Annual General Meeting of Nefab AB (publ)

Annual General Meeting of Nefab AB (publ) The Annual General Meeting of Nefab AB shareholders was held on May 27, 2000. - Continued good sales growth. - New manufacturing facility will be established in Estonia. - Expansion of facilities in North America and China. - Dividends set at SEK 1.40 per share. Report from CEO's presentation to the Annual General Meeting Increased capacity Lately, Nefab has seen a steady increase in order bookings and invoiced sales. The increase in invoiced sales in the first quarter of 2000 compared with 1999 was 26%. As a result, Nefab's Board of Directors has decided on a number of capacity improvements, resulting in investments in total amounting to approximately SEK 100 M. New manufacturing facility in Estonia Nefab's Board of Directors has taken a principle decision to establish a manufacturing facility in Estonia. The facility is intended to improve capacity for markets in Europe. Fully completed, capacity corresponds to around SEK 100 M in sales. Expansion of capacity in North America and China Demand from customers in the Asian market is great and the manufacturing facility that went into operation there in 1998 has already reached full capacity. As a result, operations are moving to a larger, leased facility. Anticipated production capacity in China will reach over SEK 100 M. The new facility will be placed in operation in September 2000. In North America, the Group has demonstrated strong growth in sales for several years. The average rate of growth over the past five years has been approximately 30%. As a result, the decision has been made to increase capacity through additional investments in the Peterborough, Canada facility. With this expansion, production capacity in the North American market will increase to around SEK 300 M. The facility is expected to go into operation by the beginning of 2001. Dividend The Annual General Meeting decided, in accordance with the Board's proposal, that shareholders receive SEK 1.40 per share, which is unchanged compared with last year. The record date was set at May 31, 2000. Dividends are expected to be distributed through VPC on June 6, 2000. Board of Directors The following Board members were reelected for the coming fiscal year: Ing-Marie Nordgren, Jochum Pihl, Björn Svedberg, Hans Nilsson and Lars-Åke Rydh. Reinhold Geijer was elected as a new Board member. Financial information Interim report January - June 2000 August 16, 2000 Interim report January - September 2000 November 7, 2000 For further information, contact President Lars-Åke Rydh, tel. +46-70-592 45 70, e-mail lars-ake.rydh@nefab.se, or Anna Stålenbring, Investor Relations, tel +46-70-814 23 44, e-mail anna.stalenbring@nefab.se Alfta, May 27, 2000 Lars-Åke Rydh CEO & President Appendix CEO's speech to the Annual General Meeting Information about Nefab Nefab delivers complete packaging solutions to international industrial groups, primarily within the telecom equipment and automotive industries. Nefab operates within two business areas - NEFAB ExPak (collapsible export packaging systems) and NEFAB RePak (reusable transport-packaging and storage systems). Nefab has its own companies in Europe, North and South America and Asia. Annual sales are about SEK 1 B. The Nefab share is listed on the OM Stockholm Exchange. Nefab AB (publ) Östra Storgatan 20 . P O Box 2184 . SE-550 02 Jönköping . Sweden Telephone +46(0)36-345050 . Telefax +46(0)36-150444 . Organization No. 556226-8143 Homepage: www.nefab.com . E-mail: info@nefab.se The registered office of the board of directors is in Ovanåker, Sweden [REMOVED GRAPHICS] CEO's speech at Nefab's Annual General Meeting 2000 Mr. Chairman, shareholders and General Meeting participants! Today is the fifth time that Nefab has held an Annual General Meeting since the company was listed on the stock exchange in 1996. All of the meetings have been held here in Alfta. During this period, we have developed into an increasingly international company, even though Hälsingland remains our operational center. Our vision is to be a global partner for complete packaging solutions. Today, I am going to demonstrate for you how far we have come in fulfilling that vision. Starting with the concept of being a "global" company, I can report that Nefab's products are sold in some 30 countries. We have our own companies in 16 countries, 9 of which also are home to production units. We have operations in Europe, North America, Asia and South America. Approximately 60% of our invoiced sales are to customers outside Sweden. Of our 1,000 or so employees, more than half of them work at companies outside Sweden. Today, we are one of the world's most international companies within the transport packaging sector. If we compare ourselves with other suppliers to the telecom equipment industry, regardless of their speciality, there are only a few who have a stronger international structure than our own. If we make a comparison with our direct competitors, those who in one way or another deliver products that are similar to Nefab's, there are not any who are even close to the position we hold. Through our global structure, we have the opportunity of living up to our vision of "partnership." We have focused our market activities on selected market segments, primarily the telecom equipment and automotive industries. Companies within these sectors are very international. By operating within the same markets, we can provide them with excellent service. Partnership not only involves the ability to deliver a good product locally in every market - in order to truly be a good partner, we have to be able to offer customers "a complete solution." Consequently, we have successively expanded our market offerings. Today, we suggest that customers rely on us for the entire process including preliminary studies regarding a company's distribution and analysis of which kind of packaging is most appropriate. We design the packaging, including packaging materials inside, and we buy supplementary packaging materials from sub- contractors, delivering a complete solution to our customers. We also offer logistical services, either on our own or in conjunction with partners. This can involve rental of a return packaging system or the physical packaging of a customer's product. As is clear from this description, we are gradually becoming more of a knowledge and service company. We still need to be a good manufacturer but the service side of business is becoming increasingly important. We received real proof a couple months ago that we have truly gone quite far in fulfilling our vision when we signed an expanded cooperation agreement with Ericsson Segment Operators. Through this contract, we will become a global supplier of a total transportation packaging solution for Ericsson. The contract involves providing Ericsson with our own packaging along with all other packaging materials required to protect the product. The contract also means that we, as consultants, will assume the role as Ericsson's packaging specialists. We will develop, in close collaboration with the client organization, appropriate product protection as new telecom products are released. This contract is, without a doubt, one of the most important