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Akbank 5.000% A | LSE:16OG | London | Bond |
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RNS Number:7599C Perstorp AB 27 April 2001 PART 1 The Perstorp Group Interim Report, three months ended March 31, 2001 In order to provide comprehensive information ahead of the planned spin-off and stock-exchange listing of the Group's flooring operations, this interim report contains financial statements for: * Perstorp excluding Pergo (pages 3-11) * Pergo - extract from interim report (pages 12-19) * The Perstorp Group (pages 20-26) * Net sales for Perstorp excluding Pergo increased by 19% and operating earnings amounted to SEK 78 m (Q1 2000: 110), adjusted for items affecting comparability. * Pergo's operating result amounted to a loss of SEK 52 m (earnings: 56); no items affecting comparability are included. * The Perstorp Group's pretax earnings amounted to SEK 23 m (230). Operating earnings, adjusted for items affecting comparability and demerged units, declined to SEK 26 m (167). * A weaker business climate is expected to result in reduced full-year operating earnings for Perstorp excluding Pergo (full-year 2000: SEK 462 m, excluding items affecting comparability). * The Board of Directors proposes that Pergo be spun off to shareholders and listed on the stock exchange. The Board also proposes a cash dividend of SEK 2.00 (4.00) per share. * Sydsvenska Kemi AB has submitted an offer for Perstorp AB and made a partial offer regarding Pergo AB. Perstorp AB - a specialized chemicals group Perstorp is about to complete the streamlining program that has been pursued by the Board of Directors and Group Management for some time. The Group is now being focused on continued growth in selected segments of the specialty chemicals market and the Pergo flooring business is being prepared for a spin-off to Perstorp shareholders and a stock-exchange listing during 2001. Accordingly, the Perstorp Group's future focus will be on specialized chemical products, such as performance chemicals and composite materials, that have the potential to yield favorable margins and high growth. Effective the beginning of the current fiscal year, chemical operations have been restructured and are now organized in four subgroups, each representing a specialized product area: Perstorp Specialty Chemicals, Perstorp Formox, Perstorp Composites and Perstorp Chemitec. Pergo to be spun off to shareholders and listed on stock exchange The Board of Directors of Perstorp AB proposes that all the shares in Pergo AB be spun off to Perstorp AB shareholders in proportion to their holdings in Perstorp AB. Pergo AB has been capitalized in a total amount of SEK 1,520 M in shareholders' equity from Perstorp AB. Accordingly, the Pergo subgroup had total pro forma shareholders' equity of SEK 1,689 m at the end of 2000 after the above capital contribution. The Board also proposes that a cash dividend of SEK 2.00 (4.00) per share be paid. The proposal is a consequence of the company's long-term strategy and streamlining of Perstorp as a specialty chemicals company. Pergo, which is a typical consumer company, will be better able to develop in its sector as an independent corporate group. At the same time, shareholders will receive shares in two exchange-listed companies that can be valued on their own merits. It is thus expected that increased value will be created for shareholders over the long term. It is proposed that the spin-off will take the form of a cost-free distribution of all the shares in Pergo AB to Perstorp shareholders pursuant to Sweden's Lex Asea legal precedent, whereby the spin-off will be possible without any immediate tax consequences in Sweden for Perstorp shareholders. It is proposed that each multiple of four Perstorp shares, regardless of share series held, will carry entitlement to one Pergo AB shares; Pergo AB will have a single series of shares. The spin-off of all of the shares in Pergo AB is subject to the approval of Perstorp's Annual General Meeting. The proposed record date for receipt of the Pergo shares is June 15, 2001. It is proposed that the Pergo AB shares be registered on the Stockholm Exchange's O List immediately following the record date. Following the spin-off, Pergo AB's initial ownership structure will be identical to that of Perstorp in terms of the proportion of share capital owned. An information brochure about Pergo will be distributed to all shareholders. Extract from the brochure will be published in a press release on April 27, 2001. The information brochure will also be published in its entirety on the Group's website (www.perstorp.com) and can be sent on request. A prospectus will be distributed ahead of the listing on the Stockholm Exchange. Offer from Sydsvenska Kemi AB The Board of Directors of Sydsvenska Kemi AB has made a public offer to all holders of shares and convertible debentures in Perstorp AB pertaining to all Series A and B shares, as well as convertible debentures issued by Perstorp AB. Sydsvenska Kemi AB has also directed a partial offer to future shareholders in Pergo AB. Industri Kapital's IK 2000 Risk Capital Fund owns Sydsvenska