Accounts Report 1998

Accounts Report 1998 - Invoicing increased by 9 per cent to SEK 2,401M - Operating earnings improved by 11 per cent to SEK 205M - Earnings per share rose by 18 per cent to SEK 4.95 - Improved operating earnings in the Americas and Asia - Strong fourth quarter - Sales of MDS systems continue to develop positively MUNTERS' OPERATIONS Munters is the world leader in moisture control with products and services for dehumidification, humidification and cooling of air. Operations are divided into three geographic regions - Europe, the Americas and Asia. In each region, operations are subdivided into the Product Areas: Dehumidification, Moisture Control Services (MCS), HumiCool and Mist Elimination & Water Treatment. Manufacturing and sales are carried out via the Group's own companies in 25 countries. The Group has 1,979 employees at year- end. GROUP ORDER INTAKE, INVOICING AND EARNINGS During the year, order intake increased by 5 per cent to SEK 2,384M (2,265). At year-end, the order backlog amounted to SEK 344M, the same level as a year earlier. The Group's invoicing increased by 9 per cent to SEK 2,401M (2,197). Adjusted for currency fluctuations, the increase was 7 per cent. Distributed by region, invoicing rose by 11 per cent in Europe, 12 per cent in the Americas and fell by 9 per cent in Asia. Consolidated operating earnings amounted to SEK 205M (184), an increase of 11 per cent. Operating earnings were positively affected by changed exchange rates with SEK 3M. Consolidated earnings before taxes increased by 11 per cent to SEK 198M (178). Net earnings for the year rose by 18 per cent to SEK 124M (105) after an effective tax rate of 38 per cent (41). Earnings per share rose to SEK 4.95 (4.18), an increase of 18 per cent. The earnings improvement is due to increased invoicing in all Product Areas and implemented rationalisation measures. During the year, a number of new products and applications were launched which had a positive effect on invoicing. The fourth quarter shows a strong trend compared with the corresponding period in the previous year. During the quarter, order intake improved by 12 per cent, invoicing by 9 per cent and operating earnings rose by 14 per cent to SEK 73M (64). Europe and the Americas show continued positive growth, especially in Product Area Dehumidification. Comparative figures referring to 1997 and earlier are reported pro forma. The criteria for the pro forma accounts are to be found in the Company's Annual Report for 1997. MARKET DEVELOPMENT The market in Europe continued to develop positively. Following a weak start to the year, demand within the MCS operations reverted to positive growth in the second half. The market in America showed continued sound growth. The turbulence in Latin America is however significant and affected marketing activities, mainly in Brazil. In Asia demand in Australia and China was positive, whereas Japan and other parts of the region reported some slow-down. Demand on the Group's products and services has a seasonal pattern in which invoicing during the second half of the year is generally higher than in the first half. In 1998 the second half of the year reported 53 per cent of the total invoicing. FINANCIAL POSITION At year end, the equity ratio amounted to 43.6 per cent (36.5) Liquid funds were SEK 82M (175) and interest-bearing liabilities (including PRI pensions) were SEK 218M (287). During the year, the net debt increased by SEK 23M to SEK 135M,.The change in net debt is mainly explained by taxes paid of a lump-sum nature (SEK 27M), a major ongoing investment programme to raise production capacity in Tobo (SEK 27M) and dividend paid (SEK 25M). The Group has unutilised loan facilities of approximately SEK 200M. INVESTMENTS The Group's capital expenditure amounted to SEK 109M (84). The majority of the investments refer to investments in a production building, production machines and IT equipment. An investment totalling SEK 40M relating to expansion of the production capacity in Tobo, Sweden, will be carried out during 1998 and 1999. In 1998, SEK 27M of this investment was expensed. PERSONNEL At the end of the reporting period, the total number of employees was 1,979, an increase of 108 during the year. REGIONS EUROPE Invoicing in Europe increased by 11 per cent to SEK 1,325M (1,191). Adjusted for currency fluctuations, invoicing rose by 9 per cent. Operating earnings amounted to SEK 90M (92). Product Area Dehumidification reports a very positive trend and increased order intake and invoicing as well as operating earnings compared with the previous year. Several important orders were received for MDS (Modular Dehumidification Systems), the new modular product concept which was introduced during the year. MDS provides the customer with a more complete system and generates increased delivery values for Munters. During the first six months of the year, unfavourable weather and weak demand in the fire damage restoration operations affected MCS. In the second quarter, costs were reduced and sales directed towards a more favourable product mix. The effect of these measures, together with improved demand, had the planned impact and the Product Area reports earnings on a par with the previous year in the third and fourth quarters. Product Area HumiCool reports an increase in order intake, invoicing and operating earnings, partly as a result of higher sales of systems