Half-yearly report january-june 1999 for Bong Ljungdahl AB

8/12/1999 7:00 AM EST

HALF-YEARLY REPORT JANUARY-JUNE 1999

for BONG LJUNGDAHL AB


NORDIC MARKET LEADERSHIP NOW ESTABLISHED

TURNOVER INCREASED BY 20 %

STRUCTURAL MEASURES GIVE CONTINUED HEALTHY PROFIT GROWTH

PROFIT AFTER NET FINANCIAL ITEMS INCREASED TO SKr 44 MILLION (15)

EARNINGS PER SHARE AFTER TAX: SKr 4.80 (1.65)


THE MARKET
As was reported for the first quarter, conditions on the Group's main

markets remained generally relatively favourable during the second
quarter. In Sweden, which is the Group's largest individual market, a high

level of activity and firm demand were the main features. On the other
Nordic markets, demand was stable, with minor variations, although the
competitive situation in Denmark and Norway intensified as a result of

stepped-up activity by international competitors.


Through the acquisition of the Finnish operation, the position as Nordic
market leader has now been established and the focus of the Group is now
directed towards further expansion in the rest of Europe.


From a European perspective, our view remains that in the long term the

envelope market will grow in volume by around 2-3 per cent per year. This
growth is being generated mainly by sustained strong expansion in the
product segments related to direct mail advertising. In line with this,

there is a trend towards higher value added products in larger formats.


SALES AND RESULT
The Group's net turnover increased by more than 20 per cent to SKr 641
million (531). This increase is largely due to the acquisition of the

Finnish business. For comparable units, the increase was just over 3 per
cent. Currency fluctuations have only had a marginal effect on turnover.


The operating profit for the first half of the year rose by SKr 32 million
to SKr 53 million (21). The most important factor behind this improvement

is that the structural measures carried out within the Scandinavian units
have now had their full effect. Over and above this, the acquisition in

Finland and further rationalisation of production in Sweden that began
towards the end of the previous financial year, also made a contribution
to the healthy improvement in earnings. The cost of the changes made to

the Swedish business, which amounted to SKr 6 million, has been taken
against the result. Capital gains of a corresponding amount were generated

by the sale of retired production equipment.

The integration of the Finnish business is continuing largely as planned.

The remaining measures are for the most part concentrated on certain
rationalisation investments and on the relocation of the stockholding

function, which is planned for late this autumn.

The operating profit for the second quarter, which is normally weaker than

the first quarter for seasonal reasons, was SKr 23 million. This may be
compared with SKr 8 million for the corresponding quarter of last year.


Increases in paper prices were announced during the second quarter which
come into effect at the start of the second half of the year. Adjustments

made to selling prices are expected to provide full compensation for the
higher raw material costs. Further increases in paper prices cannot be

excluded during the autumn.

The profit after net financial items for the January-June period almost

tripled and amounted to SKr 44 million, which may be compared with SKr 15
million for the previous year (excluding capital gains of SKr 7 million).

The acquisition of the Finnish business has involved an increase of some
SKr 2 million in the Group's interest costs.


Envelopes Sweden has continued to develop strongly. The effects of
rationalisation measures, in combination with stronger market positions,

generated a substantial improvement in earnings. Relatively favourable
market conditions also contributed to this strong performance. Turnover
amounted to SKr 267 million (259).


The Group's Danish envelopes division generated a significant improvement

in its result thanks to further development towards higher added value
products coupled with continual rationalisation measures. A stepped-up
foreign presence on the market has led to some intensification of the

competitive situation. Turnover amounted to SKr 92 million (97).


Envelopes Norway's business has made good progress. Productivity
improvements in both production and printing have generated a useful
increase in earnings. The remaining sheet-based production capacity has

now been transferred to the unit in Nybro, which is the Group's centre for
sheet and special production. This brought a further slight reduction in

the cost level. The Norwegian market is also subject to a slight increase
in international activity. Turnover amounted to SKr 90 million (97).


The most important aspects of the integration into the Group of the
Finnish envelope business, the extensive transfer of sheet production to

Nybro and the relocation of printing activities to Tampere, have now been
completed as planned. The remaining measures primarily involve some

rationalisation investments, and the relocation of the stockholding
function from Helsinki to Tampere, which is expected to be completed late
this autumn. A slight weakening of the market was noted at the beginning

of the second quarter. Turnover amounted to SKr 94 million.


The first stages in the new business plan for Envelopes Belgium are now
being implemented and, together with the earlier investments to raise
productivity, they are already generating an improvement in the result.

Envelopes Belgium's turnover amounted to SKr 87 million (72).


The transfer of the business in Poland to new, purpose-designed premises
is expected to be completed by the end of the third quarter. This will
establish an important pre-condition for further expansion by the Group's

Polish company. Turnover in local currency rose by some 14 per cent during
the reporting period, which is estimated to be broadly in line with market

growth. The result was positive and at about the same level as last
year's. Turnover amounted to SKr 15 million (14).


LIQUID FUNDS AND FINANCING
st
Closing liquid funds amounted to SKr 42 million (December 31 1998: 36)

and net debt decreased by SKr 34 million to SKr 284 million during the
period.


The equity ratio was 39 per cent (38) and debt-equity ratio was 0.67
(0.58).


CAPITAL EXPENDITURE
The Group continued its high level of capital expenditure. Fixed

investments during the period amounted to SKr 62 million and were largely
concentrated on the modernisation and technical upgrading of the machinery

and equipment at the envelope units. As a result of the ongoing process of
structural change, old equipment has been retired and sold for SKr 19
million.


