Interim Report january - september 1999

INTERIM REPORT JANUARY - SEPTEMBER 1999 [REMOVED GRAPHICS] [REMOVED GRAPHICS] Development in the third quarter was similar to the trend in the second quarter. In the industrial minerals segment, that is, mainly construction and civil engineering related, the positive trend in the US and Southern Europe continued, while the important German market remained weak, as well as South America. The countries in Southeast Asia are showing signs of recovery, but from a very low level. Overall, we expect a successive increase in demand in the industrial mineral area. As a result of the low metal prices that prevailed earlier in the year, investments in the area of metallic minerals remain at an exceptionally low level. As a consequence of the low metal prices, many customers have also reduced their stocks of wear and spare parts. Increased demand and production cutbacks in recent months has resulted in rising metals prices. Market prospects are improving and we see signs of increased demand for to next year. The three important internal programs announced for 1999 are proceeding as planned. -Inventory reduction program has resulted in a reduction of inventory of SEK 250 M since the first quarter. -Program for increased efficiency through coordination of acquired companies has resulted to date in a cost level for next year which has been reduced by SEK 60 M. -With the aim of further increasing wear and spare part sales, work is proceeding as planned for introduction of new service offerings at the beginning of next year. ORDER BOOKINGS [REMOVED GRAPHICS] Third quarter Including SEK 65 M contributed by acquired companies, order bookings amounted to SEK 3,089 M, compared with SEK 3,183 M in the corresponding period last year. Order bookings for service and parts rose SEK 188 M and for equipment by SEK 68 M. Major projects declined by SEK 351 M. Project orders normally show major fluctuations, but are currently affected by the low level of investment in the mining industry. Third-quarter order bookings in Europe amounted to SEK 1,318 M (1,405). Realignment of the product offering as a result of changes in acquired companies as well as reduced investment levels in Eastern Europe affected order bookings. Order bookings in North America rose to SEK 947 M (688) due to continued favorable trends in the construction and civil engineering industries. Most of the increase is attributable to the US. Order bookings in Asia Pacific were SEK 354 M (544). The difference is attributable to major project orders booked in the corresponding period a year earlier. Order bookings in South America amounted to SEK 209 M (266). In local currencies, order bookings were unchanged. In Africa and the Middle East, order bookings amounted to SEK 261 M, at a level corresponding to the 1998 period (277). [REMOVED GRAPHICS] First nine months Total order bookings amounted to SEK 9,830 M (11,302), including SEK 115 M from companies acquired during the period. The difference compared with 1998 is due mainly to the weak start of the year. Orders booked during the first quarter of 1998 reached record-heights for Svedala on the strength of several major project orders from Iran, among other markets. 1 INVOICED SALES Third quarter Invoiced sales amounted to SEK 3,378 M (3,416), including SEK 60 M from acquired companies. Sales of service, spare parts and wear products amounted to SEK 1,563 M (1,509), corresponding to 46% of total invoiced sales. Sales in Europe were unchanged, amounting to SEK 1,399 M (1,410). The same situation applied in North America, where sales totaled SEK 964 M compared with SEK 973 M in the year-earlier period. Invoiced sales in the Asia Pacific region declined to SEK 310 M (356) in the third quarter due to lower investment in Australia in the metallic minerals segment. In South America, invoicing declined to SEK 200 M (374) due to the recession in Brazil. About SEK 72 M of the decline is due to currency translations as a result of the devaluation of Brazil's currency. Invoicing in Africa/Middle East rose to SEK 499 M (276), due to ongoing project orders. First nine months Total sales invoiced amounted to SEK 10,068 M (10,315), including SEK 115 M attributable to acquired companies, while currency movements had an insignificant effect on total invoicing. Reduced investments in equipment for processing of metallic minerals and the business climate in Brazil were the reasons for the difference. Sales of service and parts accounted for 43% of total Group sales, calculated over the most recent 12-month period, with sales of equipment for industrial minerals accounting for 52%. Equipment used to process metallic minerals accounted for the remaining 5% of Group sales. PROFIT Third quarter Operating profit amounted to SEK 161 M (190). The operating profit from sales of service and parts was SEK 184 M, corresponding to an operating margin of 12%, while