Year-end report 1998 Vasakronan AB

[REMOVED GRAPHICS]Report on 1998 Operations February 18, 1999 Scancem's highest earnings ever Earnings increased to SEK 2,076M (1,350) - the highest ever recorded by Scancem. Excluding items affecting comparability totaling SEK 600 M, earnings were 9 percent higher than last year. Business conditions were more favorable in most principal markets and productivity improved. Profit per share after full tax was SEK 26.90 (17.55); excluding items affecting comparability, profit per share was SEK 18.55. The board proposes that the dividend be raised to SEK 12.00 per share (7.50), of which SEK 4.00 is a result of the capital gain on the sale of Gyproc Group. Scancem's future structure will determine how the Group develops during 1999. It is therefore too early at the present stage to give a more detailed earnings forecast. Based on the anticipated market situation, earnings generated by Group units are expected to remain strong. 1998 1997 Net sales, SEK M 17,560 16,070 Earnings after financial items, SEK - including items affecting comparability 2,076 1,350 - excluding items affecting comparability 1,476 1,350 Profit per share, SEK - including items affecting comparability 26.90 17.55 - excluding items affecting comparability 18.55 17.55 Dividend (proposed/actual), SEK 12.00 7.50 Return on capital employed, % - including items affecting comparability 18.3 12.9 - excluding items affecting comparability 14.1 12.9 Equity ratio, % 48 43 Debt-equity ratio, times 0.48 0.70 Figures in parentheses refer to the corresponding period of 1997. Scancem's highest earnings ever Scancem's earnings after financial items increased in 1998 and totaled SEK 2,076 M (1,350). Earnings in 1998 were the highest ever recorded by Scancem, even after deduction for items affecting comparability totaling SEK 600 M net; excluding these items, earnings were 9 percent higher. The more favorable market situation in the majority of Scancem's principal markets in 1998 was the primary factor behind the Group's continuing high earnings performance. Improved productivity was another contributing factor. After the divestment of the Gyproc Group business area in the fall of 1998, Scancem's operations were further streamlined and the Group's strong financial position was improved still more. Sales increased 9 percent Net sales of the Scancem Group totaled SEK 17.6 billion (16.1), an increase of 9 percent. Excluding the effects of exchange rate changes and company acquisitions, a total of SEK 0.3 billion, sales increased SEK 1.2 billion, or approximately 7 percent. The Gyproc Group business area was included in Group sales up to and including November 1998 and contributed SEK 0.9 billion. Net sales of the Scancem Group in markets outside the Nordic region amounted to SEK 8.2 billion (7.2), corresponding to 47 percent (45) of total sales. Cement accounted for 46 percent (45) of sales, ready-mixed concrete and aggregates for 29 percent (27) and other building materials for 25 percent (28). Earnings after financial items, SEK 2,076 M (1,350), include items affecting comparability totaling SEK 600 M net (0). Excluding these items, earnings were SEK 1,476 M (1,350), an increase of slightly more than 9 percent. Items affecting comparability include a capital gain on the divestment of the Gyproc Group business area, expenses for writing down the value of fixed assets, and provisions for restructuring costs, primarily in Castle Cement. In addition, earnings in 1998 were negatively affected by losses and provisions related to Scancem International's coal trading operations, and by bad debt losses. Scancem's operating income, excluding items affecting comparability, was SEK 1,901 M (1,667), up 14 percent. Net financial expense totaled SEK 425 M (net expense of 317). The increase was attributable primarily to a higher average net indebtedness and increased interest rates for loan financing in GBP. Profit per share after full tax was SEK 26.90 (17.55). Excluding items affecting comparability, profit per share was SEK 18.55 (17.55). Return on capital employed increased to 18.3 percent (12.9). Excluding items affecting comparability, return on capital employed rose to 14.1 percent (12.9). Return on stockholders' equity after tax was 17.3% (12.8); 5 percentage points were attributable to items affecting comparability. Gross investments in fixed assets and shares totaled SEK 1,507 M (1,835), of which SEK 334 M (705) was related to company and share acquisitions, and SEK 1,173 M (1,130) to investments in fixed assets. Of capital expenditures on fixed assets, SEK 444 M (537), or 38 percent (48), was invested in companies outside the Nordic region. All business areas reported higher earnings from operations Cement Cement Nordic's earnings after financial items increased 17 percent, compared with 1997, primarily due to higher cement shipments in Sweden and Finland (up 15 percent in both countries). Volumes declined 2 percent in Norway. Exports from Sweden and Norway also decreased to SEK 1.44 million metric tons (1.75). Scancem International's earnings after financial items were slightly higher than last year. Stronger earnings in the United States and Africa, as well as increased revenues from cement trading, were offset by losses and provisions related to coal trading operations. Cement and clinker shipments increased 18 percent in the U.S. and 12 percent in Africa. Castle Cement's earnings after financial items rose 13 percent, primarily due to improved price levels. Cement shipments were more or less unchanged. Concrete and Aggregates