During the coming years, the level of capital expenditure within the

existing structure is expected to be significantly lower.

EMPLOYEES

The average number of employees in the Group is 1,152 (1,028). This
increase is attributable to the acquisition of the Finnish business in

1998. Since the end of 1998 the average number of employees has fallen by
88.

PARENT COMPANY

The parent company's business now consists of the administration of
operative subsidiary companies and Group management functions.


OUTLOOK
The structural programme which was completed in 1998, and the additional

measures initiated in 1999, continue to give, even though at a decreasing
rate, improved results. Provided that conditions on the Group's main

markets remain relatively stable, we still expect that the Group's profit
for the year as a whole will be considerably improved compared with the
previous year..

th
Kristianstad, August 12 1999


BONG LJUNGDAHL AB (publ.)


Lennart Pihl
President and CEO


REPORT ON AUDITORS' EXAMINATION

We have performed a general examination of this half-yearly report during
the course of which we complied with the recommendation issued by the
Association of Swedish Authorised Public Accountants FAR.


A general examination is considerably less detailed than an audit. No

facts have emerged to indicate that the interim report does not satisfy
the requirements laid down in the Swedish Stock Market and Annual Accounts
acts.

th
Kristianstad, August 12 1999


Anders Lundin Göran Tidström
Authorised public accountant Authorised public accountant


Öhrlings PricewaterhouseCoopers


Next financial report
th
Thursday, October 28 1999 Interim report: January-September 1999


Further information may be obtained from Lennart Pihl, President and CEO

of Bong Ljungdahl AB.
Telephone (switchboard): +46 44 20 70 00, (direct) +46 44 20 70 50,
(mobile) 070 594 68 66


INTERIM REPORT BONG LJUNGDAHL GROUP

SUMMARY PROFIT AND LOSS Jan-June 1999 Jan-June 1998 Jan-Dec 1998

ACCOUNT (SKr million)
Net turnover 640,8 530,6 1095.3

Operating costs -587,7 -509,4 -1039.1
Operating profit 53,1 21,2 56.2


Capital gain on sale of - 7,0 7.0
subsidiary

Net financial items -8,9 -6,5 -15.4
Profit after net financial 44,2 21,7 47.8
items


Tax -9,8 -3,2 -7.5

Net profit after tax 34,4 18,5 40.3


t t
SUMMARY BALANCE SHEET June 30 1999 December 31 , 1998

(SKr million)
Fixed assets 640,3 628.3
Receivables 204,2 198.4

Stocks 188,0 200.7

Liquid funds 41,7 36.1
Total assets 1 074,2 1063.5


Equity 421,7 405.2
Interest-bearing provisions 76,4 78.2

Interest-free provisions 81,1 77.6
Interest-bearing liabilities 255,8 282.5

Interest-free liabilities 239,2 220.0
Total equity and liabilities 1 074,2 1063.5


FINANCIAL RATIOS Jan-June 1999 Jan-June 1998 Jan-Dec 1998


KRONOR PER SHARE
Earnings after standard tax 4,44 1,52/2,24 1) 4.16/4.87 1)
Ditto after full tax 4,80 1,65/2,64 1) 4.32/5.70 1)

Equity 61,10 53,64 58.80


RATIOS
Operating margin 8,3% 4,0% 5.1%

Profit margin 6,9% 2,8%/4,1% 1) 3.7%/4.4% 1)

Return on equity 15% 6%/8% 1) 7%/9% 1)

Return on capital employed 14% 7% 9%


Debt-equity ratio 0,67 0,58 0.78
Equity ratio 39% 42% 38%


Capital employed, SKr 753,8 612,4 765.9
million

Net interest-bearing debt, 283,7 217,1 317.3
SKr million


Average number of shares 7,164,840 6,990,140 7,066,721
(after full conversion)


Including capital gain on sale of the Labels division (Nova Print)


QUARTERLY COMPARISONS GROUP (SKr million)


Q Q Q Q Q Q Q Q Q Q
2/99 1/99 4/98 3/98 2/98 1/984/97*3/97*2/97*1/97*
Net turnover 302,6338.2336.4228.4255.3275.3272.8225.9268.3275.8

Operating costs - - - - - - - - - -
280,0307.7312.2217.6247.0262.4265.3220.6268.8267.4

Operating 22,6 30.5 24.2 10.8 8.3 12.9 7.5 5.3 -0.5 8.4
profit/loss
Capital gain on

sale of - - - - - 7.0 - - - -
subsidiary

company
Net financial -4,2 -4.7 -5.3 -3.6 -2.6 -3.9 -3.4 -3.2 -3.1 -3.3
items

Result after net
financial items 18,4 25.8 18.9 7.2 5.7 16.0 4.1 2.1 -3.6 5.1

*) Pro forma including Ljungdahls and excluding Labels division

CASH FLOW ANALYSIS: GROUP (SKr million)


Jan.-June. 1999 Jan.-June. 1998

Operating profit 53,1 21,2
Net financial items -9,0 -6,5
Tax paid -11,1 -2,1

Depreciation 32,5 29,1
65,5 41,7


Change in working capital 26,6 -14,0
Cash flow from current operations 92,1 27,7


Capital expenditure, etc -44,8 -24,0
Acquisitions/divestments, etc - 31,4

Cash flow after investments, etc 47,3 35,1