Year-end report 2006

Year-end report 2006 Net sales for 2006 amounted to SEK 1 448 m (1 285). Operating profit for the year was SEK 107 m (63) and profit before taxes was SEK 92 m (62). Net profit for 2006 was SEK 62 m (35). Earnings per share for the year were SEK 7.87 (4.59). Net sales for the fourth quarter of 2006 amounted to SEK 394 m (350). Operating profit for the fourth quarter was SEK 25 m (17) and profit before taxes was SEK 21 m (17) Net profit for the fourth quarter was SEK 14 m (12) and earnings per share were SEK 1.75 (1.59). The result for the fourth quarter was affected by restructuring costs amounting to SEK 15 m. Proposed dividend SEK 3.50 (3.00) per share. Net sales and profit for the full year 2006Group sales amounted to SEK 1 448 m (1 285) for the year, an increase of 13 per cent as compared to 2005.Changes to the exchange rate of the Swedish Crown as against export currencies has, in comparison with previous year, affected turnover in a negative manner to the amount of SEK 0.4 m. The operating profit for the year was SEK 107 m (63) and profit before taxes amounted to SEK 92 m (62). The profit has been affected by one-off costs amounting to SEK 15 m. These are primarily restructuring provisions for premises and salaries in connection with the closing down of the regional service centre in the Netherlands and the restructuring of the German sales company. The profit before tax has earlier been forecasted to around SEK 90 m, including one-off costs amounting to SEK 12 m. Changes to the exchange rate of the Swedish Krona as against HL Display's export currencies has, in comparison with previous year, affected operating profit in a negative way to the amount of SEK 1.1 m. The period's net interest was SEK -9 m (-10) while translation differences and other currency effects totalled SEK -5 m (9). HL Display's most important export currencies are EUR and GBP. Net sales and profit for quarter 4, 2006Group sales amounted to SEK 394 m (350) for the fourth quarter, an increase of 13 per cent as compared to the same period in 2005. The operating profit for the fourth quarter was SEK 25 m (17) and profit before taxes amounted to SEK 21 m (17). The profit has been affected by one-off costs amounting to SEK 15 m, see above. The period's net interest was SEK -2 m (-3), while translation differences and other currency effects totalled SEK -1 m (3). The year in briefDuring 2006, HL Display has shown good sales growth in most of its markets. The growth markets in Eastern Europe and Asia have developed especially well. As a result of an organizational change in the UK sales company there was no growth in 2006. In the French sales company the sales volume was unchanged as compared to last year. The sales growth combined with the fact that efficiency improvements have begun to exert an effect, have meant that operating profit has increased from SEK 63 m to SEK 107 m. One-off costs amounting to SEK 15 m excluded, the profit margin increased to 7.4 per cent (4.8). During 2006 HL Displays factory in Suzhou, China has been taken in use. The development has been positive and the factory has also started to produce for the European market. A continued expansion of the facility has been decided. The factory is expected to deliver just over 5 per cent of HL Display's total production in 2007. Raw material cost has during 2006 been historically high. The Group's most important raw material, PVC is demonstrating an all time high price. This fact has partly counteracted the gains from the earlier efficiency improvements. Actions for improved profitabilityProfitability has been prioritized before growth the latest years. Several measures to rationalize and improve efficiency have been taken. The efforts concerning cost control continues, aiming at keeping the level of operating expenses at the same level, despite growth. The range reduction project that will increase the share of standard products is expected to generate positive results gradually in 2007. During 2006 was however noticed that the action taken so far, was not be sufficient to reach a sustainable profit level of 10 per cent which is the long term goal. Hence, HL Display launched further actions, as presented in the nine-month report. Action 1 - Change of strategy for the German marketThe sales to the German market (€6 m 2005) has been unprofitable for several years. Many customers, primarily within the German retail food sector, have put a hard pressure on prices the same time as the cost level in Germany is among the highest in Europe. Unprofitable contracts have been renegotiated. To the extent that acceptable deals could not be reached the contracts has been cancelled. The company is expected to sell for around SEK 20 m less in 2007. The resources in the German sales company have been adapted accordingly. Action 2 - Outsourcing of production areas from the factory in Falun A number of production areas at the Falun factory, primarily with an important share of manual work, have during several years suffered from unsatisfying profitability. After a careful evaluation, a network of suppliers has been elected future cooperation partners. These will gradually take over a parts of the factory's present production. The action is expected to give result in terms of increased sales and improved margins gradually starting from second quarter 2007. Action 3 - Close down of the Regional Service Centre in Bergen op ZoomThe regional service centre in the Netherlands that was established in 2003 has, in spite of internal efficiency, not been able to deliver satisfactory cost of service. The reason is that the companies being serviced in Germany, Belgium and the Netherlands has not developed in accordance with the original plans. During January the service centre will be closed down and its business will be transferred to the French service centre that earlier supplies the Spanish market. A deal has been reached with the staff, but negotiations with the landlord are still pending. During 2006 the foundation has been laid for a new production organisation with the ambition to be able to quickly transfer production between the factories and to co-ordinate support fAttachment: Year-end report 2006Text version / Internet version / Print / Close