STOCKHOLM, Sweden, Feb. 27, 2002 (PRIMEZONE) - Bong Ljungdahl AB:
-- The weakening economy and production disturbances in connection
with the now completed restructuring programme have adversely
affected the result.
-- The operating profit (excluding items affecting comparability) for
2001 as a whole amounted to SKR 40 million (181). The operating
profit for the fourth quarter amounted to SKR 2 million (44). Non-
recurring costs of SKR 4 million were charged against the result
for both the year and the quarter.
-- Cost reduction measures and capacity adjustments during the fourth
quarter are expected to reduce the annual cost base by SKR 30
million.
-- The result after net financial items (excluding items affecting
comparability) for 2001 as a whole was a loss of SKR 34 million
(profit 116).
-- Cash flow during the fourth quarter amounted to SKR 41 million, an
improvement of SKR 60 million on the third quarter
-- The board and the president propose to make a rights issue for
some SKR 150 million in combination with a convertible loan stock
programme for the group's employees, and that no dividend be paid
for 2001.
Bong is a fast growing international envelope company. The Group has an annual turnover of some SKr 2.4 billion and some 1,700 employees. It has the capacity to manufacture some 15 billion envelopes a year at its facilities in Sweden, Denmark, Norway, Finland, Germany, Great Britain, Ireland, Belgium, Poland and Estonia. In recent years Bong has played an active role in the structural transformation of the European envelope industry and sees attractive opportunities for further expansion and development. Bong is a public limited company and its shares are listed on Stockholmsborsen's "O" list.
The Market
After having displayed relatively healthy growth for much of 2000, the European envelope market weakened in 2001. In line with the slackening in the international economy, the deterioration became more apparent during the year and gradually spread in geographical terms. This, in combination with the global political events in the autumn, led many customers to adopt a cautious attitude towards new sales campaigns and marketing activities, which had a particularly serious effect on the direct mailing-related product segments. In total, the envelope market in Europe is believed to have declined in 2001 by around 4-5 per cent in volume in relation to the previous year. The weak market situation resulted in sales shortfalls at several of the Group's units.
Apart from the slackening due to the state of the economy, the very extensive restructuring programme carried out by the Group in connection with the integration of newly acquired units caused a reduction in capacity and service standards during the implementation phase, which resulted in loss of market share. The integration and structuring programme has now been completed and efficiency and service standards have been restored to their planned levels.
Turnover And Result Fourth Quarter 2001
Turnover fell by 7 per cent during the fourth quarter and amounted to SKr 596 million (644), which, after adjustment for acquisitions, price changes and currency effects, was a decline of some 14 per cent in volume in relation to the corresponding period in the previous year. The low sales during the quarter can be explained to some extent by the exceptionally short working month in December.
A cost-reduction programme, which included capacity adjustments in some of the production departments, was carried out during the fourth quarter with the object of adapting the Group to the weaker market conditions. The programme, which affected more or less all units, had been completed according to plan by the end of 2001 and involved a reduction in the work force of just under 100. The annual effect of the measures is estimated at some SKr 30 million, with their full impact showing through from the beginning of 2002.
The operating profit for the fourth quarter amounted to SKr 2 million (44), after charging costs of SKr 4 million for the above mentioned cost- reduction programme.
Turnover and Result January-December 2001
During the January-December 2001 period, the Group's turnover increased by 2 per cent to SKr 2,395 million (2,347), of which 4 percentage points can be attributed to acquired units, 1 point to price increases/changes in product mix, and 7 points to currency fluctuations. For comparable units, therefore, the delivery volume declined by 10 per cent.
The operating profit (excluding items of SKr 5 million affecting comparability) amounted to SKr 40 million (181) after charging non- recurring costs of SKr 4 million. The operating margin was 1.7 per cent (7.7). A loss of SKr 3 million was included in the consolidated operating result for 2001 on account of the Binder Division, which was sold in December 2001. The result after net financial items (excluding items of SKr -5 million affecting comparability) was a loss of SKr 38 million (116). The Group's financial costs for the full year and the fourth quarter include a capital loss of SKr 1.6 million on the divestment of the Binder Division. The loss per share after tax and full dilution (excluding items affecting comparability) was SKr 2.85 (8.75).
Among the main explanations for the lower profit are the significantly lower level of capacity utilisation due to generally slacker demand and narrower gross margins resulting from the extremely steep increase in the price of fine paper - the Group's most important input item - in the previous year.
Over and above these factors, the very far-reaching restructuring programme that was carried out during the first half of the year in connection with the integration of newly acquired units caused serious disturbances. The programme, which affected most of the Group's units, and included the closure of four factories and the relocation of one- third of all the Group's envelope machinery, had a major adverse effect on the Group's productivity and delivery capacity. This project has now been completed and the intended structure has been established. Efficiency, productivity and service standards had broadly been restored by the end of the year.
The over-heating that was characteristic of the fine paper market in 2000, and which led to steep price increases, has now reverted to a more balanced situation. Paper prices stabilised during the first half year and have been showing a slightly declining trend since the autumn of 2001. However, future developments are more difficult to judge.
