RNS Number:9602E
Perstorp AB
3 February 2000
Perstorp Group
Report on operations during 1999
* Perstorp, continues its streamlining
The Group is concentrating its operations towards the chemical and flooring
sectors. Several acquisitions and alliances are being evaluated. The Group
intends to sell Perstorp Surface Materials in the near future. The intention is
to effect a separate stock-exchange listing of Perstorp Flooring within the next
two years, whereby Perstorp AB will become a specialized global chemical
company.
* Earnings Improvement
Operating earnings from continuing operations rose to SEK 627 m (1998: 540).
Pretax earnings amounted to SEK 551 m (553), after being charged with costs for
incorporating the divisions and spinning off Perbio Science*)
* Stronger positions for Perstorp Chemicals
Weak conditions in the chemical sector exerted pressure on margins, but a
gradual improvement was noted during the year. The volume trend was favorable
and the division strengthened its positions in several market segments.
* Perstorp Flooring shows sharply improved earnings
Perstorp Flooring reports a sharp improvement in earnings due to the launch of a
new range and continued successes in the US.
* Perbio Science listed on OM Stockholm Stock Exchange.
The operations of Perstorp Life Science have been spun off to shareholders and
listed on the stock exchange under the Perbio Science AB name.
*Dividend of SEK 4,00 per share
The Board of Directors proposes a cash dividend of SEK 4.00 (3.00)**) per
share. The Board will also propose that it be authorized to purchase Perstorp
shares.
*) Figures for 1998 are shown on a pro forma basis, due to the switch to
calendar-year reporting. Perbio Science is included in earnings up to the date
of its spin-off.
**) The preceding year's dividend pertained to a fiscal year that was extended
to 16 months.
General economic conditions
On the whole, the fiscal year was characterized by the continuing healthy state
of the US economy and a gradual improvement in Europe and Asia. Several European
industrial sectors showed increased growth during the year, due to an upswing in
exports and domestic consumption. The American economy continues to grow, and
forecasts for the immediate future are favorable.
Demand for chemical products was weak during the first half of the fiscal year,
but improved gradually during the second half of the year as the prospects for
the world economy brightened. This, in combination with increases in the sector,
resulted in lower prices for several products.
Demand for laminate flooring increased, particularly in the US. However,
competition continued to intensify, especially in Europe.
Activity in the construction industry increased in several countries, a trend
that mainly benefited Perstorp Surface Materials.
Streamlining towards chemical sector
In the 1996/97 fiscal year, Perstorp initiated a streamlining process aimed at
creating conditions for increased profitability and long-term growth, and thus
increased shareholders value.
During 1996-1999, the Group divested the operations of the former Perstorp
Components, Perstorp Analytical and Perstorp Plastic Systems business areas, and
spun off Perbio Science to Perstorp shareholders. These operations had combined
sales of approximately SEK 6,000 m on an annualized basis.
During the 1999 fiscal year, the Board of Directors decided to complete the
streamlining of the Group. Perstorp Chemicals is to be expanded through
acquisitions and alliances as well as organic growth. It is considered that a
divestment of Perstorp Surface Materials will be possible in the near future,
with a separate exchange listing of Perstorp Flooring effected within the next
two years.
Operating earnings by division
SEK m Change Q4 Q4
1999 1998 SEK m 1999 1998
Perstorp Chemicals 385 562 -177 124 90
Perstorp Flooring 184 52 132 54 -45
Perstorp Surface Materials 184 99 85 54 -2
Other items incl. eliminations -197 -177 -20 -22 -34
Operating earnings exclusive 556 536 20 210 9
units sold -
Perstorp Life Science 95 86 9 6 17
Business units sold 0 28 -28 0 0
Group 651 650 1 216 26
Adjusted retroactively for the internal transfer of units during 1999.
Net sales by division
SEK m Change Q4 Q4
1999 1998 SEK m 1999 1998
Perstorp Specialty Chemicals 2,355 2,398 -43 613 569
Perstorp Chemitec 1,413 1,516 -103 363 349
Perstorp Construction 279 286 -7 63 67
Chemicals
Other items incl. eliminations 110 136 -26 22 37
Perstorp Chemicals 4,157 4,336 -179 1,061 1,022
Perstorp Flooring 3,627 3,267 360 908 812
Perstorp Surface Materials 2,763 2,662 101 726 645
Other items incl.
eliminations -1,060 -1,103 43 -276 -313
Comparable net sales 9,487 9,162 325 2,419 2,166
Perstorp Life Science 865 706 159 48 180
Business units sold 0 874 -874 0 0
Group 10,352 10,742 -390 2,467 2,346
Adjusted retroactively for the internal transfer of units during 1999.