Rudus Group's earnings after financial items were slightly higher than in 1997. Increased shipments of ready-mixed concrete and aggregates in Finland, the Baltic states and Poland boosted earnings, while the crisis in Russia resulted in write-downs and exchange losses. Euroc Beton's earnings after financial items were considerably higher than last year. The increase, nearly 40 percent, was due to higher delivery volumes for ready-mix and aggregates in Sweden and Norway, and to sharply improved earnings in precast assembly unit companies in Finland. Building Materials Optiroc Group's earnings after financial items were marginally higher than in 1997. Shipments of premixed products increased in all markets. However, earnings were reduced slightly by stiffer price competition, restructuring costs in Sweden and costs for establishing operations in Poland. Earnings of lightweight aggregate companies also decreased, due mainly to lower sales in Norway. In addition, brick companies posted slightly lower earnings. The divestment of Stråbruken Mineral resulted in a substantial capital gain. Proposed dividend The board proposes that the dividend be raised to SEK 12.00 per share (7.50), of which SEK 4.00 is a result of the capital gain on the sale of Gyproc Group. Outlook for 1999 Continuing growth is expected in Sweden, Finland, Poland, the United States and African markets. The market is expected to decline further in Norway and Denmark. The trend of the U.K. and Russian markets is more uncertain. Scancem's future structure will determine how the Group will develop in 1999. It is therefore too early at the present stage to give a more detailed earnings forecast. Based on the anticipated market situation, earnings generated by Group units are expected to remain strong. Annual General Meeting The Annual General Meeting will be held on May 26, 1999 in Malmö. The Annual Report (Swedish version) is expected to be distributed to stockholders in the beginning of May. Consolidated income statement, SEK M 4th quarter 1998 1997 1998 1997 Net sales 17,560 16,070 4,461 4,266 Operating income, excluding items 1,901 1,667 396 369 affecting comparability Items affecting comparability 600 600 Operating income 2,501 1,667 996 369 Financial items -425 -317 -98 -45 Earnings after financial items 2,076 1,350 898 324 Earnings after tax 1,438 935 664 283 Consolidated balance sheet, SEK M 1998 1997 Intangible assets 2,351 2,438 Tangible assets 10,255 10,594 Financial assets 1,238 745 Current assets 5,220 4,710 Total assets 19,064 18,487 Equity 8,922 7,699 Minority share of equity 266 296 Noninterest-bearing liabilities, 4,538 4,327 including provisions Interest-bearing liabilities 5,338 6,165 Total equity, provisions and 19,064 18,487 liabilities Consolidated statement of changes in financial position, SEK M 1998 1997 Operations Operating income 2,501 1,667 Reversed amortization, write-downs, capital gains, shares in earnings, 398 1,103 etc. Financial items -394 -301 Taxes -549 -419 Change in working capital -90 -264 Cash flow in divested companies -181 - 1,685 1,786 Investing activities Acquisitions of shares and tangible assets -1,507 -1,835 Divestments of companies and tangible assets 1,589 101 Cash flow from investing activities 82 -1,734 Cash flow after investing activities 1,767 52 Financing activities Decrease/increase in financial liabilities/assets -938 350 Dividend to stockholders -400 -346 Translation differences, etc. -123 -292 Cash flow from financing activities -1,461 -288 Increase/decrease in liquid funds 306 -236 Liquid funds at December 31 626 326 Other key ratios 1998 1997 Operating margin, % 10.1 10.0 Times-interest-earned, times 5.0 4.2 Net loans, SEK M 4,389 5,614 Number of employees at December 31 10,965 11,249 Scancem AB Net sales and earnings per business area SEK M Net sales Operating Earnings Return on income after capital financial employed in items operations % 1998 1997 1998 1997 1998 1997 1998 1997 Cement Nordic* 3,14 3,17 661 582 585 499 >20 18 2 9 Scancem 4,39 3,80 383 384 342 336 20 >20 International 5 0 Castle Cement 2,15 1,94 269 237 162 143 10 10 1 9 Rudus Group 1,63 1,37 142 113 106 98 13 11 6 7 Euroc Beton 2,82 2,49 209 152 171 123 14 11 2 4 Optiroc 3,52 3,36 330 311 232 230 12 12 7 3 1) Gyproc 874 870 122 116 124 116 >20 Other 192 240 -135 -148 -166 -115 2) operations Central amortization of -80 -80 -80 -80 consolidated 3) goodwill Items affecting 600 600 comparability 4) Intra-Group - - sales 1,17 1,20 9 2 5 5 Scancem Group 17,5 16,0 2,50 1,66 2,07 1,35 18 13 ) ) 60 70 1 7 6 0 *of which, >20 >20 Finnsementti 798 708 232 206 231 200 Scancem Group 16,6 15,2 2,37 1,55 2,00 1,28 17 12 proforma excl 86 00 9 1 0 5 Gyproc Group 6) 1) Gyproc Group is included up to November30, 1998. 2) Including unallocated central operating expenses, interest including trading, and Group adjustments. 3) Including amortization of goodwill related to the acquisition of 50 percent of Scancem Group Ltd in 1996, and to the acquisition of Partek/Metra's building material operations in 1993. 4) Including a capital gain on the divestment of the Gyproc Group business area, nonrecurring write-downs/restructuring costs related to Castle Cement and aggregate operations in the United States, and provisions for losses in project-related activities in Africa. 5) Refers to the return on total capital employed on a Group level 6) Including 4 percent interest on change in net liability . ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/18/19990218BIT00730/bit0001.doc http://www.bit.se/bitonline/1999/02/18/19990218BIT00730/bit0002.pdf