and increased investment in evaporative cooling. Product Area Mist Elimination & Water Treatment reports a slight rise in invoicing during the year but reduced operating earnings. THE AMERICAS During the reporting period, invoicing in the Americas increased by 12 per cent to SEK 885M (790). Adjusted for currency fluctuations, invoicing rose by 8 per cent. Operating earnings improved to SEK 96M (84) during the period. Establishment of operations in Brazil, Canada and Mexico in recent years has contributed positively to the growth and operating earnings development. Product Area Dehumidification reports a continued strong trend. Order intake for dehumidifiers for super markets and ice hockey arenas increased. As a result of increased investments within its industrial segment, Product Area MCS reported continued growth with significantly improved operating earnings. Product Area HumiCool reports low growth due to low activity, especially in Latin America, and lower sales to the chicken industry. Product Area Mist Elimination reported a marginal increase in its invoicing but operating earnings fell due to an unfavourable product mix. ASIA Invoicing fell by 9 per cent during the year to SEK 239M (262). Adjusted for currency fluctuations invoicing fell by 4 per cent. Operating earnings rose by 13 per cent to SEK 33M (29). Adjusted for currency fluctuations, operating earnings rose by 22 per cent. This was achieved through cost reductions and a favourable product mix. Product Areas Dehumidification and HumiCool report lower invoicing, higher operating earnings but a lower order intake than in the previous year. The order intake in Japan, which in 1997 showed a positive trend, showed a significant decline in 1998. A continued strong invoicing and operating earnings trend was noted in Australia during the year and in the fourth quarter China showed positive development. Product Area MCS, which is the smallest product area in the region, reports a continued positive trend. PRODUCT AREAS DEHUMIDIFICATION During the year, invoicing amounted to SEK 1,077M (960), an increase of 12 per cent compared with 1997. During the year, European and North American markets showed a continued positive trend. Positive sales growth is registered in, among others, the USA, Great Britain, Germany and the Benelux countries. In Asia, the markets in Australia and China developed positively, whereas Japan and South-East Asia were affected by the turbulence on these markets. MOISTURE CONTROL SERVICES (MCS) Invoicing amounted to SEK 721M (659), an increase of 9 per cent. During the first half of 1998, the market showed weak demand for MCS' services in Europe whereas it increased to the previous year's level in the second half. In North America, demand remained positive during 1998. The MCS operations in Asia grew during the year, albeit from a low level. The number of service depots increased from 186 to 206 during the year. HUMICOOL Invoicing amounted to SEK 355M (329), an increase of 8 per cent. The efforts to add value to the core technology generated additional growth for several applications such as air intakes for gas turbines. The decline in Asia and some turbulence in the USA resulted in slightly lower growth than in the previous year. MIST ELIMINATION & WATER TREATMENT Invoicing amounted to SEK 284M (274), an increase of 4 per cent. Water Treatment had a year of weak development compared with the previous year which was very strong. Price squeeze and some start-up problems of new production equipment also led to some pressure on margins. PARENT COMPANY During the year, the Parent Company's result after financial items amounted to SEK -12.5M. After appropriations of SEK 93.7M (3.5) and taxes of SEK +3.6M (0), the Parent Company reports net earnings of SEK 84.8M (0). There were no sales. In 1997, the Parent Company carried out operations only during the period September to December when earnings after financial items amounted to SEK -3.4M. Liquid funds amounted to SEK 19.8M (37.1). Capital expenditure amounted to SEK 0.5M (0) and the average number of employees was 20 (20). PROPOSAL FOR DIVIDEND The Board of Directors has decided to propose that the Annual General Meeting decide an increase in dividend to SEK 1.50 (1) per share, which is equivalent to SEK 37.5M (SEK 25M) in total. ANNUAL GENERAL MEETING The AGM will be held in Konferens Spårvagns-hallarna, Birger Jarlsgatan 57 A, in Stockholm on Wednesday 28 April at 5pm. FUTURE INFORMATION DATES The complete Annual Report in Swedish will be distributed to shareholders in Munters AB around 12 April 1999. 28 April 1999 - Annual General Meeting and Interim Report January - March 11 August 1999 - Interim Report January - June 27 October 1999 - Interim Report January - September 1999 Stockholm, 25 February 1999 Lennart Evrell President For further information, please contact Lennart Evrell, CEO Tel:+46 8-626 63 03 Bernt Ingman, CFO Tel:+46 8-626 63 06 Per Bowallius, Head of Corporate Communication Tel:+46 8-626 63 08 E-mail address: per.bowallius@munters.se Munters AB (publ) P.O. Box 430 SE-191 24 Sollentuna Tel: +46 8-626 63 00 Fax: +46 8-754 68 96 Home page on the Internet: www.munters.com This report has not been the subject of special examination by the Company's Auditors. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/25/19990818BIT00490/bit0001.doc http://www.bit.se/bitonline/1999/02/25/19990818BIT00490/bit0002.pdf