Operations in 1999
Effective 1999, Perstorp reports its operations by calendar year, after having
previously reported in accordance with a split fiscal year. Since the 1997/1998
fiscal year was extended to 16 months, comparative figures in this report
regarding the 1998 calendar year are provided on a pro forma basis.
The report includes Life Science operations (Perbio Science) up to October 15,
1999, the date of their spin-off to shareholders.
The incorporation of the Group's division (see below) has given rise to internal
transfers of operational units. In this report, these units are treated as if
the transfers had occurred at the beginning of the year, and the comparative
figures for prior years have been adjusted accordingly. Thus the technical
laminate unit in Brazil has been transferred to Perstorp Surface Materials, and
the in-house service unit in Perstorp, Sweden, has been transferred to Perstorp
Chemicals. In the past, these units were reported under the "Other operations"
category. The laminate production unit in Perstorp, Sweden, has been transferred
from Perstorp Flooring to Perstorp, Surface Materials.
Perstorp received a statement from the Swedish Staff Pension Society (SPP)
during 1999 regarding an allocation from SPP of surplus pension funds in an
amount of SEK 61 m. This amount had no effect on earnings during the year.
Net sales during 1999 amounted to SEK 10,352 m (1998 calendar year: 10,742).
Adjusted for the divestment of Perstorp Plastic Systems during the preceding
year and the spin-off of Perbio Science in 1999, net sales rose by 4%. The
volume increase was 9 percentage points, while prices and currency changes had a
combined negative impact of 5 percentage points.
Perstorp Chemicals' sales declined by 4%, due mainly to lower prices for several
products, although the volume trend for the division was favorable.
The Perstorp Flooring and Perstorp Surface Materials divisions increased their
net sales during the year by 11 % and 4%, respectively. Perstorp Flooring's
sales continued to rise during 1999, particularly in the US. The increase posted
by Perstorp Surface Materials was attributable to organic growth and
acquisitions.
Operating earnings amounted to SEK 651 m, up SEK 1 m compared with the preceding
calendar year. The operating margin rose from 6.1% to 6.3%. Items affecting
comparability resulted in a net charge of SEK 86 m (charge: 7) against earnings,
of which capital gains on the sale of a property within Perstorp Chemicals
accounted for SEK 14 m, costs for the incorporation of the divisions for SEK 60
m, restructuring costs within Perstorp Flooring for SEK 25 m and costs for the
spin-off and stock-exchange listing of Perbio Science for SEK 15 m. In addition,
royalty expenses amounting to SEK 10 m were brought forward, due to the spin-off
of Perbio Science.
Adjusted for the effects of divested operations and items affecting
comparability, operating earnings amounted to SEK 627 m (540), up SEK 87 m.
Operating earnings excluding items affecting comparability
SEK m Q4 Q4
1999 1998 1999 1998
Perstorp Chemicals 371 562 110 90
Perstorp Flooring 209 66 54 -31
Perstorp Surface Materials 184 117 54 16
Other items including eliminations -137 -205 -22 -31
Operating earnings excl. items 627 540 196 44
affecting comparability
Perstorp Life Science*) 110 86 6 17
Business units sold 31
Costs for incorporation projects -60 0
Other items affecting comparability -26 -7 14 -35
Operating earnings 651 650 216 26
Net financial items -100 -97 -25 -25
Operating earnings before taxes 551 553 191 1
*) Excluding items affecting comparability
Perstorp Chemicals' earnings were significantly lower than in the preceding
year. As a result of a higher proportion of specialty products and the effects
of implemented cost-rationalization measures, the division noted an operating
margin of 9% (13), despite the weak conditions prevailing in the chemical sector
during the year.
Both Perstorp Flooring and Perstorp Surface Materials reported increased
earnings. Perstorp Flooring's sharply improved earnings derived from the
successful launch of Pergo(R) 99 during the spring, combined with the effects of
cost cutbacks and the new sales and distribution organizations introduced during
the preceding year. The earnings improvement noted by Perstorp Surface Materials
was mainly attributable to a favorable trend for laminate operations and cost
rationalization.
Earnings were charged with approximately SEK 25 m (60) for project costs related
to year-2000 compliance.
Earnings from the Group's participations in Perstorp-Clariant AB (formerly
HoechstPerstorp AB) amounted to SEK 18 m (21).
Net sales from Perbio Science, which was spun off to shareholders in
mid-October, amounted to SEK 865 m, resulting in operating earnings of SEK 95 m.
Pro forma accounts, showing the Perstorp Group excluding Perbio Science, are
provided at the end of this report.
