Year-end release 1998 for Bong Ljungdahl AB

2/25/1999 6:00 AM EST

YEAR-END RELEASE 1998
for
BONG LJUNGDAHL AB

* SHARPLY IMPROVED RESULT AFTER STRONG FOURTH QUARTER

* YEAR'S OPERATING PROFIT MORE THAN DOUBLED TO SKR 56.2 MILLION (20.7
PRO FORMA)

* PROFIT AFTER NET FINANCIAL ITEMS ROSE TO SKR 47.8 MILLION (7.7 PRO
FORMA)

* EARNINGS PER SHARE SKR 4.32 (EXCL. CAPITAL GAINS)

* BOARD PROPOSES PAYMENT OF DIVIDEND OF SKR 2.10 PER SHARE (1.20,
EQUIVALENT TO 1.80 FOR FULL YEAR)

MARKETS
Conditions on the Group's main markets were relatively buoyant during the
fourth quarter. The slowdown that to some extent characterised the Swedish
market during the early quarters was converted into an increase in the
autumn. Demand in Norway and Denmark displayed continued stability, and in
Finland, where the Group made its latest acquisition, the envelope market
is estimated to have grown by some 5 per cent in terms of volume in 1998.
Prices on the Nordic market, which accounts for almost 80 per cent of the
Group's sales, showed a slightly rising trend during the year. Volume
growth was good in Belgium and neighbouring markets, although competitive
pressure remained intense and prices were depressed.

As previously reported, the envelope market in Europe is still growing.
Most of the major markets, such as Germany, England and France, report
volume growth in the region of 5-7 per cent for 1998.

SALES AND RESULT
The Group's net turnover amounted to SKr 1,095 million (1,043 pro forma),
which means that sales were unchanged for comparable units. The sales
result was affected adversely by lower volumes and positively by slightly
better selling prices.

The operating profit increased by some SKr 35 million to SKr 56 million
(21 pro forma). The considerable improvement in the result can mainly be
attributed to the effects of the extensive restructuring process that
began following the merger of Bongs and Ljungdahls in the previous
financial year. The operating profit for the fourth quarter was SKr 24.2
million, compared with SKr 7.5 million for the same quarter in the
previous year. The recently acquired Finnish business, which was
consolidated with effect from October 1998, made a modest positive
contribution to the result for the quarter.

The profit after net financial items amounted to SKr 47.8 million (7.7 pro
forma). This figure includes a non-taxable capital gain of SKr 7.0 million
attributable to the sale of the labels division in January 1998. The
fourth quarter profit after net financial items improved by some SKr 15
million to SKr 18.9 million (4.1 pro forma).

Envelopes Sweden achieved a significant increase in its profit as the
result of extensive cost reductions, and successively improving prices,
despite lower volumes than last year. A decision was made in November 1998
on the far-reaching streamlining of the production structure at the
facilities in Kristianstad and Nybro with the object of further
strengthening the Group's competitive position and as one element in its
current expansion strategy. This programme, which will involve a reduction
of 40 in the work force, is expected to be fully implemented early in the
second half of 1999. Envelopes Sweden's turnover amounted to SKr 496
million (541 pro forma).

Envelopes Denmark continued to develop very strongly during the fourth
quarter. Efficient production and a sophisticated printing section, in
combination with further rationalisation, led to a greatly improved full-
year result. Turnover amounted to DKr 163 million (164 pro forma).

The production disturbances and delivery problems that to some extent
adversely affected the situation at Envelopes Norway during the early
quarters have now been resolved. Delivery capacity and the standard of
service have been restored. The return to normal operating brought a
successive improvement in the result, which, for the year as a whole, is
well ahead of last year's. Turnover amounted to NKr 176 million (176 pro
forma).

The acquisition of the Finnish business was finalised at the beginning of
the fourth quarter. This transaction, which is an important element in the
Group's expansion strategy with its goal of achieving market leadership in
Northern Europe, mainly involved the acquisition of the envelope business
formerly conducted through Walki Kuori, Finland's leading envelope
manufacturer. The acquisition brings into the Group annual sales of some
SKr 200 million and a market share in Finland of almost 60 per cent. A
change process intended to co-ordinate the Finnish business with Bong
Ljungdahl's existing activities is now being put into effect. An important
aspect of the integration is the transfer of speciality products made from
sheet to the Nybro factory. This measure will lead to a reduction of
around 50 in the work force at the Finnish unit. The cost of
restructuring, estimated at around SKr 10 million, was taken to reserve in
the acquisition balance. The acquisition in Finland brought goodwill of
some SKr 42 million onto the books; this will be depreciated over twenty
years.

