Moelven - Quarterly report 2/2004

Mon, Jul 26, 2004 12:00 CET

Operating revenues increase to NOK 1573.4 million (1306.7)
The new businesses Are and Mobilarum are performing as anticipated
Operating profit in the second quarter totalled NOK 36.4 million (45.0), which is a significant improvement compared to the three previous quarters
The sale of the Group's own shares boosts equity by NOK 35.6 million
The non-residential building market in Norway and Sweden has stabilised at a low level of activity
The market for sawn white wood timber should remain stable in the European markets, while the prospects for red wood is somewhat less favourable
The Board anticipates profit for the third quarter to be somewhat higher than in previous years

Directors' report

Highlights

On 1 June, Agder-Telemark Skogeierforening and Haldenvassdragets Skogeierforening purchased 4.5 per cent and 3.0 per cent, respectively, of the shares in the Moelven Group, while Glommen Skogeierforening and Mjøsen Skogeierforening expanded their ownership stake to 17.8 per cent and 9.4 per cent, respectively. The Finnish Metsäliitto Andelslag and its subsidiary Finnforest Oyj maintain their majority interest with a total of 65.2 per cent of the shares. No changes have been made to the company's corporate assembly or Board of Directors as a result of the changes in share ownership.

Demand for the Group's products has remained relatively stable in the second quarter. The non-residential building market is expected to remain weak in large parts of Scandinavia, and will have a particular impact on businesses in the Moelven Building Group. The activity level in the residential repair and maintenance sector is satisfactory both in Norway and Sweden, and this is of major importance for the Group's planing mill and laminated timber factories. For the sawmills, the availability of raw materials and the relationship between prices for raw timber and prices for processed wood products is critical for profitability. Low logging activity in large parts of Norway and a disproportion between the high price for red wood timber in Sweden and the low price for finished wood products in Europe, have been the two greatest challenges for this part of the business in the second quarter. The market situation for white wood products has been normal.

In the course of the past years, the Group has invested considerably in fire-prevention measures, involving considerable efforts to change attitudes and improve routines, combined with an investment programme in technical fire prevention equipment totalling NOK 45 million. These efforts have increased the availability of more reasonable insurance rates, and a new insurance agreement has been signed on better terms that will take effect in the third quarter 2004.

Second quarter profits for Group

Operating revenues in the second quarter increased to NOK 1573.4 million, compared to NOK 1306.7 million for the same period last year. The increase is due both to the acquisition of businesses and due to increased business activity in the existing facilities. Operating profit in the second quarter was NOK 36.4 million (45.0), which is a significant improvement compared to the three previous quarters. Compared to the same period last year, the sawmills are still operating at a low level of profitability, while the planing mills in Moelven Wood posted a significant increase in profits. Net financial expenses totalled NOK 13.2 million (9.4). The increase in financial expenses is primarily due to higher interest-bearing debt as a result of acquired businesses. Profit after taxes totalled NOK 15.1 million (24.9), corresponding to NOK 0.12 per share (0.21).

Operating revenues after the first six months of the year were NOK 2980.4 million (2450.1), with operating profit at NOK 41.8 million (75.6) and profit after taxes at NOK 14.1 mill (43.4).

Business areas

Moelven Timber Group

Operations in the businesses in the former Are Group, which became part of Moelven from 1 January this year, have met the expectations. The internal consolidation of the Group's businesses is continuing as planned, and the closing of plants in Gol, Hen and Kværnum has been carried out without having to reduce the overall activity level in the Moelven Timber Group. Laminated timber production in the second quarter has been concentrated at three instead of four plants. The fourth plant (one of the Norwegian plants) was sold to Moelven Massivtre AS, in which Moelven has a 47 per cent ownership stake. The plant will commercialise the production and sale of solid wood elements and will according to plans start production in October 2004.

Operating revenues in the second quarter for the Moelven Timber Group totalled NOK 1247.2 million (976.2), with operating profit at NOK 36.4 million (42.4). Both the planning mills at Moelven Wood, as well as the laminated timber business, have had satisfactory progress. The sawmills in the Moelven Timber Group, however, generated a lower profit, which in large part was due to an imbalance in the costs for raw materials and the prices for finished products made at the sawmills in Sweden processing red wood.

In the first six months of the year, operating revenues totalled NOK 2364.5 million (1781.3), and operating profit was NOK 50.3 million (77.4).

