Interim Report January - June 1998

Interim Report January - June 1998 - Invoicing increased by 11 per cent to SEK 1,135M - Operating earnings improved by 5 per cent to SEK 76M - Continued positive trend in the Americas - Positive development in Europe with the exception of MCS 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 1,878 employees. GROUP INVOICING AND EARNINGS During the first six months of the year, order intake increased by 2 per cent to SEK 1,179M (1,155) and the order backlog rose by SEK 49M to SEK 393M during the same period. Invoiced sales of the Munters Group increased by 11 per cent to SEK 1,135M (1,024). Adjusted for currency fluctuations, the increase was 10 per cent. Distributed by region, invoicing increased by 10 per cent in Europe, 17 per cent in the Americas and fell by 1 per cent in Asia. Adjusted for currency fluctuations, the increase in invoicing in Asia was 5 per cent. Consolidated earnings before taxes increased by 6 per cent to SEK 71M (67). Compared with the corresponding period in the previous year, this result includes a decline in earnings of approximately SEK 15M due to low capacity utilisation within the MCS operations in Europe. Earnings per share increased to SEK 1.73 (1.67). 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. However, unfavourable weather meant reduced demand for the MCS operations. The market in the Americas remained strong. Brazil, Mexico and Canada reported continued positive trends. The markets in Asia, and especially in South-East Asia, are very turbulent. As a whole, the Asian markets have so far enjoyed a continued positive earnings trend but order intake has shown a clear slow-down in recent months. Demand for the Group's products and services has a seasonal pattern in which demand during the second half of the year is normally greater than in the first half. FINANCIAL POSITION On 30 June 1998, the equity ratio amounted to 38.4 per cent (32.7). At the end of the reporting period, liquid funds were SEK 134M (81) and interest-bearing liabilities (including PRI pensions) amounted to SEK 270M (314). During the year, the net liability increased by SEK 24M and amounted to SEK 136M. The Group has unutilised loan facilities of approximately SEK 125M. INVESTMENTS The Group's capital expenditure amounted to SEK 37M (41). The majority of the investments refer to production equipment and IT investments. An investment totalling SEK 40M relating to expansion of the production capacity in Tobo, Sweden will be carried out during 1998 and 1999, of which SEK 2M was utilised during the period. PERSONNEL At the end of the reporting period, the total number of employees was 1,878 which is an increase of 7 since the turn of the year. Number of employees has increased by 64, or by 3 per cent, compared to the same period in 1997. REGIONS EUROPE Invoicing in Europe increased by 10 per cent to SEK 610M (554). Operating earnings amounted to SEK 19M (28). Product Area Dehumidification continued its positive trend and increased both invoicing and operating earnings compared with the same period in the previous year. As a result of the unfavourable weather and weak demand in fire damage restoration operations, Product Area MCS had low capacity utilisation and thus a significant fall in earnings. During the second quarter, cost-reduction measures were implemented. Among other things, a decision was made to downsize staff by approximately 35. The effect of these measures will have an impact during the third quarter. Costs for implementing the measures were charged to second quarter earnings. Product Area HumiCool enjoyed a strong increase in order intake, partly as a result of increased sales of systems and establishing operations within new market segments. Product Area Mist Elimination & Water Treatment reports a slight fall in operating earnings and a significant reduction in order intake in Water Treatment. After the end of the reporting period, the Product Area has received 5 important orders for a total value of approximately SEK 20M. THE AMERICAS During the reporting period, invoicing in the Americas increased by 17 per cent to SEK 433M (370). Operating earnings improved to SEK 49M (38) during the period. Establishment of operations in Brazil, Canada and Mexico in recent years have contributed positively to the growth and earnings development. Product Area Dehumidification reports strong development. During the second quarter, a number of large orders were received in the Zeol market segment. As a result of the influence of the weather and increased investments within the industrial segment, Product Area MCS reported continued growth. Product Area HumiCool reports a continued positive trend. Product Area Mist Elimination reports satisfactory invoicing of components for flue gas treatment. ASIA Invoicing fell marginally during the period by 1 per cent to SEK 120M. (121). Operating earnings rose by 1 per cent to SEK 15M (15). Product Areas Dehumidification and HumiCool have a similar trend, i.e. slightly lower invoicing, continued satisfactory earnings level but significantly lower order intake, mainly during the latter part of the quarter compared with the previous year. Order intake in Japan, which had previously enjoyed a positive trend, reported a marked decline in the second quarter. However, a continued strong trend is noted in Australia. Product Area MCS, which is the smallest product area in the region, reports a positive trend, partly as a result of flooding in the region. In local currencies, Asia reported continued growth during the period both with regard to invoicing and operating earnings. However, order intake during the period, calculated in local currency, was lower than in the previous year. PARENT COMPANY In the first six months of the year, the Parent Company's result after financial items amounted to SEK -4.8M. No sales were made. The Parent Company did not carry out any operations during the corresponding period in the previous year. Capital expenditure amounted to SEK 0.3M and the average number of employees was 15. FUTURE INFORMATION DATES Interim Report January - September will be published on 2 November 1998. Stockholm, 10 August 1998 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 Henrik Hegardt,Corporate Communications Tel: +46 8-626 63 05 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/1998/08/10/19990818BIT00420/bit0001.doc http://www.bit.se/bitonline/1998/08/10/19990818BIT00420/bit0002.pdf