Kemi AB. One of the preconditions for the offer is that Perstorp's Annual General Meeting approves the spin-off of Pergo AB to Perstorp shareholders and that the spin-off is implemented. Major shareholders in the company, with holdings corresponding to a total of about 65% of the total number of shares outstanding and about 75% of the voting rights in Perstorp, have expressed their support for and intention to accept the offer. The offer is described in more detail in the prospectus dated April 2, 2001, which has been distributed to Perstorp's shareholders by Sydsvenska Kemi AB. The application period in regard to shares extends from April 6 through June 6, 2001. The application period in regard to convertible debentures extends from April 6 through April 27, 2001. On April 24, the Perstorp Board recommended that holders of shares and convertible debentures in Perstorp AB accept the offer. The Board's recommendation is attached to the interim report. Operations during the report period During the first quarter, the Group consisted mainly of operations in the chemical sector, plus the Pergo subgroup. Prior to the spin-off and stock-exchange listing of Pergo, Perstorp Declam AB was transferred to the Pergo subgroup during the period. Perstorp Declam AB is included in the financial accounts for Pergo. In addition to financial statements for the Perstorp Group including the Pergo subgroup, this interim report contains pro forma financial statements for Perstorp AB excluding the Pergo subgroup. This is designed to supplement the account provided of the Perstorp Group's earnings and financial position, by presenting figures for Perstorp's remaining operations following the planned spin-off of flooring operations. Comments on Pergo's accounting principles, earnings and financial position, as well as this company's outlook for 2001, are presented in Pergo's interim report. Accounting principles The accounting principles and calculation methods used in the consolidated financial statements are the same as those applied in the 2000 Annual Report. Perstorp excluding Pergo Perstorp excluding Pergo constitutes a platform for the creation of the specialty chemicals group, Perstorp. Perstorp chemical operations consist of four well-focused divisions with varying potential to achieve Perstorp's strategic aims of achieving high growth, strengthening its leading positions and actively working to achieve structural change. In the year ahead, Perstorp will implement various measures designed to strengthen the Group in its efforts to become a future-oriented and efficient specialty chemicals company. Markets and general business conditions During the first quarter, the general business climate deteriorated relatively quickly, leading to reduced demand. This trend was particularly noticeable in the American market, which affected order bookings and production volumes in the chemical sector. Prices for several of the Group's purchased chemical raw materials remain at historically high levels and, in a few cases, have risen despite the economic downturn. Perstorp has not been able to offset this fully by raising the prices of its own products. PERSTORP SPECIALTY CHEMICALS Perstorp Specialty Chemicals is a world leader in its segments of the polyol market. The division's main products are primarily intended for the paint industry, while end users are found in the construction, automotive and printing industries, among others. Demand for Perstorp Specialty Chemicals' products was favorable during the first quarter, although a continued decline in general business conditions was noted in the American and Asian markets. Increased raw-material costs combined with pressure on prices contributed to a decrease in the division's gross margin. In the market for the basic polyol TMP, one of Perstorp's major products, the additional capacity that will enter the market during 2001 is expected to result in increased competition. Compared with the year-earlier period, net sales rose by 18%, of which the polyol operations acquired from the Degussa Huls group during the second quarter of 2000 accounted for 14 percentage points. The increase in relation to the preceding quarter was 3%. Demand for specialty polyols remains favorable, while volumes in the market for basic polyols are being maintained. The division's operating earnings declined during the period, as a result of reduced gross margins. The acquisition of the Degussa Huls group's polyol-production operations had a favorable effect on net sales and operating earnings, while the planned suspension of operations in connection with the rebuild of the unit in Italy had an adverse impact. Exchange-rate effects made a positive contribution to net sales and operating earnings. Perstorp Specialty Chemicals is implementing a comprehensive restructuring program during 2001, in order to further increase its profitability. As a result of the acquisition of the unit in Germany, the plant in Castellanza, Italy, can be supplemented to enable production of specialty polyols - including bisMPA - and Penta production at this unit can be transferred to the plants in Germany, Sweden and the US. At the