Net financial items, which amounted to an expense of SEK 100 m (expense: 97),
were charged with other financial expenses amounting to SEK 20 m (0), of which
currency effects pertaining to Brazil accounted for SEK 9 m. If these costs are
excluded, net interest expense amounted to SEK 80 m (97). The main reason for
the improvement was a reduction in average net borrowing, as well as lower
interest rates, due to a change in currency composition.
The interest-coverage multiple was 5.1 (5.1).
Tax costs totaled SEK 281 m (229). The increase was mainly attributable to tax
resulting from the incorporation project (SEK 60 m). Excluding the incorporation
project, the tax rate was 40% (41). The main reason for the high rate of
taxation is that countries with a high tax rate, particularly the US, account
for a large proportion of Group earnings.
The total tax costs consisted of SEK 246 m (172) for taxes paid and SEK 35 m
(57) for deferred tax.
Earnings per share after full conversion amounted to SEK 3.87 (4.65). Adjusted
for items affecting comparability and taxes related to the incorporation
project, earnings per share after full conversion amounted to SEK 5.86 (4.74).
P500 productivity program
The Group has been pursuing a productivity program, known as P500, since May
1997 in order to boost its profitability and competitiveness. The aim is to
achieve annual productivity improvements corresponding to SEK 500 m (in relation
to April 1997) as of the year 2000. At the end of the fiscal year, improvements
corresponding to slightly more than the targeted amount had been achieved. In
practice, the goal has actually been surpassed by a broad margin, since the
figures do not include improvements achieved by Perstorp Plastic Systems, which
was divested in 1998.
During the year, a market recession exerted pressure on prices. The generated
productivity gains were utilized to enhance the Group's competitiveness and to
create scope for aggressive action.
Performance during the fourth quarter
Net sales rose during the fourth quarter in relation to the preceding quarter,
with all divisions making a contribution. However, the third quarter, which
includes the summer-vacation period in most countries, is usually weaker than
the fourth quarter. Fourth-quarter sales were 12% higher than in the
year-earlier period, despite the divestment of Perbio Science during the period.
In terms of operating earnings, the fourth quarter was the strongest period
during 1999 and significantly better than Q4 1998. Earnings during the quarter
benefited from a continued improvement in conditions in the chemical market,
which resulted in higher margins. Fourth-quarter results were also affected by
the fact that some customers in the chemical market accumulated inventories as
part of preparations for the millennium shift.
Perstorp Flooring's efficiency program began to make a substantial impact
during the quarter, resulting in a considerable earnings improvement compared
with Q4 1998.
Perstorp Surface Materials noted a favorable volume trend for decorative
laminates and technical laminates which, combined with a healthy productivity
improvement, resulted in a strong trend of earnings.
In the corresponding fourth quarter of 1998 a rapid worldwide decline in
chemical markets had a strongly negative impact on earnings.
Net financial items during the fourth quarter amounted to an expense of SEK
25 m, an improvement of SEK 13 m compared with the preceding quarter. The third
quarter was charged with other financial expenses amounting to SEK 13 m. The
corresponding amount for the fourth quarter was SEK 7 m. The interest portion of
net financial items decreased by SEK 7 m compared with the third quarter, due
mainly to lower net borrowing following the spin-off of Perbio Science.
Tax costs totaled SEK 88 m, equal to a tax rate of 46%.
The divisions
Perstorp incorporated its divisions during the fiscal year, in order to
enhance their potential to develop within their particular sectors and to
increase their freedom to rapidly implement strategic structural changes. The
new structure also enables the creation of shareholder value through active
efforts to improve the Group's constituent parts, as exemplified by the spin-off
of Perbio Science.
Costs for the incorporation and exchange listing of Perbio Science amounted
to SEK 95 m, including taxes of SEK 80 m. The tax costs did not affect
consolidated earnings, since they were charged directly against the Perstorp
Group's shareholders' equity at the spin-off date.
Costs for the incorporation of the other three divisions, which were expensed
in stages during 1999, totaled approximately SEK 120 m, including taxes of SEK
60 m.
PERSTORP CHEMICALS
SEK m Change Q4 Q4
1999 1998 SEK m 1999 1998
Net sales 4,157 4,336 -179 1,061 1,022
Operating earnings 385 562 -177 124 90
Operating margin, % 9.3 13.0 -3.7 11.7 8.8
Depreciation 249 223 26 56 64
Investments 401 414 -13 54 146
* The chemical market was characterized by overcapacity and thus lower prices
compared with the preceding year. Following a weak first half of 1999, however,
market conditions improved gradually as the prospects for the world economy
brightened. Perstorp Chemicals strengthened its market positions in several
segments during the fiscal year.
