Report of the Board of Directors for the 3rd Quarter 2000

• Strong profit figures for Group at end of third quarter.
• Forestia collaboration contributes improvement to timber industry activities.
• Better than average order reserve for the Swedish Construction & Contracting and Interior Layout businesses.
• Stable prices expected for sawn spruce timber, and slight improvement in prices for pine products.


THE GROUP

Operating revenues and profit
Operating revenues for the first nine months of the year amounted to NOK 3570.9 million, compared to NOK 2567.0 million for the same period last year. The largest increase was posted in the Timber Industry Division, and is primarily due to the acquisition of Forestia AS. Operating profit totalled NOK 162.9 million (57.6). If the business activities in Forestia AS had been included in the figures for 1999, the profit after nine months last year would have totalled NOK 60 million.
For the third quarter, operating revenues totalled NOK 1162.2 million (815.3), with NOK 74.9 million (19.3) in operating profit.

The third quarter profits reflect a one-time income of NOK 34.3 million, which came as a result of a pay back of pension fees from the Swedish pension co-operative SPP. Of the total amount, NOK 8.9 million was paid in cash, while the remainder will be paid back over the next five years. The economic effect of this payment on the third quarter results has been distributed among the various subsidiaries in relation to their actual share of the benefits.

Operating result before tax after nine months totalled NOK 105.9 million (23.0) Net profit totalled NOK 96.3 million, resulting in earnings per share of NOK 0.83 million (0.15). The cash flow from operations after the first nine months was NOK 203.0 million (105.6), corresponding to NOK 1.74 (1.14) per share.
The number of employees in the Group at the end of the third quarter was 3147 (2373). Taking into account the acquisition of Forestia AS, the number of employees at the end of the third quarter last year would have been 3196.
Employees were offered the opportunity to buy shares in the company in the third quarter. In all, 329 employees took advantage of the offer, purchasing a total of 1.3 million shares. In all, employees in the Group own about 2 million shares, corresponding to 1.7 per cent of all shares in the company.

Balance and financing
Total capital at the end of the third quarter totalled NOK 2,625.5 million (1,972.4), and the increase is primarily due to the acquisition of Forestia. Employed capital amounted to NOK 1940 million (1421). In the course of the third quarter, employed capital was reduced by NOK 104 million. The yield on employed capital for the first nine months of the year amounted to 12.6 per cent (5.5).
Net interest bearing debt at the end of the third quarter totalled NOK 1029 million (760) and the liquid reserve totalled NOK 511 million (346). Investments in production equipment for the first nine months of the year were NOK 54 million.
The Group’s shareholder equity amounted to NOK 911.4 million (661.3), corresponding to an equity ratio of 34.7 per cent, or NOK 7.83 (8.61) per share.
The Board of Moelven Industrier is authorised to buy back up to 11.9 million of the company's own shares, corresponding to 10 per cent of the share capital. At the end of the third quarter the company was holding 1.8 million of its own shares.

BUSINESS DIVISIONS
Timber Industry
For the Timber Industry Division overall, operating revenues for the first nine months of the year increased to NOK 2545.4 million (1446.4) and operating profit increased to NOK 107.7 million (7.8). Had the business activities in Forestia AS been included in the figures for 1999, operating revenues would have been NOK 2364 million, and operating profit NOK 10 million. Operating revenues for the third quarter alone amounted to NOK 843.0 million (447.1) and operating profit totalled NOK 45.1 million (0.3). If the results from Forestia’s timber operations had been included, operating profit in 1999 would have been NOK - 1 million.
A reserve totalling NOK 30 million was set aside to cover costs involved in restructuring the organisation in connection with the acquisition of Forestia. So far this year NOK 11.5 million of the reserve has been expended – NOK 8.5 of which has been used in the 3rd quarter. The work integrating Forestia into the Group is proceeding as planned and the implemented measures at the end of the 3rd quarter have already generated savings equal to NOK 55 million on an annual basis; this is 35 per cent of the expected savings planned to be realised by the end of 2002.

Sawmills - Timber
The sawmills' operating revenues the first nine months of the year were NOK 2064.8 million (1158.5) and operating profit totalled NOK 81.9 million (-2.9). Operating revenues for the third quarter totalled NOK 607.0 million (349.6) and operating profit was NOK 24.5 million (-4.4). Business activity for much of the third quarter was slow as a result of the summer holiday season, particularly as regards the export-oriented sawmills which to some degree have customers who take their holidays after the Scandinavian holiday season. Prices for sawn spruce timber have remained stable in terms of the various importing countries’ currencies, however, a weak Euro has led to a somewhat reduced operating revenues. On the other hand there has been a slight increase in prices for pine products.

Processing - Wood
Operating revenues for the first nine months of the year totalled NOK 953.1 million (459.0) and operating profit was NOK 25.8 million (10.7). In the third quarter, operating revenues amounted to NOK 343.4 million (154.1) and operating profit totalled NOK 20.6 million (4.7). The improved result is primarily due to an increase in deliveries to the Norwegian market. Demand in the Swedish market is also good, but Moelven’s market share is lower in this market.

Laminated Timber
Operating revenues for the first nine months of the year totalled NOK 399.2 million (379.2) and operating profit was NOK 9.8 million (6.4). For the third quarter, operating revenues totalled NOK 128.1 million (138.1) and operating profit reached NOK 5.6 million (3.7). The number of contract deliveries and other deliveries involving standard beams to the Norwegian market has developed slower than expected in the third quarter. Demand for glulam in the various export markets is solid, although the price level is rather low.

Construction & Contracting
Operating revenues for the first nine months of the year were NOK 381.8 million (410.6) and operating profit was NOK 22.0 million (35.2). For the third quarter, operating revenues totalled NOK 122.2 million (132.0) and operating profit was NOK 12.2 million (14.1). Demand for module-based buildings is good, particularly in the Swedish market, and a solid level of activity is expected in the fourth quarter. The Electrical Services business is showing a positive trend compared to the previous quarter and the general level of activity is on the rise, yet has still not reached a satisfactory level.

Interior Layout
Operating revenues the first nine months of the year were NOK 375.5 million (354.3) and operating profit amounted to NOK 28.8 million (26.4). In the third quarter, operating revenues were NOK 110.0 million (108.5) and operating profit was NOK 11.0 million (7.8). No significant changes in the market situation have taken place for the companies in the Interior Layout Division. On 1 September, Moelven acquired the company Hulåns Snickeri AB, which is located in Dalarna in Sweden, and has for a longer period of time been the main supplier of partitions with glass inserts to the Interior Layout Division’s Swedish company Eurowand AB. Huläns Snickeri AB has 45 employees and about NOK 30 million in annual operating revenues. The acquisition will lead to better co-ordination between the two companies, which will strengthen the business activities in this division for Moelven.

Other businesses
This area covers the Group’s parent company - two companies that mainly supply services to other Group companies, including the management of various properties not related to the Group’s four core business areas.
Operating revenues for the first nine months totalled NOK 41.4 million (54.6), with an operating loss of NOK -5.4 million (-18.2). The third quarter posted an operating profit of NOK 1.0 million (-6.6).

OUTLOOK
The outlook for the fourth quarter is generally good for most of the Group’s divisions. The number of orders on book for the Construction & Contracting and Interior Layout divisions’ Swedish businesses is higher than normal, and new market concepts have been developed that should increase Moelven’s market share for processed wood products in Sweden. No significant changes are expected in prices for sawn spruce timber, and prices for pine products have already shown a slight upswing.
The Board anticipates that the results for the year will be significantly better than for last year.
Moelv, 27 October 2000
Board of Directors, Moelven Industrier ASA

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