same time, capacity for specialty products in the US is being expanded. As a result, Perstorp Specialty Chemicals' production of Penta will become more efficient and its ability to satisfy increasing demand for specialty polyols will be improved. PERSTORP FORMOX Perstorp Formox is the world's leading supplier of plants for the production of formalin, with a market share of slightly more than 50%. The division has an even larger share of the global market for formalin catalysts. A slight weakening of demand for plant-construction projects and formalin deliveries was noted during the period. Net sales rose by 13% compared with the first quarter of 2000, mainly as a result of increased intra-Group deliveries, but declined by 13% in relation to the preceding quarter. Operating earnings during the report period were at the same level as in the year-earlier period and the preceding quarter. During the period, Perstorp Formox signed multi-year contracts with major customers regarding deliveries of formalin catalysts. In addition, a contract regarding a rebuild of an existing formalin plant was signed during the period, and following the end of the report period regarding delivery of a complete formalin plant. PERSTORP COMPOSITES Perstorp Composites' products are based on fiber-reinforced materials that combine low weight and high performance. They can be used increasingly to replace metals in, for example, the automotive, aviation, aerospace, electronics and sports industries. Underlying growth in the division's market segments is favorable. Net sales rose by 33% compared with the first quarter of 2000. Operating earnings were significantly higher than in the preceding quarter but at the same level as in the corresponding period in 2000. Exchange-rate effects had a favorable effect on earnings compared with the year-earlier period, while increased raw-material costs had an adverse impact. PERSTORP CHEMITEC Perstorp Chemitec is active in three market segments: resins, thermosets and seamless flooring. Customers are found in the automotive, construction and engineering sectors, among others. One of Perstorp's strategic aims is to improve the margins on the division's products and to participate actively in the structural transformation of each of its sectors. Markets in Europe, which were not significantly affected by economic slowdown during the period, account for most of the division's sales. The volume trend was favorable and a slight improvement in margins was achieved compared with the preceding quarter, as a result of price increases implemented for several of the division's own products. Net sales rose by 33% in relation to the year-earlier period and by 7% compared with the fourth quarter of 2000. The increase compared with the year-earlier period was mainly attributable to the acquisition of Plasta Erkner, as well as by the effects of changes in prices and exchange rates. Operating earnings were lower than in the corresponding period in 2000, due to such factors as the inability to fully offset increased prices for purchased raw materials. However, earnings were higher than in the preceding quarter. Perstorp and Matsushita Electric Works have reached an exclusive agreement regarding the production, development and marketing of new products in the amino resins segment. Two major orders in the seamless industrial flooring segment were received during the period, one of which related to Beijing Nokia Mobile Telecommunications Ltd's plants in Beijing and the other to an extensive in-door car park project at Heron City in Barcelona, Spain. Other In the tables below, the item "Other" for the Group's operating earnings mainly comprises Group-wide costs and items affecting comparability. During the first quarter of 2000, the item affecting comparability consisted of a capital gain of SEK 75 m on the divestment of Perstorp Surface Materials. The amount for the current report period includes SEK 12 m for items affecting comparability. The streamlining of Perstorp's operations is enabling a continuing reduction of Group-wide costs. Up to year-end 2000, the item "Other" also included central research and development costs. Accordingly, "Other" does not relate exclusively to chemical operations. PRO FORMA ACCOUNTS Assuming that the Annual General Meeting approves the Board of Directors' proposal, Perstorp will become a streamlined specialty chemicals group during the year. A pro forma income statement for the Perstorp Group excluding Pergo is presented below. A table containing an equivalent pro forma account of the Perstorp Group's balance sheet, cash flow statement and selected key data based on the planned spin-off of the Pergo subgroup to shareholders is also presented. For corresponding data regarding Pergo's operations, reference is made to the below extract from Pergo AB's interim report. The accounts are based on the financial statements for 2000, taking into account the capital contribution of SEK 1,520 m that was granted to the Pergo subgroup at year-end 2000. Accordingly, the Pergo subgroup had total pro forma shareholders' equity of SEK 1,689 m at the end of 2000 after the above capital contribution. Capitalization