equipment accounted for SEK 20 M, with an operating margin of 2%. The change in earnings by region is attributable mainly to changes in invoicing. [REMOVED GRAPHICS] Net financial expense in the third quarter was SEK 70 M (expense: 57). Accordingly, profit after net financial items amounted to SEK 91 M, compared with SEK 133 M in the year-earlier period. First nine months of 1999 Operating profit amounted to SEK 513 M (651). Profit attributable to sales of service and parts amounted to SEK 517 M, corresponding to an operating margin of 12%. Operating profit attributable to equipment sales amounted to SEK 94 M, with an operating margin of 2%. Measures decided to date in the ongoing project to improve internal efficiency have affected earnings negatively in the amount of SEK 20 M due to restructuring. As a result of these restructuring measures, the cost level will be SEK 60 M lower next year. Consequently, compared with 1999, the positive effect on earnings will be SEK 80 M. [REMOVED GRAPHICS] Currency movements during the first nine months of 1999 yielded favorable effects on operating profit amounting to SEK 113 M, most of which is attributable to positive effects of exports from Brazil following the country's devaluation in the beginning of 1999. Favorable currency effects are reported in end-customer markets. The calculation does not take into account the adverse effects of devaluation in the region. Information has been received from SPP regarding allocation of pension funds. The amount is SEK 86 M and is not recognized as income in this report. In 2 accordance with SPP´s current rules, the company is eligible for cash repayment of the entire amount since the pension liability has been settled. Profit after net financial items amounted to SEK 420 M (484). Net financial items amounted to an expense of SEK 93 M (expense: 167). The improvement in net financial items includes a positive exchange rate difference of SEK 104 M resulting from an earlier decision to discontinue hedging of foreign net assets. [REMOVED GRAPHICS] Profit after tax in the first nine months of 1999 amounted to SEK 318 M, corresponding to SEK 6.60 per share, compared with SEK 340 M and SEK 7.10 per share in the year-earlier period. Profit per share for the most recent 12- month period was SEK 12.60. ACQUISITIONS The following acquisitions were carried out in the third quarter: Dunlop-Skega of Australia, formerly a jointly owned company in Australia, is now a wholly owned subsidiary of the Svedala Group. The company manufactures and markets linings for grinding mills. Annual sales amount to approximately SEK 100 M, with about 75 employees. Pyrotherm, another Australian company, which has developed a unique technology for drying and calcinating minerals, was acquired. The company has annual sales of about SEK 50 M. Svedala acquired Ludlow-Saylor, an American company, in the first half of 1999. Ludlow-Saylor manufactures wear parts for screens. The company has annual sales of SEK 100 M and about 100 employees. INVESTMENTS AND DEPRECIATION Group investments in property, plant and equipment, not including the assets of acquired companies, totaled SEK 324 M (330) during the first nine months of 1999. Depreciation amounted to SEK 296 M (299) during the same period. FINANCING AND CASH FLOW Cash flow before investments amounted to SEK 465 M (239) during the first nine months of 1999. Net borrowing as of September 30, 1999 totaled SEK 4,526 M, an increase of SEK 325 M since year-end 1999. The increase in net borrowing since year-end includes a loan totaling SEK 192 M, which was raised to finance acquisitions. Since the inventory reduction program was started during the first quarter of this year capital tied up in inventories declined by SEK 250 M, excluding acquisitions and currency movements. The goal set to reduce the average inventory level by SEK 500 M during a 12-month period remains in effect. PERSONNEL The Group had about 10,900 employees at September 30, 1999. Excluding acquisitions, the labor force declined by about 480 persons since year-end 1998 as a result of the ongoing program to enhance internal efficiency. ORDER BOOKINGS AND PROFIT PER REGION [REMOVED GRAPHICS] [REMOVED GRAPHICS] [REMOVED GRAPHICS] 3 [REMOVED GRAPHICS] [REMOVED GRAPHICS] [REMOVED GRAPHICS] [REMOVED GRAPHICS] [REMOVED GRAPHICS] The figures in this report are unaudited. Malmö, October 28, 1999 Thomas Oldér President and CEO The year-end report on 1999 operations will be released on February 17, 2000. The 1999 Annual Report will be distributed at the end of February/early March 2000. The Annual General Meeting will be held on April 11, 2000. [REMOVED GRAPHICS] Svedala Industri AB (publ), Informationsavdelningen, Box 4004, 203 11 Malmö Tel 040-24 58 00, Fax 040-24 58 78 4 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/28/19991027BIT01020/bit0001.doc http://www.bit.se/bitonline/1999/10/28/19991027BIT01020/bit0002.pdf