Interim Report, January - March 2002

5/15/2002 6:53 AM EST

INTERIM REPORT, JANUARY - MARCH 2002

· OPERATING PROFIT* WAS SKr 23 MILLION (32)

· RESTRUCTURING AND COST-REDUCTION MEASURES MITIGATE EFFECTS OF WEAK
MARKET CONDITIONS

· PROFIT AFTER NET FINANCIAL ITEMS* AMOUNTED TO SKr 6 (15)

· CASH FLOW** WAS SKr 55 (9)

· CONDITIONS IN BOARD PROPOSALS FOR RIGHTS ISSUE AND CONVERTIBLE LOAN
STOCK ESTABLISHED


Q1 Q4 Q3 Q2 Q1
2002 2001 2001 2001 2001

Net turnover, SKr million 592 596 548 578 673

Operating profit/loss, 23 2 -5 11 32
SKr million*
Profit/loss after net 6 -22 -22 -6 15
financial items, SKr million*
Cash flow after investment 55 42 -19 -63 9
activities, SKr million**

* Excluding items affecting comparability of Skr 6 million relating to
capital gain on sale of
property (Q1/2002) and cost items of Skr 5 million relating to the
cancelled acquisition of
Stronghold Group (Q1/2001)
** Excluding proceeds of property sales of SKr 51 million (Q1 2002)

MARKET AND SALES
The persistent weakness of the economy continued to have a moderating
effect on envelope consumption at the start of 2002. In relation to the
same period last year, the envelope market in Europe is judged to have
declined in volume by 5-10 per cent during the first quarter of 2002,
with variations depending on market area. The economic slowdown that
characterised most of 2001 had acquired only limited momentum by the end
of the first quarter last year. Recession, excess capacity and the
fragmented structure of the most of our major markets caused stiffer
competition for available volumes, which in turn put prices under
greater pressure.

Bong has maintained its position on the Nordic markets, which account
for some 41 per cent of the Group's turnover. On the highly competitive
English market, the Group experienced relatively healthy growth in
volume and slightly raised its market share. Sales on the English market
account for some 23 per cent of the Group's turnover. In Germany, which
accounts for about 19 per cent of the Group's turnover, the market is
estimated to have contracted sharply in the first quarter of 2002 in
relation to the same period last year. The Group's position on the
German market weakened in 2001 as a result of restructuring problems,
but sales moved broadly in line with the market during the beginning of
2002.

The trend towards increased internationalisation among our customers is
becoming more marked. One consequence of this is that large and
internationally expanding customers are increasingly inclined to adopt a
pan-European approach when it comes to buying envelopes. This applies as
much to wholesalers as it does to end-users from a wide variety of
different industries. The Bong Group, by virtue of its size, structure
and market coverage, is well placed to benefit from this trend.

TURNOVER AND RESULT
The Group's turnover declined by 12 per cent on the same period last
year to SKr 592 million (673). Two percentage points of this decline are
attributable to the divested Binder Division, some 3 percentage points
to lower prices and changes in product mix, and just under 10 points to
lower volumes. Currency fluctuations boosted turnover by just over 3
percentage points. In relation to the immediately preceding quarter,
however, turnover remained broadly unchanged.

The Group's operating profit (excluding items of SKr 6 million affecting
comparability) amounted to SKr 23 million (32), which was an improvement
of SKr 21 million on the fourth quarter, despite continued weak market
conditions. The operating margin was 3.8 for the period under review,
which is 2 percentage points higher than for 2001 as a whole. Completed
restructuring measures, productivity improvements, and the effects of
last autumn's cost-reduction and capacity adjustment programme have thus
to some extent offset the weak volume growth.

The price of fine paper, the Group's most important input item, was
stable during the period, running at a slightly lower level than the
average for 2001.

Items of SKr 6 million affecting comparability relate to a capital gain
before tax on the sale of the Group's industrial property in Norway.

The profit after net financial items (excluding items affecting
comparability) amounted to SKr 6 million (15). This represents an
increase of SKr 28 million on the last quarter of 2001. Earnings per
share after tax and full dilution amounted to SKr 0.70 (1.21) for the
period.

As already announced, in January 2002 the Group sold its interest in
Eurotrade Business Products, the associate company through which Bong
marketed its TYVEK® range of envelopes. The transaction has only had a
marginal effect on the consolidated result. Bong now pentrates the
market for these products direct and on own account.

LIQUID FUNDS, CASH FLOW AND FINANCING
The Group's closing liquid funds amounted to SKr 83 million (43 at
December 31, 2001), excluding agreed but not drawn credit facilities of
SKr 191 million (116 at December 31, 2001).