* Although net sales declined by 4%, the volume trend was favorable. Sales
and earnings rose during the final quarter of the year, partly due to
stockpiling by certain customers ahead of the new millennium.
* Operating earnings decreased significantly compared with 1998, due to the
weak state of the chemicals market. Although the trend for raw-material prices
is pointing upwards, the price increases implemented for several of the
division's products led to steadily improving margins during the year.
Accordingly, the full-year operating margin was 9.3%.
* The division is continuing to increase the amount of specialty products in
its range; for example, sales of special polyols rose by approximately 20% in
1999. Perstorp Chemicals strengthened its worldleading positions in formalin
technology markets through orders for five complete formalin plants for delivery
to Asia, South America and Europe during 2000.
* Investments in increased capacity and the manufacture of new products
continued at the division's units, particularly in Sweden, France, Great
Britain and Brazil. A formaldehyde plant for DuPont de Nemours
(Nederland) B.V. was constructed during the fiscal year in Dordrecht, the
Netherlands, and put into operation in January 2000. Total investments in the
plant slightly exceeded SEK 200 m, of which two-thirds were expensed during
1999.
PERSTORP FLOORING
SEK m Change Q4 Q4
1999 1998 SEK m 1999 1998
Net sales 3,627 3,267 360 908 812
Operating earnings 184 52 132 54 -45
Operating margin, % 5.1 1.6 3.5 5.9 -5.5
Depreciation 80 63 17 22 15
Investments 87 97 -10 34 2
* The market for laminate flooring and other types of solid flooring continues
to grow in Europe and the US. Demand for Perstorp Flooring's products continued
to increase in the US, although the competition is intensifying. The European
market is still marked by competition from products distributed through various
low-price channels.
* Net sales rose by 11 % compared with the preceding year, due largely to the
successful launch of Pergo(R) 99 during spring 1999. The strongest increase
was noted in the US, the division's largest market, while sales trends in
Europe varied from market to market, with the UK and Spain accounting for
the main increases.
* Earnings improved sharply from SEK 52 m to SEK 184 m, due to the launch of
attractive new products and the effects of cost reductions and a new
organizational structure. However, the full impact of the measures implemented
will not be attained until 2000.
* Perstorp Flooring is striving to establish an image as a leading,
innovative flooring company. The division's activities are focusing increasingly
on market-oriented competitive factors, such as leading brands, a high rate of
innovation and strong positions in all distribution channels. A channel-based
organization has been introduced, product development intensified and
continued efforts made to enhance the Pergo(R) brand. The division will be
renamed Pergo AB during 2000.
* As part of this process, Perstorp Flooring transferred the production of
laminate for flooring to Perstorp Surface Materials and reached a long-term
delivery agreement with this company. Laminate flooring will continue to be
produced at Perstorp Flooring's units in Trelleborg, Sweden, and Raleigh, North
Carolina.
* The reasons for intensifying product development activity are to broaden the
technology and product base and to develop new designs and functions that
strengthen the division's market positions. The launch of the new range Pergo(R)
99 in Europe and the US was followed by additional product launches in the
American market during autumn 1999. Following fiscal year-end, a large number of
new products were introduced at the annual Surfaces Fair in Las Vegas, USA.
These launches included new flooring formats, installation systems featuring
adhesive-free joints ("click joints"), products with increased wear resistance
and a large number of new designs. Further product launches are scheduled during
2000 in Europe and the US.
PERSTORP SURFACE MATERIALS
SEK m Change Q4 Q4
1999 1998 SEK m 1999 1998
Net sales 2,763 2,662 101 726 645
Operating earnings 184 99 85 54 -3
Operating margin, % 6.7 3.7 3.0 7.4 0
Depreciation 125 127 -2 33 32
Investments 232 201 31 37 60
* The Perstorp Group intends to sell Perstorp Surface Materials. This will
enable Perstorp to participate in the creation of a leading player in market for
decorative surfaces and to continue the streamlining of the Group.
* Demand for the division's products was favorable in several of its markets,
particularly those for decorative laminates. A very strong trend was noted in
Southern Europe, while developments in Germany were weaker. Conditions in the
UK, the division's largest individual geographic market, improved during the
latter part of 1999, after a weak start to the year, The trend in Brazil, the
division's main market in South America, was strong despite the currency unrest
in the country. A recovery also occurred in the division's markets in Asia.
* During the year, the Group's production of laminates was concentrated to
Perstorp Surface Materials, which thereby also became the supplier of all
laminates to the Flooring division. A long-term agreement was reached with
Perstorp Flooring regarding deliveries of laminates for flooring production.