Items affecting comparability of SKr 5 million consist of costs incurred on the acquisition of Stronghold Group and the planned share issue in connection with this, both of which were cancelled.
Significant Events in 2001
As one stage in the concentration on envelopes the Group sold its Binder Division in December 2001. It was bought by a company controlled by Per Fransson, formerly the Division's manager and a vice president at Bong. In view of the buyer's association with the Group the transaction is conditional on it receiving the approval of Bong's shareholders at the Annual General Meeting on 14 May 2002. Turnover of SKr 56 million and an operating loss of SKr 3 million are included in the consolidated profit and loss account for the 2001 financial year on account of the Binder Division, which has some 65 employees. The sale resulted in a capital loss of SKr 1.6 million, which is stated amongst financial items
The Group's Internet-based e-commerce system, known as envelop-e(r), was launched in 2001 for customers of the Swedish and Norwegian units. The portal is regarded as user friendly and cost effective and we expect to continue to attract growing numbers of visitors and rising demand. We are currently planning to launch the system at the Group's other units.
Significant Events After 2001 Financial Year
The marketing of the TYVEK(r) envelope, a product type offering especially effective protection of contents, has so far been handled by Eurotrade Business Products Ltd, a half-owned associate company in England. As announced in previously released information, this arrangement has been terminated and Bong began to canvass the market direct and on own account in January 2002. Following this change, the Group's total interest of 50 per cent of the capital and votes in Eurotrade Business Products Ltd was sold in January to the Curtis group. The book value of the shares in Eurotrade was SKr 1 million and the divestment is expected to have only a marginal effect on the result.
Contracts have been exchanged in February 2002 to sell the Group's industrial property in Norway for NKr 45 million (=SKr 52 million). The property, which is located in Stokke just outside Tonsberg, consists of some 10,000 square metres of factory, warehousing and office premises. It is being bought by a consortium of private, Norwegian property investors. The transaction, which is one stage in the reduction in capital tied up in the Group, generated a capital gain of some SKr 4 million. Completion is expected in March 2002 once the buyers have obtained the necessary official consents. Bong has signed a long-term rental agreement with the buyers and intends to continue its business in the property on an unchanged basis.
Liquidity, Cash Flow and Financing
The Group's liquid funds at the end of the reporting period amounted to SKr 43 million (70), excluding approved but undrawn credit facilities of SKr 116 million. After investment activities (excluding company acquisitions and divestments) the business absorbed cash of SKr 30 million (positive cash flow of SKr 182 million, of which the proceeds of property divestments amounted to SKr 130 million). The fourth quarter cash flow after investment activities (excluding company acquisitions and divestments) amounted to SKr 41 million, which was an improvement of SKr 60 million on the third quarter of 2001.
Net debt at December 31, 2001 amounted to SKr 1,141 million (1,017). The weakening of the Swedish krona has caused an increase of SKr 76 million in the Group's net debt.
The Group's closing equity amounted to SKr 658 million (675). The equity ratio at the year-end was 28.1 per cent (28.8) and the debt equity ratio was 1.73 (1.51).
Capital Expenditure
Net fixed capital expenditure during the year, excluding company acquisitions, amounted to SKr 61 million (101 after adjustment for the previous year's property divestments of SKr 130 million) and reflects the planned adjustment to a considerably lower relative level than in recent years. The year's investments related mainly to production machinery for the envelope units. Capital expenditure is expected to remain low in 2002.
Employees
The average number of employees in the Group was 1,854 (1,892), of which some 125 joined the Group as a result of acquisitions. The number of employees at the end of 2001 was 1,693, with the divestment of the Binder Division accounting for a reduction of 64 in the total.
Parent Company
The parent company's business consists of the administration of its operative subsidiaries and the provision of Group management functions. The result after net financial items was a loss of SKr 20 million (profit 114).
Rights Issue
With the object of strengthening the Group's capital base and making possible further growth and consolidation of the Group's leading position on the European envelope market, the Board decided today to recommend the Annual General Meeting to carry out a rights issue to existing shareholders for some SKr 150 million. The issue will be combined with a convertible loan stock programme for the Group's employees. Further details will be released together with the notice convening the Annual General Meeting on May 14, 2002.
Dividend
In line with the Group's dividend policy and in view of the weak result for the year, the Board proposes that no dividend be paid for 2001.
Outlook
There is still great uncertainty regarding the future development of the international economy, which makes it difficult to assess market developments in the coming months.
In the longer term, however, we are still of the opinion that the market will grow at a sustainable rate of 2-3 per cent a year. The Group's strong position of leadership on the European envelope market, the effects of the now completed structuring measures, and the potential for further consolidation in the European envelope industry, therefore mean that the growth prospects for Bong's sales and earnings are regarded as bright.
The same accounting principles have been applied as for the annual report for 2000.
Coming events: May 14, 2002 Interim report at March 31, 2002 May 14, 2002 AGM August 16, 2002 Interim report at June 30, 2002 November 1, 2002 Interim report at September 30, 2002
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