of the Pergo subgroup was effected via a new share issue and shareholder contributions to the Pergo subgroup's Parent Company. The accounts for the Pergo subgroup also include Perstorp Declam AB, which was transferred during the first quarter of 2001. The pro forma accounts do not include the divested unit Perstorp Surface Materials. Results during the report period Quarterly Data for Perstorp excl. Pergo (and excl. demerged business units) - pro forma SEK m 1999 2000 2001 I II III IV I II III IV I Net sales 1,049 1,102 976 1,081 1,199 1,343 1,343 1,399 1,425 Operating earnings Perstorp chemical operations 87 89 85 124 120 140 164 69 88 (former Perstorp Chemicals) Others -31 -78 -61 -24 65 -8 2 15 -22 Perstorp excl. Pergo 56 11 24 100 185 132 166 84 66 Operating earnings adjusted for items affecting comparability Perstorp chemical operations 87 89 85 110 120 138 121 97 88 (former Perstorp Chemicals) Others -27 -52 -31 -24 -10 -6 -6 8 -10 Perstorp excl. Pergo 60 37 54 86 110 132 115 105 78 NET SALES for Perstorp excluding Pergo rose 19% to SEK 1,425 m (1,199). The volume increase was 9%, which corresponds in its entirety to the chemical operations acquired in Germany during the second quarter of 2000. OPERATING EARNINGS amounted to SEK 66 m (185). Items affecting comparability amounted to a charge of SEK 12 m (revenue: 75) against earnings, due mainly to the restructuring of the Group and the takeover process. The revenue of SEK 75 m for the year-earlier period related to the capital gain from the sale of Surface Materials operations. Accordingly, excluding items affecting comparability, operating earnings amounted to SEK 78 m (110). Operating earnings from chemical operations (formerly Perstorp Chemicals) amounted to SEK 88 m (120). The decline compared with the year-earlier period was due mainly to lower margins. Neither of these periods was affected by items affecting comparability. The corresponding earnings during the preceding quarter amounted to SEK 97 m, adjusted for items affecting comparability. The restructuring of Penta production operations and the resulting supplementary measures required for production of various specialty polyols at the plant in Italy gave rise to costs of SEK 12 m during the first quarter of 2001, an amount that is not matched by any revenues. OTHER OPERATING REVENUES AND EXPENSES amounted to SEK 32 m (7), with exchange-rate effects of SEK 25 m accounting for most of the increase. EARNINGS FROM PARTICIPATIONS IN ASSOCIATED COMPANIES in an amount of SEK 1 m (3) pertained to Perstorp Clariant AB, which manufactures water-borne dispersions and is continuing to be affected by depressed margins. NET FINANCIAL ITEMS amounted to revenue of SEK 10 m (-). The improvement compared with the year-earlier period was due mainly to the acquisition of withdrawal rights from Alecta at a price that was lower than nominal value and the following redemption of the rights at nominal value. This contributed revenue of SEK 32 m. The financial net was adversely affected by an increase in working capital, higher interest rates compared with the year-earlier period and the capitalization of Pergo. TAX COSTS totaled SEK 27 m (83). Accordingly, the tax rate was 36% (45), which is the estimated effective tax rate for the entire year. Adjusted for the sale of Perstorp Surface Materials, the tax rate for year-earlier period was 43%. Actual tax accounted for SEK 26 m and deferred tax for SEK 1m of total tax for the report period. Financial position TOTAL ASSETS rose by SEK 208 m compared with December 31, 2000 to SEK 5,584 m (5,376) at the end of the period. The rise in total assets was due mainly to an increase in accounts receivable, exchange-rate effects and the fact that deferred tax receivables are reported gross as of 2001. WORKING CAPITAL (current operating receivables and inventories less current operating liabilities) rose during the period by SEK 134 m, mainly because accounts payable decreased while accounts receivable rose. An increase in sales of chemicals to Asia, a market characterized by longer credit periods, contributed to the increase in accounts receivable. INTANGIBLE FIXED ASSETS amounted to SEK 138 m (137), of which goodwill accounted for SEK 116 m (119). PROVISIONS rose by SEK 125 m during the quarter, due mainly to the fact that deferred tax receivables are reported gross as of 2001. In the past, the deferred tax receivable on tax loss carryforwards, which amounted to SEK 113 m at year-end 2000, was reduced from provisions. NET DEBT rose during the period to SEK 1,492 m (1,278) on March 31. The increase was mainly due to the rise in working capital requirements, as well as higher tax payments resulting from the reversal of untaxed reserves. SHAREHOLDERS' EQUITY rose by SEK 138 m compared with December 31, 2000 to SEK 2,387 m (2,249) at the end of the period. Shareholders' equity was affected positively by exchange-rate effects in an amount of SEK 87 m and by net profit for the period of SEK 51 m. CONTINGENT LIABILITIES rose by SEK 11 m compared with December 31, 2000, due to an increase in sureties. INVESTMENTS amounted to SEK 88 m, of which SEK 44 m related to strategic