* Due to the strong trend for decorative laminates and flooring laminates, net
sales rose by 4% despite devaluation effects in Brazil.
* The comprehensive restructuring and rationalization process initiated in
1997/98 has started to generate favorable effects, whereby operating earnings
increased to SEK 184 m (99). The rise was attributable to profitability
improvements with laminate operations. The integration of the foil operations
acquired in Embu, Brazil, during the year has been concluded, but this
process had an adverse impact on full-year earnings.
Perstorp Life Science/Perbio Science
* As part of the continued streamlining of the Group, the Annual General Meeting
in April 1999 voted in favor of a Board proposal to spin off the Perstorp Life
Science division's operations (Perbio Science AB) to Perstorp AB shareholders
and to list the new company's shares on the stock exchange. The objective was to
enable shareholders to benefit directly from future value growth in this market
segment and to more rapidly release the operations' inherent potential.
* Perbio Science is included in the consolidated income statement up to the
spin-off date. Net sales and operating earnings rose sharply during this period.
Pro forma accounts, showing the Perstorp Group excluding Perbio Science, are
provided at the end of this report.
Financial trend
Total assets decreased by SEK 467 m compared with December 31, 1998 to SEK 8,169
m (8,636) at the end of 1999. The spin-off of Perbio Science reduced total
assets by approximately SEK 900 m. This reduction was offset by an increase in
operating assets.
Adjusted for effects related to Perbio Science, working capital (current
operating receivables plus inventories less current operating liabilities)
decreased by SEK 180 m, despite an increase in inventories within Perstorp
Chemicals ahead of the new millennium. The decrease is a consequence of an
increased focus on working capital. The capital turnover rate rose slightly.
Long-term operating assets amounted to SEK 3,947 m (4,087), which included SEK
45 m for intangible assets, of which goodwill accounted for SEK 21 m.
Provisions decreased by SEK 319 m, mainly as a result of the redemption of PRI
pensions through a lump-sum amortization to SPP.
Not borrowing decreased during the year to SEK 1,597 m (1,623) at year-end. The
spin-off of Perbio Science reduced net borrowing by SEK 322 m. This reduction
was offset by the amortization of PRI pensions.
Shareholders' equity decreased by SEK 752 m to SEK 3,776 m (4,528), the net
result of cash dividend payments of SEK 286 m, costs of SEK 528 m for the
spin-off of Perbio Science, negative exchange-rate effects of SEK 219 m and net
profit of SEK 281 m for the year. Brazil accounted for nearly half of the
exchange-rate effects.
The equity ratio declined from 53% at the beginning of the year to 47% at the
end.
The return on shareholders' equity decreased by one percentage point to 7%, due
mainly to extraordinary tax costs of SEK 120 m for the incorporation program.
The return on capital employed was 11% (10), with the increase due to a
reduction in average capital employed and increased operating margin.
Investments amounted to SEK 906 m, of which Perbio Science accounted for SEK 174
m. Strategic investments, that is, measures that result in a significant
increase in the value of a particular subgroup, accounted for about SEK 582 m of
total investments. Notable strategic investments included Perstorp Specialty
Chemicals' formaldehyde plant at DuPont's complex in Dordrecht, the Netherlands,
Perstorp Surface Materials' acquisition of the foils plant in Embu, Brazil and
Perstorp Flooring's plants for the production of newly developed products.
Free cash flow amounted to SEK 963 m (360). The improvement was mainly
attributable to a decrease of SEK 333 m in working capital, excluding changes in
tax in consolidated balance sheet, compared with an increase of SEK 147 m in the
preceding year, as well as a decrease in investments in fixed assets from SEK
456 m to SEK 324 m. Operating cash flow amounted to SEK 593 m (365).
Research and development
Research and development activities accounted for slightly more than 2% of sales
revenues. The main activities were conducted within Perstorp Chemicals and
Perstorp Flooring. The expenditures pertained primarily to continued development
of special polyols and projects based on Perstorp's expertise in formaldehyde
catalysts, with the focus on developing catalysts for environmental
applications.
In line with Perstorp Flooring's increased focus on innovativeness, considerable
development work was devoted to new designs, formats and functions, several of
which will be launched during the first half of 2000.
In pace with the Group's increasing concentration on the chemical sector, the
business development company, Pernovo, has directed its operations towards
specialty chemicals, functional additives and advanced materials, which
complement the Group's established technologies and markets.