Envelope Belgium's result weakened slightly during the fourth quarter,
largely due to even stiffer price competition. The result for the year as
a whole was positive and better than last year's, although it has not yet
reached a satisfactory level. Turnover amounted to BFr 683 million (621).

Envelope Poland's turnover continued to rise at a double-digit rate to
reach approximately 12 million zloty. The profitability of the Polish
envelope business is still relatively good.

The result of the Binders division, which is integrated with the envelope
units in Sweden and Poland, was better than in the previous year and is
once again making a positive contribution to the consolidated result.
Turnover amounted to SKr 65 million (62).

DIVESTMENT
As already reported, the Group's labels division, Nova Print, was divested
as of January 1, 1998. This transaction, which is one stage in the Group's
strategy of focusing the business on envelopes, generated a capital gain
of SKr 7 million.

LIQUID FUNDS, FINANCING, ETC
Closing liquid funds amounted to SKr 36 million (Dec 31, 1997: 32). Net
loan liabilities increased by some SKr 31 million during the year to SKr
317 million (286). The increase is largely the net effect of the
acquisition of the Finnish business and the divestment of the labels
division.

The closing equity ratio was 38 per cent (38) and the debt-equity ratio
was 0.78 (0.76).

CAPITAL EXPENDITURE
The Group's net capital expenditure amounted to SKr 70 million and mainly
related to machinery at the envelope units. These investments represent a
general technical upgrading, and are already leading to productivity
improvements during the current year, although they have not yet had their
full effect.

EMPLOYEES
The average number of employees in the Group amounted to 1,078, a
reduction of 76 for comparable units compared with the previous financial
year (May-December 1997).

PARENT COMPANY
The envelope and binder units in Kristianstad and certain central
functions are included within the parent company, Bong Ljungdahl AB. The
profit after net financial items amounted to SKr 21.9 million (3.9).

DIVIDEND
The Board has decided to recommend the Annual General Meeting to resolve
in favour of paying a dividend of SKr 2.10 per share for 1998. (SKr 1.20
for the abridged financial year May-December 1997, equivalent to SKr 1.80
for twelve months.)

The proposal is based on the Board's decision to adopt a somewhat altered,
and more market oriented dividend policy, the main implications of which
are that the dividend, taking into account Bong Ljungdahl's financial
position and development potential, should correspond on average over a
period of years to around one-third of the profit after tax (formerly one-
quarter after tax).

OUTLOOK
The Group's profitability has steadily improved as the effect of the
structuring measures taken has shown through. During the final quarter of
1998, the programme that was agreed in connection with the merger of Bongs
and Ljungdahls in1997 more or less had its full effect. The full-year
effects of this will make a positive contribution to the result in 1999.

In addition, further rationalisation measures are being taken and the
recently completed acquisition in Finland will also have a full effect.

In combination with the generally positive trend on the market, these
factors mean that the outlook for 1999 is considered to be bright. We
therefore expect a further improvement in the results.

ANNUAL GENERAL MEETING
The Annual General Meeting will be held at the Yllan Trade Fair Centre in
Kristianstad at 6.00 p.m. on May 6, 1999.

Kristianstad, February 25, 1999
BONG LJUNGDAHL AB (publ)

Board

Further information may be obtained from Lennart Pihl, Managing Director
and Group Chief Executive, Bong Ljungdahl AB. Telephone: switchboard +46-
44- 20 70 00, direct no. +46-44-20 70 50 mobile +46-70-594 68 66

Financial reports:
Thursday, May 6, 1999 Interim report January- March 1999/Annual
General Meeting
Thursday, August 12, 1999 Interim report January- June 1999
Thursday, October 28, 1999 Interim report January-September 1999
BONG LJUNGDAHL GROUP 1998

1) 2)
SUMMARY INCOME STATEMENT Jan-Dec 1998 Jan-Dec 1997 May-Dec 1997
Million Swedish kronor