investments, meaning major investments that result in a significant increase in the value of a particular subgroup. Notable investments included the production adaptations being made by the Italian plant within Perstorp Specialty Chemicals. Action program In order to reduce fixed costs and tied-up capital, a new action program for the Perstorp Group excluding Pergo has been initiated. The reasons underlying the program are the weaker business climate and the reduction in the size of the Group following the planned spin-off of Pergo AB. The aim of the program which will run for a 12-months period, is to reduce the Group's annual cost level by at least SEK 100 m and to reduce working capital. Outlook for 2001 The following outlook for 2001 was published in the 2000 Annual Report. "With respect to 2001, we anticipate a weakening of global conditions in the chemical market, coupled with an increased imbalance in the market and thus lower demand. It is estimated that part of this decline will be offset by improved gross margins as an effect of lower raw material prices. The first six months will be marked by operational stoppage and the running-in of the plant in Italy due to rebuilding measures required for the manufacture of specialty polyols. The comprehensive program that will be implemented in stages during the year, in order to boost the efficiency of the production structure, is also expected to make a positive contribution to full-year earnings." It was also stated in the Annual Report that rapid changes in general market conditions could be expected to lead to increased uncertainty regarding price trends for products and raw materials. Although this outlook stands firm, we have concluded that the uncertainty regarding the future market and price trends increased during the period. As a result, the Perstorp Group excluding Pergo will not be able to achieve full-year operating earnings in line with those reported by corresponding units in 2000 (SEK 462 m, pro forma, excluding items affecting comparability). Earnings Perstorp Group excl. Pergo - pro forma SEK m Q1 2001 Q1 2000 Full year 20001) Net sales 1,425 1,199 5,284 Cost of goods sold -1,173 -921 -4,236 Gross earnings 252 278 1,048 Sales, administration and R&D costs -207 -178 -655 Items affecting comparability -12 75 105 Other operating revenues and expenses 32 7 62 Result from participation in associated 1 3 7 companies Operating earnings 66 185 567 Net financial items 10 - -20 Earnings before taxes 76 185 547 Taxes -27 -83 -161 2) Minority share in net profit 2 2 8 Net profit of the period 51 104 394 1. In relation to the pro forma income statement presented in the Annual Report for 2000, a correction has been made in the form of a reclassification between costs of goods sold, on the one hand, and sales, administration and R&D costs, on the other. Prior to the correction, costs of goods sold amounted to SEK 4,271 m and sales, administration and R&D costs amounted to SEK 620 m. 2. Group contributions granted to the Pergo group during 2000 have been eliminated pro forma, resulting in an increase of SEK 13 m in takes. Consolidated Balance Sheet Perstorp Group excl. Pergo - pro forma SEK m March 31, Dec 31, March 31, 2001 2000 2000 Intangible fixed assets 138 137 32 Tangible fixed assets 2,889 2,813 2,259 Deferred tax receivables 1) 114 - - Financial fixed assets 342 333 282 Inventories 654 664 585 Current operating receivables 1,364 1,338 1,274 Current financial assets 83 80 267 Cash and bank - 11 146 Total assets 5,584 5,376 4,845 Shareholders' equity 2,387 2,249 2,921 Minority interests 39 39 39 Provisions 1) 508 383 398 Long-term financial liabilities 87 58 - Current operating liabilities 998 1,256 1,167 Current financial liabilities 1,565 1,391 320 Total shareholders' equity and 5,584 5,376 4,845 liabilities 1. Up to year-end 2000, the deferred tax receivable related to unutilized tax loss carryforwards was reported among provisions as a reduction of deferred tax liabilities. Cash flow analysis Perstorp Group excl. Pergo - pro forma Cash flow analysis, summary 1) Q I 2000 Operating earnings 66 Depreciations 93 Change in working capital -134 Current investments in fixed assets -44 Adjustment for divested fixes assets 8 Operating cash flow -11 Standard tax related to operating earnings -21 Free cash flow -32 Net financial items 10 Reversal of standard tax 21 Taxes paid/change in deferred tax receivables -144 Adjustment item, including exchange-rate differences -15 Cash flow from operations -160 Strategic investments in fixed assets -44 Net cash flow -204 Free cash flow per share, SEK -0.45 Net debt at beginning of period -1,278 Net cash flow -204 Currency effects -10 Net debt at end of period -1,492 Key Ratios Perstorp Group excl. Pergo - pro forma Key Ratios 2) Q I Q I Full year 2001 2000 2000 Operating margin, % 4.6 15.4 10.7 Operating margin, adjusted for non-comparable items, % 5.5 9.2 8.7 Interest-coverage ratio, times 3.2 6.8 6.1 Free cash flow/net sales, % -2 1) 1) 1. It was not possible to prepare a Cash Flow Statement for 2000, since no balance sheet was prepared for Perstorp excluding Pergo at the end of 1999. 