acids and Glycerol, operating profits decreased by SEK 1 million in the second 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 this year's deliveries were based on contracts signed late in 2000. The price decrease for glycerol levelled off in the second quarter. Product segment technical oils managed a volume increase despite a mild recession, in particular in the motor industry. The Feed Materials Business Area (SEK million) 3 3 6 6 12 months months months months months Apr - Apr - Jan - Jan - Jan - Jun Jun Jun Jun Dec 2001 2000 2001 2000 2000 Net sales 90 58 177 124 252 Gross contribution 24 24 47 52 96 Operating profit 3 5 5 11 18 Operating profit in the Feed Materials business area totalled SEK 5 million (11). 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 FMD. Sales of feed fats have increased in 2001, and Karlshamns has secured additional market shares on the Nordic market as customers are giving more and more priority to product safety. THE KARLSHAMNS GROUP Profit after net financial items The Group's profit after net financial items amounted to SEK 88 million (59). Consolidated net financial items decreased by SEK 2 million to SEK -8 million. Interest-bearing liabilities were an average SEK 53 million higher in the first six months of 2001 than in the corresponding period 2000. Capital expenditure The Group's net investments in fixed assets amounted to SEK 60 million (43) in the first half of 2001. Net investments for the full year 2000 totalled SEK 117 million. Working capital The Group's working capital as at 30 June 2001 amounted to SEK 413 million (395). The increase in working capital was mainly caused by higher inventory volumes than last year. Financial position The Group's shareholders equity as at 30 June 2001 amounted to SEK 778 million (790). Total assets amounted to SEK 1,628 million (1,548). The equity/assets ratio was 48 per cent (51). The Group's net debt as of 30 June 2001 was SEK 305 million (199). Personnel The Group's average number of employees in the first half of 2001 was 749 (767). The number of employees in the Group as at 30 June 2001 was 756 (766). 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 37.06 (37.64). Development Process 2001 With Karlshamns vegetable raw materials, leading technological expertise and the positive driving forces in our immediate surroundings as a solid starting point, 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, RR11 Revenue, RR 12 Tangible fixed assets and RR18 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 15 August 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/2001/08/15/20010815BIT00460/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/08/15/20010815BIT00460/bit0002.pdf The full report