Net turnover 1,095.3 1,042.8 766.9
Operating costs -1,039.1 -1,022.1 -752.9
Operating profit 56.2 20.7 14.0

Capital gains on sale of 7.0 - -
subsidiary
Net financial items -15.4 -13.0 -11.0

Profit after net 47.8 7.7 3.0
financial items

Tax -7.5 -5.2 -2.2
Net profit for the year 40.3 2.5 0.8
1) The consolidated income statement for January- December 1997 is stated
on a pro forma basis including the Ljungdahls Group and excluding the
Labels Division (Nova Print).
2) For the abridged financial year May- December 1997 (8 months)
Ljungdahls is included as of June 1, 1997, and the Labels Division is
included for the entire period.

SUMMARY BALANCE SHEET December 31, 1998 December 31, 1997
Million Swedish kronor

Fixed assets 628.3 540.8
Receivables 198.4 225.6
Inventories 200.7 195.6
Liquid funds 36.1 32.3
Total assets 1,063.5 994.3

Equity 405.2 374.7
Interest-bearing provisions 78.2 75.3
Interest-free provisions 77.6 81.3
Interest-bearing liabilities 282.5 243.3
Interest-free liabilities 220.0 219.7
Total liabilities and equities 1,063.5 994.3

Jan-Dec 1998 May-Dec 1997
KEY RATIOS
Kronor per share
3
Earnings after tax at standard rate 4.16/4.87 ) 0.30
3
" after full tax 4.23/5.70 ) 0.10
Equity 58.80 53.60

RATIOS
Operating margin 5.1% 1.8%
3
Profit margin 3.7%/4.4% ) 0.4%

3
Return on equity 7%/9% ) 1%
Return on capital employed 9% 4%

Debt-equity ratio 0.78 0.76
Equity ratio 38% 38%

Capital employed SKr million 763.1 693.2
Net interest bearing debt, SKr 317.3 286.2
million
Average number of shares (for Jan- 7,066,721 6,553,257
Dec 1998 after full conversion)
3
) Including capital gains on sale of Labels Division (Nova Print)

QUARTERLY COMPARISONS: GROUP
Pro forma including Ljungdahls and excluding Labels Division

Million 4/1998 3/1998 2/1998 1/1998 4/1997 3/1997 2/1997 1/1997
Swedish
kronor
Net turnover 336.4 228.4 255.3 275.3 272.8 225.9 268.3 275.8
Operating -312.2 -217.6 -247.0 -262.4 -265.3 -220.6 -268.8 -267.4
costs
Operating 24.2 10.8 8.3 12.9 7.5 5.3 -0.5 8.4
profit/loss
Capital
gains on - - - 7.0 - - - -
sale of
subsidiary
Net -5.3 -3.6 -2.6 -3.9 -3.4 -3.2 -3.1 -3.3

financial
items
Profit/loss
after net 18.9 7.2 5.7 16.0 4.1 2.1 -3.6 5.1
financial
items


TURNOVER AND RESULT BY DIVISION

Net turnover Profit/loss
Jan-Dec Jan-Dec May-Dec Jan-Dec Jan-Dec May-Dec
Million Swedish 1998 1997* 1997** 1998 1997* 1997**
kronor

Envelopes 1,030.2 980.5 589.9 65.8 29.5 19.7
Files 64.7 62.3 37.7 1.8 -0.6 -1.6
Labels - - 139.3 - - 3.3
Central Group 0.5 - - -11.4 -8.2 -7.3
Total 1,095.4 1,042.8 766.9 56.2 20.7 14.1
Capital gains 7.0 - -
Net financial -15.4 -13.0 -11.0
items
Profit after net
financial items 47.8 7.7 3.1

* Pro form including Ljungdahls and excluding Labels Division.
** For the abridged financial year May- December 1997, including
Ljungdahls as of June 1, 1997 and the now divested label divisions for the
entire period

CASH FLOW ANALYSIS: GROUP

Million Swedish kronor January-December 1998
Operating profit 56.3
Net financial items -15.4
Tax paid -8.2
Depreciation 59.6
92.3

Change in working capital -2.9
Cash flow from operations 89.4

Capital expenditure, etc -77.4
Acquisitions/divestments, etc -49.9
Cash flow after investments, etc -37.9