Moelven Building Group

The vacancy rate for offices in the largest cities in Sweden and Norway is still quite high and the demand for new non-residential buildings has stabilised at a low level. The need to adapt capacity has been largest in the area modular system interiors. The Moelven Building Group has experienced an increase in deliveries as a result of the acquisition of businesses and increased deliveries for multi-family housing. After the acquisition of Mobilarum, the Group now produces building modules at four plants in Sweden. The work coordinating operations between the plants, which will involve some degree of product specialisation, is progressing as planned, and profitability at the Swedish module factories is improving.

Operating revenues for the Moelven Building Group in the second quarter were NOK 333.3 million (336.0), and operating profit totalled NOK 9.2 million (11.8). Both Moelven Modular Buildings and Moelven Modular System Interiors posted a somewhat weaker final result.

Operating revenues the first six months were NOK 628.5 million (680.7), and operating profit totalled NOK 9.6 million (18.8).

Other businesses

This business area consists of the Group's two holding companies and joint services in Norway and Sweden, as well as some smaller businesses that are not involved in core Group business activities. Operating revenues in the second quarter totalled NOK 20.9 million (11.8), with an operating loss of NOK 9.2 mill (-9.0). For the first six months, operating revenues totalled NOK 36.6 million (24.1), with an operating loss of NOK 18.1mill (-20.6).

Employees

At the end of the second quarter, the Group had 3284 employees (2957). The number of employees has increased by 29 in the course of the second quarter, which is due to normal seasonal variations and a somewhat higher level of contract activities in parts of the Moelven Building Group. Absenteeism due to illness was 6.4 per cent (6.8) in the second quarter.

Investments, balance sheet and financing

Investments totalling NOK 57 mill (48) were made in the second quarter, primarily in the area of maintenance. The largest single investment was linked to the construction of Telemarksbruket, which is scheduled to be completed by the beginning of the fourth quarter.

At the end of the second quarter, the Group had assets totalling NOK 3126.4 million (2580.3) and employed capital totalling NOK 2138 mill (1774). The increase is due to the acquisition of the Are Group and Mobilarum. The amount of capital employed has been reduced somewhat in the second quarter, which is a development that will continue as a result of normal seasonal variations through the last six months of the year.

In connection with the changes in ownership structure, the Group sold own shares, which strengthened equity by NOK 35.6 million. Equity at the end of the second quarter totalled NOK 1097.4 mill (982.6), corresponding to an equity ratio of 35.1 per cent (38.1). The reduction compared to the year before is the product of the recent acquisitions. The goal of the Board is to increase the equity ratio gradually to approximately 40 per cent.

Net interest-bearing debt totalled NOK 1041 million (791), and the liquidity reserve was NOK 687.5 mill (440.6).

Prospects

The Board expects that the non-residential building market will remain slow during the second half of the year. The Moelven Building Group has focussed on industrialised, module-based concepts and the sale of these should perform somewhat better than the overall market. The market for wood-based construction material, which in large part is used for repair and maintenance of residential building, is expected to remain at a satisfactory level, while prices for certain types of sawn red wood timber is expected to continue to be low. Overall, the Board expects that profit this year for the Group will be somewhat lower than last year.

Board of Directors,

Moelven Industrier ASA

Moelv, 23 July 2004

The full report with tables can be downloaded from the following link:

Moelven Industrier ASA is a Scandinavian industrial group that supplies products and associated services to the Scandinavian building market. The Group's businesses employ over 3.200 persons and have a total annual turnover of some NOK 5.6 billion. The Group's close to fortyfive business units are organised into two business areas: the Moelven Timber Group and the Moelven Building Group. Moelven is a member of Finnforest Corporation Oyj.   Finnforest Corporation, owned by Metsäliitto-group, is Europe's biggest international mechanical wood group with a turnover of EUR 1.8 billion. Moelven Industrier ASA is Finnforest's majority-owned Norwegian-based subsidiary. Operations are grouped into two industrial divisions: Engineered Wood and Solid Wood. Finnforest's main geographical markets are the UK, Germany, France, Scandinavia and Finland, Its customers include industrial end users, DIY stores, building suppliers and timber merchants, building contractors and developers. Finnforest Corporation operates in over 20 countries and employs over 7,600 people.    SENDER:  Moelven Industrier ASA  P.O. Box 134, N-2391 Moelv  Tel. +47 62 34 70 00  Fax. +47 62 36 92 80  Internett: http://www.moelven.com  E-mail: post@moelven.com  HUGIN Online: http://www.huginonline.no/MOE/

Moelven - Quarterly report 2/2004

Documents & Links