Interim Report for January - June 2001

Interim Report for January - June 2001 · Invoiced sales up 16% to SEK 597 M (515). · Profit after net financial items amounted to SEK 41 M (58, of which 7 in SPP surplus funds). · Earnings per share after full tax amounted to SEK 4.24 (6.39). · Sales to customers in telecom equipment industry increased 20% to SEK 278 M (232). Invoicing to customers in the automotive industry rose 37% to SEK 53 M (39). · Favorable growth in Asia and Central Europe. Sales company established in Poland. · Strategic cooperation agreement with SCA Packaging. · Lower growth than expected resulted in measures to reduce costs. Continued uncertainty regarding demand in the telecom equipment industry. Second quarter 2001 The second quarter was characterized by continued slowdown in demand from customers in the telecom equipment industry. Sales in the second quarter amounted to SEK 296 M (275), up 8% compared with the year- earlier period. Sales are deemed to have been affected positively by about SEK 17 M due to changes in currency exchange rates. Order bookings amounted to SEK 284 M (287). Profit after financial items during the second quarter amounted to SEK 17 M (37). The result in the year-earlier quarter included SEK 7 M in surplus funds from SPP. First half year 2001 Invoiced sales in the first six months of 2001 amounted to SEK 597 M (515), up 16%. Invoicing is estimated to have been affected positively by about SEK 34 M due to changes in currency exchange rates. Order bookings to date this year amounted to SEK 595 M (542), a 10% increase. Europe and Asia Growth was strongest in Asia and Central Europe, while sales in the Nordic market declined compared with the preceding year The Swedish market, in which significant deliveries are made to the telecom equipment market, was affected adversely by the decline in the industry. Accordingly, the number of personnel in the Swedish production units is being reduced successively. At the end of last year, an agreement was reached covering increased cooperation with Flextronics. Consequently, Nefab assumes responsibility for delivery of complete packaging solutions to the customer's operations in Poland. Accordingly, a sales company was established outside Gdansk and deliveries will begin during September. The trend in the UK is characterized by the slowdown in the export industry. This has resulted in a weak volume development for Nefab. North America The market in North America, which has grown strongly for a number of years, is now showing signs of a slowdown due to the weakened economy. In addition, a contract with an important customer was lost during the second quarter. Operations in North America were restructured during the summer. Chicago will be the center of sales and market development for the entire North American market. Production is being concentrated to the newly constructed production plant in Canada. Telecom equipment industry Sales to customers in the telecom equipment industry increased 20% to SEK 278 M (232), accounting for 47% of consolidated sales. Purchased products account for a substantial portion of the increase. In March, an agreement was signed with the Chinese telecom equipment manufacturer Huawei, a market leader in the Chinese fixed-telephony area. The agreement means anticipated additional sales of about SEK 25 M annually. The first half of 2001 was characterized by a continued weak development in the telecom equipment market. The decline in volume for Nefab affected mainly the operations in the Nordic region, the UK and North America. However, the shift toward production in low-cost countries has benefited Nefab's operations in Asia. The automotive industry and other market segments The automotive industry segment posted a favorable development. Invoicing rose 37% to SEK 53 M (39), corresponding to 9% of consolidated sales. Sales for other market segments increased by 9% to SEK 266 M (244). Complete packaging solutions Nefab's product range has been revised increasingly, from deliveries of a packaging to offering the customer a total solution. The product then becomes a combination of analysis, consultation and delivery of both in- house produced as well as purchased products. During the first half of the year, the proportion of purchased products increased by about SEK 35 M, corresponding to slightly more than 40% of the Group's total growth in invoiced sales. In line with the endeavor to provide complete packaging solutions, the operations of MK Specialemballage were acquired at the end of 2000. These operations became a part of the Nefab Group effective March 1 this year. The company manufactures and sells packaging materials to Swedish industry. The products consist of customized cushioning and securing packaging assemblies produced from plastic foam. Cooperation with SCA An agreement was signed in May with SCA pertaining to strategic cooperation within the industrial packaging sector. The agreement covers global in production development, service, marketing, sales and logistics. Close cooperation will also be initiated with the global division for protective packaging that is currently being established by SCA in North America. The base of these operations is the North American company Tuscarora Inc., which was acquired by SCA recently. Earnings Profit after net financial items for the first six months amounted to SEK 41 M (58). Surplus funds from SPP amounting to SEK 7 M were included in the year-earlier result. The earnings for the six-month period after net financial items are estimated to have been affected marginally by changes in currency exchange rates. The successively increasing proportion of purchased products is changing the cost structure. The proportion of costs of goods sold is increasing, while overhead costs and tied-up capital - and consequently depreciation and financial expenses - are declining in relation to products produced internally. The Group's sales costs are increasing, due mainly to increasing costs of technical sales support. These costs are part of a concerted effort to increase expertise within the Group with respect to the sale of complete packaging solutions. Nevertheless, total fixed costs for the Group are now being aligned to meet the prevailing demand situation. Net financial items for the period were affected in part by heavy investment volume and the build up of inventories, and partly by the unfavorable trend in the Brazilian currency. Efforts to reduce tied-up capital in the Group have been intensified. Earnings per share for the period amounted to SEK 4.24 (6.39). The year- earlier profit per share was affected positivelyby SEK 1.23 for nonrecurring items. Return on capital employed was 19.0% (30.4). Capacity and investments Group investments for the period amounted to SEK 78 M (24). In response to the demand signaled by the market during the second half of 2000, a decision was made on an invest-ment program for increasing capacity in the Group. Capacity was strengthened in Europe as well as in North America. The investment in the production plant in Estland is scheduled to be ready for operations at year-end 2001.Due to the prevailing demand situation, the investment in Estonia has altered character. Initially planned as capacity reinforcement, the facility is now intended as a rationalization investment. Operations in North America have been restructured, whereby operations were concentrated to the newly constructed facilities in Canada. Due to the strong growth in Asia, the decision was reached to build a new production unit in Shenzhen in southern China. The unit is projected to begin operation during the autumn. Investments for the period include the acquisition of MK Specialemballage's operations. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/15/20010815BIT00490/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/08/15/20010815BIT00490/bit0001.pdf The full report