Personnel
The average number of Group employees during the fiscal year was 6,505 (1997/98:
6,747), distributed as follows geographically:
1999 1997/98
Sweden 36 37%
Other EU countries 28 30%
US 17 18%
Other regions 19 15%
The actual number of Group employees at the end of the year was 5,379 (6,102).
The decrease in the number of employees was due mainly to the spin-off of Perbio
Science (688 employees).
Y2K
Since 1997, Perstorp has conducted an extensive project aimed at ensuring the
Y2K compliance of the Group's administrative and embedded systems. The Group's
total costs for this program amounted to about SEK 90 m, of which some SEK 85 m
was for external input. Of the total costs, approximately SEK 25 m was charged
against operations in 1999 and some SEK 60 m against 1998.
The transition to the new millennium progressed as planned and the minor faults
that arose at the beginning of 2000 were promptly corrected.
Management of financial risks
Perstorp works actively in order to reduce the Group's exposure to financial
risks. The main risks are as follows.
Currency risk/Transaction exposure: At fiscal year-end, the net of currencies
sold/bought on forward contracts amounted to SEK 512 m, corresponding to about
13% of the estimated net inflow of SEK 4,019 m during the following 12 months.
According to Perstorp's risk policy, hedging of this type of exposure is not the
main alternative.
Currency risk/Translation exposure (foreign net assets): At fiscal year-end, the
value of foreign net assets was SEK 3,334 m, of which SEK 788 m was hedged
through loans in the same currency. Perstorp's policy is that translation
exposure should not be hedged, unless it is of a financial nature.
Interest risk: At fiscal year-end, interest rates for the entire loan portfolio
were fixed for an average period of 34 days. Perstorp's policy permits a
variation of between 30 and 360 days.
Financing and liquidity risk: Perstorp's borrowing is largely undertaken on a
short-term basis. To secure high financial preparedness, the Group has a
committed line of credit in the form of a Multi-Currency Revolving Credit
Facility in an amount of USD 300 m, which was unutilized at year-end. Perstorp's
policy is that committed lines of credit (with an average remaining term of at
least two years) available at each point in time must correspond to the Group's
net financial debt less working capital.
Credit risk: To limit the credit risk, maximum risk levels have been set for
each counterparty. No credit losses have been incurred to date. Perstorp's
policy is that, as a rule, its counterparties must have a minimum rating
(short-term) of A-1 from Standard and Poor's
Financial exposure: The main rule in accordance with Perstorp's policy is that
loans and investments shall be undertaken in the basic currency of the
particular Group company. One exception from this rule is Perstorp do Brasil,
which, for interest-expense reasons, is partly financed in USD.
Environment
Work in the field of safety, health and the environment (S.H.E.) continued
during 1999.
Additional plants received ISO 14001 certification during the year, Virtually
all of the plants and large facilities at the complex in Perstorp, Sweden, are
now certified, as are units in Trelleborg, Sweden, Castellanza, Italy, Gent,
Belgium, and Toledo, USA. During the first half of 2000, it is estimated that
more units in Great Britain and France, among other countries, will receive
certification. Extensive training programs are being held in parallel with the
implementation of environmental management systems.
A comprehensive report on the Group's environmental work will be published on
www.perstorp.com in connection with the release of the Annual Report.
The Perstorp share
At Perstorp AS's request, the Company's shares were reregistered on the OM
Stockholm Stock Exchange's A list on April 13, 1999, after having been
registered on the 0 List since September 4, 1997.
The record date for participation in the spin-off of Perbio Science AB was
October 15, 1999 and the shares have been registered on the Stockholm
Stock Exchange's 0 List since October 18, 1999.
The year-end price per Perstorp share was SEK 79, which corresponds to a market
capitalization of SEK 5,815 m. The equivalent figures on December 31, 1998 were
SEK 60.70 and a market capitalization of SEK 4,467 m, adjusted for the spin-off
of Perbio Science. Accordingly, Perstorp shareholders received a total return,
including the cash dividend and adjusted for effects related to Perbio Science,
of 37%. During the corresponding period, the Stockholm Stock Exchange's Yield
Index rose by 69%. The Dow Jones index for European specialty chemicals
companies increased by 11.5%. On February 2, 2000 the price of the Perstorp
share was SEK xx kr, which corresponds to an increase of x% since the turn of
the year.
Options
During October 1999 a group of seven senior executives of the Perstorp Group
have purchased a total of 640,000 call options on an equivalent number of Series
B shares in Perstorp AB from AB Custos, the largest individual Perstorp
shareholder.
The price per option is SEK 4.98 and the options can be converted into Series B
shares in Perstorp AB from October 29, 1999 to October 29, 2000 at an exercise
price of SEK 73 each. The terms for the options were established on the basis of
a market valuation undertaken by KPMG Corporate Finance.