The cash flow strengthened further during the first quarter and amounted
to SKr 106 million (11) after investment activities (excl. company
acquisitions and divestments), of which property sales generated an
inflow of SKr 51 million before tax. The tax charge on the property
transaction amounted to some SKr 10 million, which will be paid in the
form of an annual payment corresponding to 20 per cent of the prior
year's closing liability on account of the transaction. Apart from the
proceeds of the property sale, the much strengthened cash flow in
relation to the immediately preceding quarter is mainly due to an
improved operating result, a controlled level of capital expenditure and
the absence of restructuring costs involving cash disbursements.

The net debt amounted to SKr 995 million (1,141 at December 31, 2001).
following a decline of SKr 146 million during the quarter, of which SKr
37 million was due to currency effects. The net debt-equity ratio
declined as a result of the relatively strong cash flow during the
period to 1.54 (1.73 at December 31, 2001).

At the end of the quarter, equity amounted to SKr 645 million (658 at
December 31, 2001). The translation into Swedish kronor of the net asset
values of foreign subsidiary companies during the period reduced the
consolidated equity by SKr 23 million. The closing equity ratio was 28.6
per cent (28.1 at December 31, 2001).

CAPITAL EXPENDITURE
Net capital expenditure for the period, excluding the proceeds of
property sales of SKr 51 million, and excluding company acquisitions and
divestments, amounted to SKr 0 million (24).

EMPLOYEES
The average number of employees was 1,676 (1,902).

SHARE ISSUE
As already announced, the Board has decided to carry out a rights issue,
subject to the approval of the Extraordinary General Meeting to be held
on May 14, 2002. The object of the issue is to strengthen the Group's
capital base and permit further growth and consolidation of the Group's
position as a leading company on the European envelope market. Existing
shareholders will be entitled to subscribe to one new share for every
two shares they own at an issue price of SKr 35 per share. In the event
of full subscription, the proceeds of the issue will amount to some SKr
152 million before issue costs. Further details of the rights issue were
provided in the notice convening the EGM, which was published on April
29, 2002.

Melker Schörling and his companies, who represent 25.5 per cent of the
shares in the company, have undertaken to subscribe for their full
entitlement of shares, and to guarantee a further 20 per cent of the
issue.

INCENTIVE PROGRAMME FOR EMPLOYEES
With the objective to stimulate greater interest in the business and its
results, boost motivation and increase the sense of identity with the
company, the Board has proposed that the Annual General Meeting to be
held on May 14, 2002 resolve in favour of issuing convertible loan stock
to employees of the Group. It is proposed that the offer should be
extended to all established employees in Sweden and to senior executives
and key individuals in countries outside Sweden. It is proposed that the
loan run until 2007, and amount to a maximum nominal value of SKr 50
million and result in dilution of no more than 4.9 per cent (without
taking the above-mentioned rights issue into account). Further details
regarding the convertible programme are provided in the Board's proposal
to the AGM, which was released on April 30, 2002.

ACCOUNTING PRINCIPLES
The new recommendations issued by the Swedish Financial Accounting
Standards Council that came into effect on January 1, 2002 are applied
in this report. The introduction of the new recommendations has not
resulted in any changes in the information provided.

PROSPECTS
There are still no clear signs of a recovery in the international
economy, which means that there is reason to expect the market to remain
weak for some time to come.

In the longer term, however, we are still of the opinion that the market
will grow at a sustainable rate of 2-3 per cent a year. The Group's
strong position on the European envelope market, the effects of the now
completed structuring measures, and the potential for further
consolidation in the European envelope industry, therefore mean that the
growth prospects for Bong's sales and earnings are regarded as bright.

Kristianstad, May 14, 2002

Lennart Pihl
Managing Director and CEO

This interim report has not been subject to specific examination by the
company's auditors


Further information may be obtained from Bong Ljungdahl AB's MD and CEO,
Lennart Pihl on +46 44 20 70 00, +46 44 20 70 50 (direct), or +46 70 594
68 66, (mobile)

Coming financial reports
Interim report January - June 2002: August 16, 2002
Interim report January - September 2002: November 1, 2002
Year-end release 2002: February, 2003

Bong is one of Europe's envelope company. The Group has annual sales of
some SKr 2.4 billion, approximately 1,700 employees and the capacity to
manufacture 15 billion envelopes per year at its production facilities
in Sweden, Denmark, Norway, Finland, Estonia, Poland, Germany, Belgium,
Great Britain, and Ireland.In recent years, Bong has played an active
role in the current process of restructuring in the European envelope
industry through the acquisition of several envelope manufacturers. The
Group sees worthwhile opportunities for further expansion and
development. Bong is a public company and its share is listed on
Stockholmsbörsen's "O" list.