STOCKHOLM, Sweden, Aug. 28, 2002 (PRIMEZONE) --
Quarter January - June
Pro forma
Remaining
units
MSEK 2002 Q 2 2002 Q 1 2002 2001
Net sales 2,293 1,958 4,251 4,092
Operating profit 389 328 717 507
Profit after net 275 231 506
financial items
Sveaskog AB owns more than 99% of AssiDoman AB. AssiDoman isconsolidated in the Sveaskog Group with effect from 2002.
Operating profit for the second quarter increased by MSEK 61 or 19% compared with the previous quarter. All business areas improved their earnings. Capital gains from property sales also rose.
Operating profit for the period January - June improved by MSEK 210 or 41% compared with the same period in 2001. This improvement is attributable to the Forestry operations and Cartonboard business areas as well as lower group-wide costs. Capital gains from property sales decreased.
In June, Sveaskog concluded an agreement with Kinnevik on acquisition of approximately 200,000 ha of productive forest land and the sawmill operations within Korsnas. Following approval by the Swedish Competition Authority, the takeover was effected on 27 August.
Changes in the Group
At the end of 2001, Sveaskog AB acquired approximately 95% of the shares in AssiDoman AB. Sveaskog's holding has subsequently risen to more than 99%. Compulsory redemption procedures are under way for the remaining shares.
AssiDoman was consolidated in Sveaskog's balance sheet at 31 December 2001. Starting in 2002 AssiDoman's operations are reported in Sveaskog's consolidated accounts. Pro forma 2001 accounts have been prepared for sales and operating profit for the new Sveaskog Group.
Sveaskog primarily conducts forestry and timber sales based on its holdings which now total approximately 3.5 million ha of productive forest land. The forestry operations also include property management as well as commercial activities relating to hunting, fishing and natural experiences. The Group also includes an extensive sawmill business and the cartonboard mill in Frovi. The forestry operations are conducted under the Sveaskog name. The industrial operations are conducted under the names AssiDoman Timber and AssiDoman Cartonboard.
Sveaskog has been assigned by its owner to implement an extensive programme of property sales. A policy for property deals was adopted by the Board in June. Property sales were at a low level in the first half of the year.
In June 2002, Sveaskog and Industriforvaltnings AB Kinnevik signed a general agreement under which Sveaskog acquires approximately 235,000 ha of land, of which 200,000 ha is productive forest land, and Korsnas AB's sawmill operations (annual production approximately 160,000 m3fo) for a total purchase price of MSEK 2,060. Following the Swedish Competition Authority's approval of the acquisition, the takeover was effected on 27 August.
Sales, earnings and profitability
The decline in the global economy which started in 2001 has lessened and there are some signs of an upturn. However, there is uncertainty regarding the strength of an upturn mainly due to the unstable development of the US economy. In Europe and Japan there is also uncertainty about consumption and growth development.
Most economic assessments indicate some international growth in the second half. However, economic development is not clear-cut and there is a risk that the international business climate will remain weak for some time.
The trend for Sveaskog's products has been relatively favourable. The pulp and paper industry has been less adversely affected by the economic trend than many other sectors. This has led to continued stable demand for pulpwood. Demand for sawlogs was positively affected by a more balanced market for sawn timber. The market situation for the Group's cartonboard products has been favourable.
Second quarter
Net sales for the quarter amounted to MSEK 2,293, an increase of MSEK 335 or 17% over the previous quarter. Increased sales are reported by all business areas.
Operating profit amounted to MSEK 389, an increase of MSEK 61 or 19% compared with the previous quarter. Earnings improved for all business areas. The result for the second quarter included capital gains from property sales of MSEK 10 compared with MSEK 2 in the previous quarter.
Profit after net financial items amounted to MSEK 275 in the second quarter, compared with MSEK 231 in the previous quarter. Net financial items amounted to MSEK -114 (-97), a decline of MSEK 17 due to non- recurring fees in connection with loan conversion.
January - June
Net sales for the first half amounted to MSEK 4,251, an increase in relation to the same period of 2001 for remaining units of MSEK 159 or 4%. Sales rose for all business areas.
Operating profit amounted to MSEK 717 (507), an increase of MSEK 210 or 41% for remaining units compared with the same period a year ago. This improvement is attributable to improved earnings for Forestry operations and Cartonboard and lower group-wide costs. Timber's earnings were unchanged. Operating profit for the first half included capital gains from property sales of MSEK 12, compared with MSEK 30 in the previous year.
Profit after net financial items for the first half of the year amounted to MSEK 506. Net financial items amounted to MSEK -211.