Dividend, Annual General Meeting and reporting dates
The Board of Directors proposes a cash dividend of SEK 4,00 per share (1997/98
adjusted 3,00), which is an increase of 33%. The preceding year's dividend
pertained to a fiscal year that was extended to 16 months.
At the Annual General Meeting, the Board will propose that the Board be
authorized to make a decision regarding the repurchase of Perstorp shares up to
10% of the total number of shares. A prerequisite for such a repurchase will be
that the government bill regarding the repurchase of shares is enacted as
anticipated, It is proposed that such authorization apply until the following
Annual General Meeting. The purpose is to provide the Board with an additional
instrument for use - if considered necessary - in efforts to boost shareholder
value.
Such a repurchase could be effected via the stock exchange or through an offer
to shareholders. It is proposed that the Board's authorization also include
permission, within the confines of the new legislation, to transfer repurchased
shares.
The Annual General Meeting will be held at Persgarden in Perstorp, Sweden, on
April 8, 2000, at 10 a.m.
The Annual Report will be published and distributed to shareholders in
mid-March.
The preliminary publication dates for quarterly reports during 2000 are as
follows: April 25, July 24 and October 20.
Outlook
We anticipate that the Group's operations will benefit from continuing favorable
general economic conditions during 2000.
Perstorp Chemicals will also benefit from the sale of several formaldehyde
plants and deliveries from the newly started Dutch plant in Dordrecht.
In the laminate flooring market, growth is expected to remain favorable and a
large number of new product launches during the year are expected to contribute
to a healthy performance by Perstorp Flooring. The launches, however, will not
gain an impact until the second quarter.
Perstorp, February 3, 2000
Perstorp AB
Board of Directors
Earnings
Income Statement Change Q4 Q4
SEK m 1999 1998 SEK m 1999 1998
Net sales 10,352 10,742 -390 2,467 2,346
Cost of goods sold -7,357 -7,559 202 -1,723 -1,673
Gross earnings 2,995 3,183 -188 744 673
Sales, administration and R&D -2,281 -2,561 280 -563 -634
costs
Items affecting comparability -86 -7 -79 14 -35
Other operating revenues and 5 14 -9 20 13
expenses
Result from participations in 18 21 -3 1 9
associated companies
Operating earnings 651 650 1 216 26
Net financial items -100 -97 -3 -25 -25
Earnings before taxes 551 553 -2 191 1
Taxes -281 -229 -52 -88 -34
Minority share 11 11 0 2 3
Earnings after taxes 281 335 -54 105 -30
Earnings per share 3.93 4.68 -0.75 1.47 -0.42
Earnings per share after full 3.89 4.65 -0.78 1.43 -0.38
conversion
Consolidated Balance Sheet
SEK m Dec.31,1999 Dec.31,1998
Long-term operating assets 3,947 4,087
Long-term financial assets 316 314
Inventories 1,387 1,909
Current operating receivables 2,312 2,126
Current financial assets 207 200
Total assets 8,169 8,636
Shareholders' equity 3,776 4,528
Minority Interests 56 56
Provisions 526 845
Long-term financial liabilities 271 407
Current operating liabilities 1,802 1,539
Current financial liabilities 1,738 1,261
Total liabilities and shareholders'
equity 8,169 8,636
Key Ratios
Full year Full year Q4 Q4
1999 1998 1999 1998
Turnover rate
- total capital, times/year 1.23 1.21 1.16 1.10
- working capital,times/year 4.7 4.2 4.7 3.7
Operating margin, % 6.3 6.1 8.8 1.1
Return
- total capital, % 8 8 11 1
- shareholders' capital, % 7 8 11 neg
- capital employed, % 11 10 15 2
Debt/equity multiple 0.4 0.4 0.4 0.4
Equity ratio, % 47 53 47 53
Interest-coverage ratio, 5.1 5.1 4.4 1.0
times/year
Shareholders' equity per 53 63 53 63
share, SEK
Free cash flow/net sales, % 9 3 12 3
Number of shares 71,584,341 71,584,341 71,584,341 71,584,341
Number of shares 74,114,341 73,610,991 74,114,341 73,610,991
after full conversion*)
