Interim Report January-September 1999

Interim Report January - September 1999 *Net turnover, MSEK 18,085 (17,640) +3% *Operating profit, MSEK 1,166 (1,426) -18% *Profit after financial items, MSEK 799 (1,009) -21% *Net profit, MSEK 485 (721) -33% *Net earnings per share SEK 4.10 (6.00 full year 1998) *Return on equity (moving 12 months) 3% (5% full year 1998) @ Market trend Following a weak start to the year, the markets for packaging-related products gradually strengthened. An economic recovery is taking place in Europe. The North American economy is expected to remain strong. There are no signs of serious setbacks to the recovery in Asia. This market improvement mainly applies to liner, sack and kraft paper, as well as barrier-coated products. The situation for market pulp is also developing well. The market for cartonboard and corrugated board has been weaker with prospects for improvement towards the end of the year. The market trend for paper sacks is weak. The situation for sawn timber remains uncertain. The market trend for the majority of the Group's product areas is favourable. The millennium changeover is expected to lead to increased demand which will result in some stockpiling. Assessments showing underlying strong demand indicate a positive trend which will also limit the effects of a probable depletion of stocks after the new year. Sales, results and profitability In the first nine months of 1999, AssiDomän's net turnover amounted to MSEK 18,085 (17,640), an increase of MSEK 445 or 3% compared with the same period in 1998, mainly due to the acquisition of the corrugated board company Esswell. Operating profit for the first nine months of 1999 amounted to MSEK 1,166 (1,426), a decrease of MSEK 260 or 18% compared with the same period in 1998. Operating profit included capital gains from property sales of MSEK 91 (52). The changed value of the Swedish krona against AssiDomän's export currencies, including effects of forward contracts and translation differences, had a net negative impact on operating profit of approximately MSEK 108. The weak demand at the beginning of the year meant that several of the Group's paper mills implemented market-related production cutbacks. The market then improved steadily, which led to higher prices and a positive earnings trend for packaging materials and pulp. Increased raw material costs had a negative impact on earnings for the conversion operations which has not yet been compensated by higher selling prices. In total, delivery volumes in the first nine months of 1999 increased slightly compared with 1998. Since price increases implemented at the end of the period failed to compensate fully for earlier lower prices, the average price level during the period was down slightly for most products. A continued negative development for sawn timber led to less favourable earnings for the period for AssiDomän's sawmill operations. During the period, the forestry operations were mainly characterised by lower volumes from the Group's own forests, leading to reduced earnings. These lower volumes were due partly to the distribution of Sveaskog AB and partly to the fact that the felling volume was higher than normal in the previous year and adjustment to a more long-term level is now taking place. Taken as a whole, the lower earnings compared with the first nine months of 1998 were due to the trend in the forestry and sawmill operations. The less favourable earnings, compared with 1998, for packaging paper, containerboard and pulp were compensated by a favourable earnings trend in the conversion operations. Compared with the second quarter of 1999, net turnover fell by MSEK 612 or 10% in the third quarter, mainly due to seasonal fluctuations and the fact that, following the distribution, Sveaskog ceased to be part of the Group after 14 June this year. Operating profit for the third quarter amounted to MSEK 372, a decline of MSEK 117 or 24% compared with the second quarter. Earnings in the industrial operations continued to improve while earnings for the forestry operations declined. The improved earnings in the industrial operations are attributable to packaging materials and pulp while earnings for the conversion operations declined, partly due to seasonal factors and partly because of higher raw material prices. The changed earnings for the forestry operations were mainly due to seasonal fluctuations and a consequence of the distribution of Sveaskog. AssiDomän's profit after financial items amounted to MSEK 799 (1,009), a decline of MSEK 210 or 21%. Net financial items amounted to MSEK -367 (-417). The estimated tax charge amounted to MSEK 312 (284), corresponding to approximately 39% of pre-tax profit. The higher tax rate compared to previous years is due, among other things, to a changed distribution by country of taxable profits. The result for the period for 1999 included aggregated non-recurring income in the third quarter in a net amount of MSEK 26, of which net financial items accounted for MSEK -6. Return on capital employed in the period October 1998 - September 1999 amounted to 5% (8) and return on equity in the same period was 3% (4). For the full year 1998, return on capital employed was 7% and return on equity 5%. AssiDomän's target for return on equity is 13% over a business cycle. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/29/19991029BIT00020/bit0001.doc The full report http://www.bit.se/bitonline/1999/10/29/19991029BIT00020/bit0002.pdf The full report