events in Nefab's history. While the contract will involve increased sales, the most important benefit will be the development of our expertise as a company, which will serve as a foundation for continued profitable growth. While Ericsson is our biggest customer, accounting for approximately one- fourth of invoiced sales, we are also a supplier to a majority of the other players within the telecom industry. Nortel has been one of our fastest-growing customers in recent years. Other important customers within the industry include Alcatel and Nokia. Combined, the telecom industry accounts for 43% of our invoiced sales. Together with companies in the mechanics, plastics, electronics and software industries, we play an important part in the supply chain that, in the end, results in individual consumer use of telephones. Nefab's growth over the past 12-month period (April - March) was 32%. We estimate that we have about 10% of the total potential market, which we estimate to be around SEK 5 billion. We will continue to focus on the telecom industry. Our calculations show that shipping volumes will grow by approximately 15% annually. It is our ambition to acquire market share and grow faster than the market. This, in combination with the fact that we have growth potential by offering customers other services and a more complete solution, means that the rate of growth of invoiced sales in this segment should exceed 15% in coming years. The NEFAB ExPak (export packaging) business area stands to gain the most from successes in the telecom equipment industry. Not surprisingly, this business area has demonstrated highly favorable development. Profitability for the business area is good. The other business area, NEFAB RePak (reusable packaging), has experienced a period of slower growth, although we are starting to see an increase in sales again. The business area has been posting profits again since autumn 1999. Its most important segment is the automotive industry. Currently, that segment represents a modest share of our total invoiced sales, but we have concluded that there are good growth opportunities. Over the past year, we have reviewed various niche markets within the automotive industry and I am convinced that this effort will yield results. The reason for my optimism regarding the automotive industry is that reusable packaging is often the best choice from both a business economic and environmental standpoint. Nefab's environmental position in the transport packaging market is good. This is true not only of its reusable packaging, but also of its export packaging. During 1999, our sales in North America grew very rapidly. During the latest five-year period, sales increased on average 30% per year. North America now accounts for about 15% of our total sales and is, as a result, a very important market. We believe there will be continued positive development and will therefore be investing in more production capacity at the Peterborough, Canada facility. After the expansion, capacity in North America will total around SEK 300 M. Just over two years ago, we started up a facility in China. During those two years, the unit has developed in a very positive manner. Volume has grown rapidly, primarily in the telecom equipment industry, and the unit is now profitable. We have great expectations for the future and are consequently planning to expand capacity in China as well. A new facility is expected to be ready there by September of this year. Investments will provide the company with an anticipated production capacity of around SEK 100 M. The positive development of the operations in Europe has continued. We have a very strong market position on several markets, and expect to be able to grow together with important customers the coming years. The capacity used in Europe is relatively high, and therefore we will establish a new production plant in Estonia. Estonia is a suitable location from a logistic point of view. With a big part of the raw material purchased in Russia, we can supply the European markets in a cost-effective way. The investment will add Group capacity with approximately SEK 100 M. The three projects that the Board of Directors has decided upon, will result in an investment of about SEK 100 M. Our most recent major project, located in Brazil, has seen a number of setbacks. We are now, however, observing a slow but steady increase in volume and I am optimistic that we will be able to register our first profitable operational month during this year. This spring, we acquired the minority share in the company, which is now wholly owned by Nefab. Earnings have been strongly influenced by the market initiatives under way in North America, China and Brazil. There has been a significant financial burden for eight quarters. Now, as we start to earn income from these new markets, this will have a very positive effect on the company's earnings. During 1999, profit after net financial items was SEK 36 M, a considerable improvement over conditions in 1998. Of this SEK 36 M, SEK 27 M was earned during the last two quarters. The positive growth trend continued during the first quarter of 2000, which was the Group's best ever. Growth was 26% and profit after net financial items was SEK 21 M. That corresponds to a net margin in line with the company's long-term goal of 9%. Return on capital employed was 24%. Based on the most recent 12-month period, we have reported earnings of SEK 57 M. Since the tax burden has now returned to more normal levels, profit per share has increased considerably, amounting to SEK 2.51 for the first quarter. I foresee that invoiced sales will continue to increase. In 1994, we set a goal of SEK 1 billion for sales in the year 2000. That goal corresponded to annual growth of 15%. We will be close to achieving this goal this year. It is primarily the telecom equipment industry that is behind this growth. Even the more project-oriented sales within the NEFAB RePak business area are expected to see positive development this year, thanks to contracts with customers in the automotive industry. For 2000 as a whole, profit after net financial items is expected to be twice as high as in 1999. In other words, I am very positive about Nefab's potential for the coming year. We hold a strong market position and our most important customer segment, the telecom equipment industry will, in all likelihood, continue to expand. I have mentioned a number of investments in increased capacity during my presentation. One could speculate as to whether we are moving into a new period of activity that will weigh down our earnings. These investments are, however, of a completely different character compared with the startup projects in China and Brazil. We are expanding already established platforms, which is a much smoother process. It is my estimation that these projects will not involve anywhere near the same burden on our earnings as previously implemented activities have done. With that, shareholders, I conclude my presentation of the Nefab Group's operations for 1999. Thank you for your attention. Lars-Åke Rydh CEO & President ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/27/20000527BIT00020/bit0001.doc http://www.bit.se/bitonline/2000/05/27/20000527BIT00020/bit0002.pdf