Brødrene Hartmann A/S today announced the report for the first
quarter 2008.
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revenue growth posted in Q1 has been replaced by a lower revenue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."