2. Pro forma key figures based on the balance sheet are not presented, since valid calculations regarding Perstorp excl Pergo, which did not exist at the beginning of 2000, are not possible. Pergo AB The accounts below are an extract from the interim report for the first quarter of 2001 that will be included in Pergo's listing prospectus and which constitutes part of Perstorp AB's interim report. The prospectus will be distributed to shareholders at the end of May ahead of the planned spin-off and stock-exchange listing of Pergo. All financial figures for prior periods are presented pro forma. 1) Net sales and earnings Sales amounted to SEK 874 m (867). A certain degree of price pressure combined with lower sales of accessories in North America had an adverse impact on net sales compared with the first quarter of 2000. This was offset by the stronger exchange rate for the US dollar. The operating result during the period was a loss of SEK 52 m (earnings: 57). The weaker earnings were mainly attributable to a low capacity utilization at Pergo's production plants, which was largely due to the transition to direct laminate flooring. Increased costs for Pergo's forceful design and product-development programs and the increase in the pace of new product launches, as well as a certain degree of price pressure in North America, had an adverse impact on earnings. The favorable results of the new product launches are not expected to become noticeable until during the second half of 2001. Costs in an amount of SEK 18 m, pertaining to a patent dispute in the US, among other matters, were charged against earnings for the period. Exchange-rate movements had only a marginal impact on earnings during the period. The positive effect of the appreciation of the US dollar was neutralized by increases in Euro-denominated purchases, which also increased in value in relation to the Swedish krona. 1) Preparation of the consolidated financial accounts was based on the assumption that the "new" Pergo Group was formed on January 1, 2001. Accordingly, earnings include revenues and costs for all companies throughout the period January 1 to March 31, 2001. Since shares in subsidiaries at the time of the Pergo Group's formation were acquired at the book value in Perstorp's consolidated accounts and not at market value, these acquisitions did not result in any goodwill or negative goodwill. The difference between the acquisition value and acquired equity has been entered directly in shareholders' equity. Pergo's capitalization became effective on January 1, 2001. The interim report has been prepared in accordance with the Financial Accounting Standards Council's recommendations. Market Pergo's two main markets for laminate flooring, Europe and North America, continue to grow, at the same time as competition has intensified. Prices have been depressed by the fact that direct laminate flooring, which is based on a more cost-effective production method, is rapidly increasing its market share. Competition between home stores and specialist flooring outlets has increased during recent years, resulting in price pressure and an increase in market shares for home stores. In order to resolve this "channel conflict," which is most noticeable in North America but also exists in Europe, Pergo has differentiated its product range between the various channels. Laminate flooring featuring glue-free joints, also known as click joint, which simplify the laying of flooring, has been rapidly accepted by the market and is enjoying increasing consumer demand. A number of patent disputes in this field are under way among various players, including Pergo. At present, these disputes are not expected to have a sssignificant adverse impact on Pergo's operations. The overall assessment is that the flooring market in Europe and North America slackened slightly during the period, which mainly affected textile flooring. Sales of laminate flooring continue to grow, albeit at a slightly slower pace than previously. Europe Laminate flooring featuring glue-free joints and direct laminate flooring, which are manufactured by the associated company Witex, were launched during the period. The market reception has been favorable to date. Separate programs have been designed for the primary distribution channels: specialist flooring outlets, retail chains and the contract market. The new product program for the contract market will be launched during the second quarter, when a number of additional new products for the retail sector will also be introduced. North America Separate programs have been designed for the two distribution channels that are currently being used by Pergo. The differentiation of the product range has been appreciated by the market. The new range for specialist flooring outlets was presented at the beginning of January. A new range has also been developed for The Home Depot retail chain, Pergo's largest customer. Deliveries of products from the new ranges will commence in May, which is expected to boost sales as of the third quarter of 2001. Production and distribution The change in production-technology towards direct laminate flooring and flooring with glue-free joints