*) As a result of the spin-off of Perbio Science, the number of shares after
full conversion has increased by 503,350
Cash flow analysis/Group
Change Q4 Q4
SEK m 1999 1998 SEK m 1999 1998
Operating earnings 651 650 1 216 26
Depreciation 511 521 -10 120 126
Change in working capital 333 -147 480 101 38
Current investments in fixed assets -324 -456 132 -72 -113
Operating cash flow 1,171 568 603 365 77
Tax related to operating earnings -208 -208 0 -69 -8
Free cash flow 963 360 603 296 69
Adjusted for taxes, financial items -370 5 -375 -67 30
and other items
Cash flow from operations 593 365 228 229 99
Strategic Investments in plant
and company acquisitions -582 -471 -111 -52 -145
Effect of Perbio spin-off/
Divestments 516 474 42 516 0
Cash flow before dividend 527 368 159 693 -46
Dividend to shareholders -814 -197 -617 -528 0
Net cash flow -287 171 -458 166 -46
Free cash flow per share before 13.45 5.03 2.43 4.13 0.96
conversion
Net debt at beginning of period -1,623 -2,178 -2,098 -1,426
Net cash flow -287 171 165 -46
Net debt in acquire/divested
Operations 322 520 322
Currency effects -9 -136 14 -151
Net debt at end of period -1,597 -1,623 -1,597 -1,623
Quarterly data (1998 and 1997 pro forma)
SEK m 1997 1998 1999
IV I II III IV I II III IV
Net sales 2,746 2,885 2,931 2,580 2,346 2,549 2,792 2,544 2,467
Cost of goods -1,964-2,006 -2,064 -1,816 -1,673 -1,830 -1,979 -1,825-1,723
sold
Gross earnings 782 879 867 764 673 719 813 719 744
Sales,
Administration -628 -666 -666 -595 -634 -572 -605 -541 -563
and R&D costs
Items affecting 66 -3 8 23 -35 -15 -48 -37 14
comparability
Other operating 29 5 0 -4 13 -3 -8 -4 20
revenues and
expenses
Result from 2 1 3 8 9 4 7 6 1
participations
in associated
companies
Operating earnings 251 216 212 196 26 133 159 143 216
Net financial items -47 -16 -38 -18 -25 -14 -23 -38 -25
Earnings before
taxes 204 200 174 178 1 119 136 105 191
Taxes -70 -70 -62 -63 -34 -42 -57 -94 -88
Minority share -1 5 2 1 3 0 2 7 2
in net profit
Earnings after taxes 133 135 114 116 -30 77 81 18 105
Quarterly data, divisions
Net sales 1997 1998 1999
SEK m IV I II III IV I II III IV
Perstorp Chemicals 1,059 1,116 1,152 1,046 1,022 1,086 1,060 950 1,061
Perstorp Flooring 787 803 830 822 812 852 980 887 908
Perstorp Surface
Materials 596 682 684 651 645 635 757 645 726
Other items, Incl.
Eliminations -213 -257 -294 -239 -313 -272 -284 -228 -276
Total "0ngoing 2,229 2,344 2,372 2,280 2,166 2,301 2,513 2,254 2,419
Business"
Perstop Life 140 174 172 180 180 248 279 290 48
Science
Business units sold 377 367 387 120 0 0 0 0 0
and eliminations
Group 2,746 2,885 2,931 2,580 2,346 2,549 2,792 2,544 2,467
Quarterly data, divisions
Net sales 1997 1998 1999
SEK m 1997 1998 1999
IV I II III IV I II III IV
Perstorp Chemicals 156 162 152 158 90 87 89 85 124
Perstorp Flooring 35 48 28 21 -45 6 66 58 54
Perstorp Surface 16 25 41 35 -2 37 57 36 54
Materials
Other items, Incl. 45 -48 -50 -45 -34 -31 -82 -62 -22
Eliminations
Total "0ngoing 252 187 171 169 9 99 130 117 210
Business"
Perstop Life 9 23 21 25 17 34 29 26 6
Science
Business units sold -10 6 20 2 0 0 0 0 0
and eliminations
Group 251 216 212 196 26 133 159 143 216
Net effect of the spin-off of Perstop Life Science
Earnings/Group Remaining Perstop- Total
SEK m operations Life Science
Net sales 9,487 865 -10,352
Cost of goods sold -6,877 -480 -7,357
Gross earnings 2,610 385 2,995
Sales, administration and R&D costs -2,013 -268 -2,281
Items affecting comparability -71 -15 -86
Other oper. revenues and expenses 12 -7 5
Results from participations in 18 0 18
associated companies
'Operating earnings 556 95 651
Net financial items -81 -19 -100
Earnings before taxes 475 76 551
Taxes -244 -37 -281
Minority share in net profit 11 0 11
Earnings after taxes 242 39 261
Earnings per share 3.38 0.54 3.93
Earnings per share after full conversion 3.33 0.54 3.87
Operating margin, % 5.9 11.0 6.3
END
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