Net tax for the period is estimated at MSEK -141, corresponding to an average tax rate of 28%. Net profit amounted to MSEK 365.
Return on net operating assets (excl. property sales) amounted to 6% during the period, compared with a set target of a minimum of 5%. Return on equity amounted to 6%.
Interest cover was 3.2. The target is a minimum of 2.0.
The average number of employees amounted to 2,325, compared with 2,432 in the previous year and 2,427 in the first half of 2001 for remaining units.
Cash flow, investments and financial position Cash flow from operating activities amounted to MSEK 444 in January - June. In the same period investments in fixed assets excluding shares amounted to MSEK 168, mostly within Cartonboard.
Interest-bearing net debt amounted to MSEK 8,501 on 30 June 2002, compared with MSEK 7,913 at year-end 2001. Debt increased due to the parent company's acquisition of additional shares in AssiDoman AB at the beginning of the year.
The debt/equity ratio amounted to 0.68, compared with the target of 1.0. The Group's visible equity ratio at the end of the period was 48%.
Business areas
Forestry operations
Forestry operations include the operating areas Forestry, Timber Market, Properties, and Hunting, Fishing and Natural Experiences.
Second quarter
In northern Sweden the market situation for softwood pulpwood was balanced. Demand for hardwood fibre remained strong which led to increased imports. Availability of pine and spruce timber was good.
In southern Sweden (especially County of Gotaland) a balanced market for softwood pulpwood changed to a surplus. For sawlogs the market situation showed a continued trend towards a surplus of pine timber and a shortage of spruce timber.
Prices only changed marginally in the different market areas.
Total wood deliveries as well as deliveries from the Group's own forests remained largely unchanged.
Operating profit (excl. property sales) amounted to MSEK 308, compared with MSEK 285 in the previous quarter. The improvement is attributable to a seasonal increase in rental income which was partly neutralised by higher costs for the Group's own forestry and lower margins in timber deals.
January - June
Operating profit for the period (excl. property sales) amounted to MSEK 593, an increase of MSEK 17 compared with the same period in the previous year. This improvement was mainly due to higher total volumes and improved efficiency in timber deals as well as lower felling costs which compensated for the effects of a slightly lower volume from the Group's forests as well as lower prices.
Timber
Second quarter
The European market for sawn timber strengthened during the period with increased demand and higher prices in local currency. The stronger Swedish krona, however, counteracted the positive price effects. Processed products remained subject to intense competition with some price pressure. Timber's delivery volumes increased compared with the first quarter.
As a major industry player, Sveaskog intends to participate in the development of a strong sawmill industry. Sveaskog regards the sawmills as an asset of long-term-strategic importance.
Operating profit for the period was MSEK 18 compared with operating loss of MSEK 5 in the previous quarter. This improvement was due to increased volumes and higher prices.
January - June
Operating profit for the first half of 2002 amounted to MSEK 13 which is on a par with the same period last year. Higher delivery volumes compensated for a negative trend within the processing operations.
Cartonboard
Second quarter
The market situation for packaging board remained stable. Demand for liquid packaging board was very favourable. Cartonboard's deliveries increased slightly over the previous quarter.
Operating profit amounted to MSEK 80 compared with MSEK 67 in the previous quarter. The MSEK 13 improvement was due to higher production levels, increased deliveries and lower production costs.
January - June
Operating profit for the period amounted to MSEK 147, an increase of MSEK 51 compared with the same period last year. The improvement was attributable to higher production levels, increased deliveries, higher prices and lower production costs.
Parent Company
Sveaskog AB owns and manages properties and shares in subsidiaries and is responsible for group-wide financing.
Net sales amounted to MSEK 198 (224). Sales are mainly attributable to the forestry operations conducted on the company's forest holdings.
Loss after financial items amounted to MSEK 303 (70 profit), of which capital gains from property sales accounted for MSEK 7 (7). The decline in earnings was due to higher interest expenses attributable to the acquisition of AssiDoman. The average number of employees was 170 (172).
Investments in fixed assets, excluding shares, amounted to MSEK 7 (7). Liquid assets and short-term investments amounted to MSEK 12 (69) at the end of the first half compared with MSEK 623 at year-end 2001. The interest-bearing net debt amounted to MSEK 13,789 (163) compared with MSEK 12,546 at year-end 2001. The increase in the net debt compared with the first half of 2001 is due to the acquisition of AssiDoman AB.
Stockholm, August 2002
Lars Skold President
Sveaskog AB (publ.) (556558-0031)
This interim report has not been reviewed by the company's auditors.
Financial calendar Interim report for January - September 29 October 2002 Year-end report January - December 18 February 2003
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