that is currently under way has necessitated a major investment program. A new line for the production of laminate flooring featuring glue-free joints has been put into operation at the plant in Trelleborg, Sweden. During April, another new production line will be installed and one of the existing lines will be rebuilt. Both of these measures are designed to enable production of flooring with glue-free joints. A distribution center in Trelleborg for deliveries of laminate flooring to Nordic countries and to parts of the rest of Europe became operational during the period. A decision has been taken regarding investments in an additional line in Garner, North Carolina, USA, for the production of direct laminate flooring. This requires a 4,500 square meter expansion of the plant. In addition, a 17,000 square meter distribution center will be constructed adjacent to the production plant. These investments are scheduled for completion at year-end 2001, which will mark the conclusion of an approximately USD 27 m investment program. Pergo is considering the use of a sale-leaseback arrangement for the financing of all or part of the construction investments. As a result of that Pergo changes its product range towards an increased proportion of direct laminate flooring, certain suppliers have filed claims against Pergo, due to not insignificant decreases in the volume of purchases from Pergo. Pergo has rejected these claims. The current assessment of these claims is that they will not have a significant adverse impact on Pergo's operations. Investments Group investments in fixed assets during the period totaled SEK 59 m (48). Working capital/capital employed Inventories have risen by SEK 97 m compared with year-end, mainly as a result of the build-ups ahead of the forthcoming product launches during the spring/ summer. At the end of the period, capital employed amounted to SEK 2,213 m, an increase of SEK 184 m during the period. Financial position Net debt has risen by SEK 274 m since year-end and amounted to SEK 541 m at the end of the period. Tax The estimated tax rate for the Group is 35%. Personnel The number of Pergo Group employees at the end of the period was 946, compared to 1083 at the beginning of the period, of whom 605 were employed in Europe and 289 in North America. The decrease compared with year-end is mainly attributable to the personnel laid off during the preceding year at the plant in Perstorp. Preparations for the stock-exchange listing Perstorp's Board of Directors will propose to its Annual General Meeting on June 12, 2001 that all of the shares in Pergo AB be spun off to Perstorp AB shareholders and subsequently listed on the stock exchange. The proposed record date for receipt of Pergo shares is June 15, with the proposed initial listing on the Stockholm Exchange 's O List shortly thereafter. A new Parent Company, Pergo AB, has been formed. Perstorp Declam, which manufactures such products as laminate for high-pressure laminate flooring, is also included in the Pergo accounts during the current report period. Pergo has been provided with equity of SEK 1,520 m, on which interest has been calculated as of January 1. Accordingly, the Pergo Group had pro forma shareholders' equity of SEK 1,689 m at the end of 2000. During January, Michael Boris-Moller was recruited as new president of the Pergo Group, with his appointment becoming effective on April 1, 2001. In addition, a new Board chaired by Christer Gardell, President of AB Custos, has been elected. The other Board members are: Kurt Augustsson, Senior Advisor at SCA, Gunnar Brock, Board member in such companies as Perstorp and OM-gruppen, as well as Lego of Denmark, Karl Stenstrom, Chairman of the Board of the Swedish American Chamber of Commerce and of Thomas Concrete Inc., USA, Thomas Svensk, President of C Tybring-Gjedde ASA, and Katarina Wendt Englund, President of Jaxvall Design AB, as well as Ulla Ohlsson and Christer Jonsson, representing the employees. Outlook for 2001 Pergo is entering an intensive period that will involve extensive marketing work and the launch of a large number of new products that are expected to help the company strengthen its position as "an innovative interior decor company that manufactures flooring." Pergo is expected to show a loss during the first part of 2001, due to the completion of the comprehensive adjustment program required for its technology shift and to launches of new products, which are expected to start yielding significant effects during the latter part of the year. As a result of the company's unique offering of new products and more competitive pricing following the reorientation towards direct lamination and glue-less joints, combined with selective marketing programs customized for each induvidual market, Pergo's potential for strengthening its market positions is regarded as favorable. Earnings Pergo Group SEK m Q1 Q 1 Most Full recent year 2001 2000 12 months 2000 Net sales 874 867 3,720 3,713 Cost of goods sold -680 -589 -2,751 -2,660 Gross earnings 194 278 969 1,053 Sales, administration and R&D costs -253 -216 -961 -924 Items affecting comparability 0 0 -295 -295 Other operating