Interim Report January - September 2001

Interim Report January - September 2001 · Invoiced sales increased 8% to SEK 861 M (800). · Profit after net financial items amounted to SEK 56 M (91, of which 7 in SPP surplus funds). · Earnings per share after full tax amounted to SEK 5.30 (9.88). · Invoicing to customers in telecom equipment industry increased 7% to SEK 405 M (378). Invoicing to customers in the automotive industry rose 16% to SEK 76 M (65). · Favorable growth in Asia and Central Europe. · The cooperation with SCA Packaging develops well. · Substantial costs reductions as a result of the lower growth. Third quarter 2001 The third quarter was characterized by a continued slowdown in demand from customers in the telecom equipment industry. Sales in the third quarter amounted to SEK 264 M (285), down 7% compared with the year- earlier period. The positive effect on invoiced sales attributable to changes in currency exchange rates is estimated at approximately SEK 20 M. Order bookings amounted to SEK 250 M (272). Profit after net financial items during the third quarter amounted to SEK 15 M (33). First nine months 2001 Invoiced sales during the first nine months of 2001 amounted to SEK 861 M (800), up 8%. The positive effect on invoiced sales attributable to changes in currency exchange rates is estimated at approximately SEK 54 M. Order bookings to date this year amount to SEK 845 M (813), a 4% increase. Europe Central Europe, where the customer base primarily consists of automotive companies and other engineering companies, showed a positive trend throughout the nine-month period. The Swedish market, in which significant deliveries are made to the telecom equipment market, was affected adversely by the downturn in the industry. As a result, the number of personnel in the Swedish production units was reduced. Volumes stabilized during the third quarter. At the end of last year, an agreement was reached to expand cooperation with Flextronics, whereby Nefab assumed responsibility for delivery of complete packaging solutions to the customer's operations in Poland. A sales company was established near Gdansk for this purpose. The trend in the UK is characterized by a slowdown in the export industry. This has resulted in a weak volume trend for Nefab. The operation was restructured at the close of the period. This involved redistributing production capacity from the UK to other European units. Asia The Chinese market is continuing to develop well. Invoiced sales are mainly to customers in the telecom equipment sector. In response to increased demand from southern China, a new plant was established in the province of Guangdong toward the close of the period. North and South America After growing strongly for several years, the market in North America is now showing signs of a slowdown due to the weakened economy. Great uncertainty prevails in the market and the future volume trend is difficult to assess. 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 has been concentrated to the newly constructed production plant in Canada. Demand in the Brazilian market is weak and no tangible improvement is expected during the nearest future. Telecom equipment industry Sales to customers in the telecom equipment industry increased 7% to SEK 405 M (378), accounting for 47% of consolidated sales. Purchased products accounted for a substantial portion of the increase. The first nine months of 2001 were characterized by continued weak development in the telecom equipment market. The decline in volumes mainly affected Nefab's operations in the Nordic region, the UK and North America. On the other hand, the current trend toward relocation of production to low-cost countries is having a positive effect on Nefab's operations in China. The automotive industry and other market segments The automotive industry segment showed a positive trend. Invoiced sales rose 16% to SEK 76 M (65), corresponding to 9% of consolidated sales. An agreement valued at SEK 25 M during the coming year was signed in September with Dräxlmaier, the German manufacturer of vehicle components. The agreement relates to deliveries of returnable packaging for shipping cables. Earlier in the year an order for returnable packaging was secured from the cable manufacturer Yazaki. These two agreements are the result of a marketing campaign focused toward the market segment producing cables for the automotive industry. Sales to other market segments increased by 6% to SEK 380 M (357). Complete packaging solutions Nefab's product range has increasingly shifted from supplying a packaging to offering the customer a total solution. The product then becomes a combination of analysis, consultation and delivery of both Nefab's products and purchased products. During the first nine months of the year, the proportion of purchased products increased by about SEK 45 M. At the beginning of October, an agreement was reached with Ericsson to acquire the company's packaging pool, which is one of Europe's largest, with more than 600 users of nearly one million returnable packaging. The pool will serve as a base enabling Nefab to also develop logistics services for other customers and segments. Cooperation with SCA In May, an agreement was signed with SCA pertaining to strategic cooperation within the industrial packaging sector. The agreement relates to global cooperation on product development, service, marketing, sales and logistics. Cooperation was also initiated with the new 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 recently acquired by SCA. During the six months that SCA and Nefab have been cooperating, more than 20 projects with good potential have been identified. Earnings Profit after net financial items for the first nine months amounted to SEK 56 M (91). Surplus funds from SPP amounting to SEK 7 M were included in the year-earlier result. Changes in currency exchange rates have had a marginal effect on profit after financial items for the nine-month period. Costs totaling approximately SEK 6 M for the restructuring of operations in the UK were charged against third-quarter earnings. 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 increased, due mainly to increasing costs of technical sales support. These costs are part of a oncerted 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 both by a heavy investment volume and by the unfavorable trend of the Brazilian currency. Exchange-rate loses on loans for Brazilian operations amounted to slightly more than SEK 4 M for the period. Efforts to reduce tied-up capital within the Group were intensified and working capital was reduced by SEK 27 M during the third quarter. Combined with the current losses, restructuring of the British and American companies resulted in charges against consolidated earnings, of which the tax value has not been capitalized as a precautionary measure. This, combined with a cautious valuation of the loss carryforward deriving from the Brazilian operations, resulted in a high tax burden for the period in percentage terms. Earnings per share for the period amounted to SEK 5.30 (9.88). Nonrecurring items exerted a positive effect amounting to SEK 1.23 on earnings per share for the year-earlier period. Return on capital employed was 17.1% (31.0). Capacity and investments Group investments for the period amounted to SEK 112 M (34). Investments for the period include the acquisition of the operations of MK Specialemballage AB. In response to the demand signaled by the market during the second half of 2000, an investment program was approved in order to increase capacity within the Group. Capacity was strengthened in both Europe and North America. The production facility in Estonia in which the Group invested is expected to be ready to begin operations at the beginning of 2002. 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. The plant in Estonia is also well located from the viewpoint of logistics. The major portion of the Group's sheet materials requirement is purchased in Russia for deliveries to Europe and North America. The operations in North America were restructured with a view to concentrating production to the newly constructed plant in Canada. Production capacity in Europe also underwent restructuring, which involved closing down production in the UK. The restructuring is part of a program aimed at redistributing production to countries with a favorable cost structure. Due to the strong growth in Asia, the decision was reached to build a new production unit in Shenzhen in southern China. The unit was placed in operation during the autumn. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/31/20011031BIT00460/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/10/31/20011031BIT00460/bit0001.pdf The full report