Q3 Report 2000
October 03 2000 - 5:46AM
UK Regulatory
RNS Number:9222R
Perstorp AB
3 October 2000
Perstorp AB presents preliminary nine-month report and a full-
year earnings estimate for 2000
As announced in the September 28 press release, Perstorp
Intressenter AB has stated that it is unable to complete
its bid to acquire all shares and convertible debentures
in Perstorp AB. This decision was due to the fact that
Perstorp Intressenter AB's financing conditions could not
be fulfilled.
Due to the resultant speculation, the Board of Perstorp AB want
to present the following preliminary report on the
Group's earnings for the first nine months of the 2000
fiscal year, and an estimate of full-year earnings.
Perstorp Intressenter AB has announced that it is studying the
prerequisites for submitting a new offer. Following
consultation with the OM Stockholm Exchange, the
suspension of trading in Perstorp shares will remain in
force until further notice.
PERSTORP GROUP
Preliminary report on operations
during the nine months ended September 30, 2000
Group earnings
SEK m Q IIl Q I-IIl Most Full year
recent
2000 1999 2000 1999 12 months 1999
Perstorp Chemicals 163 85 423 261 547 385
Pergo -57 58 20 130 74 184
Other items including -21 -42 72 -107 70 -109
eliminations
of which Perstorp -24 19 14 63 37 86
Laminatproduktion
Operating earnings
excluding
demerged business 85 101 515 284 691 460
units
Demerged business units 0 42 1 151 41 191
Group 85 143 516 435 732 651
Net financial items -18 -38 -45 -75 -70 -100
Earnings before taxes 67 105 471 360 662 551
Operating earnings by division
adjusted for items affecting comparability
SEK m Q IIl Q I-IlI Most Full
recent year
2000 1999 2000 1999 12 1999
months
Perstorp Chemicals 118 85 376 261 486 371
Pergo 23 58 100 155 154 209
Other items including -10 -12 10 -47 8 -49
eliminations
of which Perstorp -8 19 30 63 53 86
Laminatproduktion
Operating earnings excluding
demerged business units 131 131 486 369 648 531
Demerged business units 0 49 1 166 41 206
Operating earnings
adjusted for items
affecting comparability 131 180 487 535 689 737
Operating earnings amounted to SEK 516 m. Positive items
affecting comparability include the capital gain of SEK
75 m from the sale of Perstorp Surface Materials, entered
under "Other, including eliminations," and repayment of
SEK 61 m in pension monies from SPP, distributed by
operations as follows: Perstorp Chemicals: SEK 45 m;
Pergo: SEK 5 m; Perstorp Laminatproduktion: SEK 5 m;
Other: SEK 6 m. During the third quarter, the total cost
of items affecting comparability amounted to SEK 107 m -
of which Pergo accounted for SEK 86 m and Perstorp
Laminatproduktion for SEK 21 m - and primarily concerned
changes in product range and production techniques. Of
this amount, SEK 41 m was due to write-downs of fixed
assets, which has no effect on cash flow.
Operating earnings after adjustments for items affecting
comparability and demerged units amounted to SEK 486 m.
Perstorp Chemicals
Demand for several of Perstorp Chemicals' products
increased during the period, due to the favourable
economic conditions. At the same time, rising prices were
noted for several raw materials, which Perstorp is
countering through price increases, the effect of which,
however, involves a certain delay.
Perstorp Chemicals' operating earnings rose
significantly, due mainly to an increase in net sales.
The acquisitions of the polyol operations of the Degussa-
Huls Group and the phenol resin operations of Plasta
Erkner that were carried out during the first half-year
contributed to earnings for the period, and are expected
to contribute to an even greater extent during the next
fiscal year.
Pergo and Perstorp Laminatproduktion
As indicated in Perstorp's six-month interim report, the
flooring market is characterized by increased competition
and price pressure, while at the same time, direct
laminate flooring and new joining systems are increasing
their shares of the total market. This has occurred more
rapidly than expected. Pergo introduced several new
products during the period. However, due to delays in
introducing these products to the market, their impact on
sales and earnings is not expected to be felt until the
fourth quarter in the U.S. and somewhat later in Europe.
The delays were due primarily to a partial switch to new
technology, delayed installation of production lines for
new products and adaptation of products in accordance
with new customer requirements. As indicated in the
report, Pergo's earnings were adversely affected by
restructuring costs in the flooring operations.
During the period, Pergo introduced direct laminate
flooring, within the framework of its long-term
cooperation with Witex, which is proceeding according to
plan. Pergo also introduced a proprietary glue-free
flooring to the market, and launched glue-free flooring
with the well established Uniclic system, within the
framework of a license agreement.
In the American market, prices declined during the
period. The delayed launches of new products are now
being conducted in accordance with a revised schedule. In
September, Home Depot, Pergo's largest customer in the
U.S. began a launch of glue-free flooring from Pergo.
The glue-free flooring is to be introduced at most of the
company's 1,100 U.S. sales locations until year-end, at
which time a major nationwide marketing campaign will
commence.
In the fragmented European market, prices have continued
to decline. Pergo's new product launches are taking place
later than expected, and they are not expected to
generate effects until after the end of the fiscal year.
Nonrecurring expenses related to the adaptation of
Pergo's production and distribution as a result of
changes in product range and production techniques, as
well as employment terminations, have been charged
against operating earnings. Due to these expenses and to
the delays in product launches, Pergo's operating
earnings for the first three quarters of the year
amounted to SEK 20 m. Earnings for Perstorp
Laminatproduktion, which is primarily a supplier of
laminate flooring to Pergo, were also adversely affected
by expenses caused by the said changes.
If the changes in the flooring market accelerate, it may
become necessary for Pergo and Perstorp Laminatproduktion
to take further corrective measures in the coming fiscal
year, but these would not be expected to have any
material adverse affect on Group cash flow.
Full-year estimate for the 2000 fiscal year
Assuming the current favourable business trend continues,
full-year earnings for the Group in its current structure
- that is, excluding "demerged business units" - are
expected to amount to SEK 625 - 650 m before items
affecting comparability.
Earnings include nonrecurring revenue from proceeds of
the sale of Perstorp Surface Materials (SEK 75 m) and the
repayment of pension monies from SPP (SEK 61 m), which
will basically be offset by restructuring costs expensed
during the fiscal year.
Perstorp Chemicals will continue to perform favourably,
whereas full-year earnings for Pergo and Perstorp
Laminatproduktion will be adversely affected by lower
prices and the said delays in product launches, and are
therefore expected to be considerably lower than
previously expected. Uncertainty regarding future
earnings for these operations has increased.
For 2001, Perstorp believes that Perstorp Chemicals will
continue to develop favourably and be positively affected
by the acquisitions carried out during the current year.
Performance improvements are expected from Pergo and
Perstorp Laminatproduktion, as ongoing product launches
and restructuring begin to take effect. However,
uncertainty regarding the future earnings trend for the
two latter operations has increased.
More detailed information on Group's financial
performance will be provided in Perstorp' definitive nine-
month report, to be presented on October 20.
Perstorp, October 2, 2000
Board of Directors
Perstorp AB
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