revenues and expenses 4 -5 21 12 Result from participation in associated 3 0 4 1 companies Operating earnings -52 57 -262 -153 Net financial items -1 -8 -40 -47 Earnings before taxes -53 49 -302 -200 Taxes 19 -11 75 45 Minority share in net profit 0 0 1 1 Net profit/loss for the period -34 38 -226 -154 Depreciation and write-downs for the -28 -35 -350 -357 period Earnings per share, SEK -1.90 2.12 -12.62 -8.60 Number of shares outstanding 1) 17,897,430 17,897,430 17,897,430 17,897,430 1) Pertains to the number of shares the Parent Company received in connection with its capitalization during the first quarter of 2001. Balance Sheet Pergo Group SEK m March 31, 2001 March 31, 2000 Dec 31, 2000 Intangible fixed assets 0 3 0 Tangible fixed assets 856 1,006 798 Financial fixed assets 203 35 216 Inventories 542 420 445 Current receivables 1,329 847 1,220 Cash and bank 15 33 54 Total assets 2,945 2,344 2,733 Shareholders' equity 1,679 1,044 1,689 Minority interests 3 4 3 Provisions 65 105 70 Long-term liabilities 1) 531 628 337 Current liabilities 667 563 634 Total shareholders' equity and 2,945 2,344 2,733 liabilities 1) Pertains to interest-bearing liabilities to the Perstorp Group, which will be replaced by external long-term financing prior to the exchange listing of the Pergo Group. Cash flow statement Pergo Group SEK m Q1 Q1 Full year 2001 2000 2000 Ongoing business Earnings after financial items -53 49 -200 Adjustments for items not included in cash flow - Depreciation 28 35 143 - Write-downs 214 - Result from participation in associated companies -3 0 -1 Tax paid 3 17 -63 Cash flow from ongoing business before change in working -25 101 93 capital Cash flow from change in working capital Change in inventories -97 -18 -43 Change in current receivables -89 -90 -419 Change in current liabilities 29 -30 40 Other, including exchange-rate differences 7 -22 -20 Cash flow from ongoing business -175 -59 -349 Investment operations Acquisition of associated companies -143 Acquisition of tangible fixed assets -59 -48 -135 Sale of tangible fixed assets 1 1 4 Cash flow from investment operations -58 -47 -274 Financing operations Group contribution received 47 Capital contribution 782 Loans raised 194 71 Amortization of debt -220 Cash flow from financing operations 194 71 609 Cash flow during the year -39 -35 -14 Cash and bank at beginning of year 54 68 68 Exchange-rate differences in liquid assets 0 0 0 Cash and bank at year-end 15 33 54 Shareholders' equity Pergo Group SEK m Q1 Q1 Full year 2001 2000 2000 Share Restricted Non-Restricted Total Total Total 1) 1) capital reserves reserves At beginning of period 179 430 1,080 1,689 996 996 Earnings for the period -34 -34 38 -154 Capital contribution 782 Group contribution 47 received Tax on Group -13 contribution Translation difference 30 -6 24 10 31 At end of period 179 460 1,040 1,679 1,044 1,689 1) Amounts for the comparative periods have not been divided into restricted shareholders' equity and unrestricted shareholders' equity, since the "new" Pergo Group did not exist at the beginning of 2000. In view of this, the information value of such a division was considered to be minor. Net sales by region Pergo Group SEK m Q1 Q1 Most recent Full year 2001 2000 12 months 2000 Europe 308 321 1,245 1,258 North America 530 517 2,312 2,299 Asia 20 16 92 88 Latin America 14 11 57 54 Others 2 2 14 14 Total 874 867 3,720 3,713 Key ratios Pergo Group Q 1 Q1 Most recent Full year 2001 2000 12 months 2000 Sales growth, % 0.8% 1.8% 2.1% 2.1% Gross margin, % 22.2% 32.1% 26.0% 28.4% Operating margin, % -5.9% 6.6% -7.0% -4.1% Average capital employed 2,064 1,639 1,965 1,867 Return on capital employed, % - - -11.7% -7.2% Net debt 514 599 514 240 Net debt/equity ratio, % 31% 57% 31% 14% Interest-coverage ratio, times -1.22 4.57 -2.98 -2.01 Equity ratio, % 57% 45% 57% 62% Earnings per share, SEK -1.90 2.12 -12.62 -8.60 Shareholders' equity per share, SEK 93.81 - 93.81 94.37 Quarterly data Pergo Group Earnings SEK m Q 1 Q 4 Q 3 Q 2 Q 1 2001 2000 2000 2000 2000 Net sales 874 1,050 885 911 867 Cost of goods sold -680 -807 -655 -609 -589 Gross earnings 194 243 230 302 278 Sales, administration and R&D costs -253 -238 -225 -245 -216 Items affecting comparability 0 -199 -96 0 0 Other operating revenues and expenses 4 6 11 0 -5 Result from participation in 3 1 0 0 0 associated companies Operating earnings -52 -187 -80 57 57 Net financial items -1 -15 -14 -10 -8 Earnings before taxes -53 -202 -94 47 49 Taxes 19 45 22 -11 -11 Minority share in net profit 0 1 0 0 0 Net profit/loss for the period -34 -156 -72 36 38 Depreciation and write-downs for the -28 -208 -77 -37 -35 period Earnings per share, SEK -1.90 -8.72 -4.02 2.01 2.12 Number of shares outstanding 1) 17,897,430 17,897,430 17,897,430 17,897,430 17,897,430 1) Pertains to the number of shares the Parent Company received in connection with its capitalization during the first quarter of 2001. Net sales by region Europe 308 303 315 319 321 North America 530 698 525 559 517 Asia 20 28 25 19 16 Latin America 14 17 16 10 11 Others 2 4 4 4 2 Total 874 1,050 885 911 867 MORE TO FOLLOW QRFIRMTTMMBTBLB
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