Revenue for Q1 2008 came to DKK 416 million, up 9% from the same period last year.
Operating result (EBIT) for Q1 2008 stood at DKK 34 million against DKK 5 million last year. The normalised operating result (EBIT) for Q1 2008 came to DKK 34 million against DKK 19 million last year, up 79%.
Consolidated earnings (EAT) for Q1 2008 came to DKK 16 million against the year-earlier level of DKK -3 million, reflecting an increase of DKK 18 million after allowing for DKK -1 million in effect of discontinued operations in Q1 2007.
Equity at 31 March 2008 came to DKK 226 million, reflecting an improvement of DKK 6 million from the opening level.
Hartmann increases the revenue forecast for the full year 2008 by DKK 20 million, from approx. DKK 1,460 million to DKK 1,480 million. The revenue growth posted in Q1 has been replaced by a lower revenue level in April than expected.
General operational improvements in Q1 and April: Because of the higher activity level and the strong growth in the European core business in the first three months of the year and a preliminary operating result (EBIT) for April 2008 on a par with expectations, the Group is isolated making an upward adjustment of approx. DKK 10 million of the operating result forecast for the full year.
Changed market situation for Industrial Packaging: Industrial Packaging is a minor business area and posted 15% of the Group revenue in 2007.
As announced in stock exchange release no. 8/2008 of 16 May 2008, the largest customer of the business area Industrial Packaging has announced its intention to gradually phase out purchases of Hartmann's moulded-fibre packaging products, starting in 2009 and ending late that year. No revenue effect is expected from this in 2008. The customer in question accounted for approx. 65% of the revenue of Industrial Packaging in 2007.
The knowledge of the declining market potential and the closing down of the industrial packaging activities in North America and Asia have caused that Hartmann already before the loss of the big customer adjusted forecast for this business area.
However, Management finds that Industrial Packaging still has a customer potential for moulded-fibre packaging solutions that is expected to compensate to some extent for the lost revenue. For that reason Hartmann has in 2007 initiated a sales and development process focused on sales of moulded-fibre packaging to other high-volume segments in Europe. Management believes that there is a potential within the area of food service, such as catering.
As a consequence of the changed market situation, Hartmann intends to accelerate the planned relocation of industrial packaging to its production plant in Hungary. This is expected to involve approx. DKK 8 million in non-recurring costs already in 2008. The relocation is expected to reduce unit costs.
In the Group forecast for 2009 Hartmann has calculated a 30-35% decline of revenue for Industrial Packaging compared with the 2007 level (incl. Asia and North America) and in 2010 a revenue is expected to be 25% of the 2007 level (incl. Asia and North America) based upon a surplus in sale to existing customers. Operating result for 2010 is also expected to be approx. 25% of the 2007 level (normalised).
A scrutiny of the assets of Industrial Packaging indicates that some assets cannot be removed and have no scrap value. For that reason a write-down of approx. DKK 30 million of the value of the assets in Industrial Packaging is forecast for Q2 2008. Although it will affect revenue and equity, the write-down will not affect the cash flow.
Sale of building and production line in Malaysia: The Group's operations in Malaysia and China will be closed down for good in Q2 2008. When the Annual Report 2007 was released, two conditional agreements had been signed for the sale of a building and a production line. These two agreements have now become final and the effect thereof, totalling approx. DKK 15 million, will be recognised in the result for Q2 2008.
The operating result (EBIT) forecast is adjusted on account of the above developments from the level of DKK 70 million stated in the Annual Report 2007 to approx. DKK 55 million for the full year.
The total effect of the above-mentioned items is expected to have a positive tax effect of approx. DKK 10 million on earnings before tax (EAT) for the year.
Moreover, the closure of the production plants in Asia has resulted in the reclassification in Q2 2008 (from equity to financials) of the amount of DKK 16 million in accumulated exchange losses stated in the Annual Report 2007. The reclassification relates exclusively to the income statement and has no equity or cash flow effect.
Accordingly, the earnings after tax (EAT) forecast for the year is changed from approx. DKK 20 million to approx. DKK 0-5 million.
At the Annual General Meeting on 22 April 2008 the Board of Directors was authorised to increase the company's B-share capital and abolish the system of multiple share classes conditional upon the organisation of a capital increase of a minimum nominal amount of DKK 35,075,460. If the Board decides to exercise the authority, the plan as of now is to arrange a share issue with pre-emptive rights for existing shareholders.
Provided that the subscription price decided upon reflects a certain discount, and taking into account the current listed price of the share, the net proceeds will be in the region of DKK 250 million. This is only an estimate, and it depends upon factors such as a fully subscribed issue.
Hartmann's CEO Peter Arndrup Poulsen on the result for Q1 2008:
"We had a strong quarter in the European business with strong growth in the operating result that almost doubled from the year-earlier level. This reflects a continuation of the positive trend from Q4 2007."
Peter Arndrup Poulsen on the outlook for 2008:
"We are making an upward adjustment of the amount forecast in operating result for 2008 by DKK 10 million due to increased activity levels and general operational improvements in the European core business, and by a further DKK 15 million due to the sale of a building and a production line in Malaysia."
"Due to a changed market situation for our business area Industrial Packaging we will accelerate our plans to relocate production to our production plant in Hungary. We expect the relocation to involve approx. DKK 8 million in non-recurring reorganisation costs already in 2008. We have also scrutinised our assets related to Industrial Packaging and expect to write down their value by approx. DKK 30 million in Q2 2008."
"The overall effect of these factors brings us to adjust the amount forecast in operating result by DKK 15 million, from DKK 70 million to approx. DKK 55 million."
