RNS Number:6967Y
Perstorp AB
9 February 2001
The issuer advises that the following replaces the "final results"
announcement released today 09/02/2001 at 14:59 under RNS number 6731Y.
Corrections are denoted within the asterisks(* *):
*Page 2 Structural costs ahead of the planned
exchange-listing of Pergo*
Ahead of the planned *stock-exhange listing of Pergo,* this work has been
further accelerated and the costs have been quantified within the framework of
a concrete action plan.
*Page 13 Outlook for 2001:*
With respect to 2001, we anticipate a weakening of global conditions in the
chemical market and thus lower demand. *It is estimated that part of this
decline will be offset by improved gross margins as an effect of lower raw
material prices.*The comprehensive program that will be implemented during the
year, in order to boost the efficiency of *polyols* production structure, is
also expected to make a positive contribution to full-year earnings.
All other details remain unchanged and the full-amended text appears below.
PERSTORP GROUP
YEAR-END REPORT 2000
* Pretax earnings amounted to SEK 339 m (551). Operating earnings,
adjusted for items affecting comparability and demerged units, rose to SEK 600
m (531).
* Strong improvement in Perstorp Chemicals' operating earnings, due to
favorable growth and increased proportion of specialty products.
* Sharp decline in Pergo's operating earnings, due to such factors as
comprehensive restructuring measures.
* The Board of Directors intends to propose that Pergo be spun off to
shareholders and listed on the stock exchange. A cash-dividend proposal will
be presented when the terms and conditions for Pergo's spin-off have been
established.
Perstorp AB a specialized chemical group
In line with the strategy established in October 1999, the Board of Directors
has decided to focus the Group on continued growth within segments of the
specialty chemical market and to prepare Pergo for a spin-off to shareholders
and a separate listing on the stock exchange. Accordingly, the Group's future
focus will be on specialized chemical products, such as performance chemicals
and composite materials, which have the potential to yield favorable margins
and high growth.
In the past ten years, Perstorp's chemical operations have shown average
annual growth of more than 13%, mainly organic, and an operating margin (EBIT)
of 12%. They hold world-leading positions in several areas and conduct
production operations on four continents. During 2000, the Group's chemical
operations noted total sales of approximately SEK 5,250 m, with 2,300
employees.
Pergo to be spun off to shareholders
and listed on the stock exchange
At the Annual General Meeting, the Board will submit a proposal regarding the
spin-off of Pergo to Perstorp AB shareholders. The subsidiary Perstorp Declam
(formerlyPerstorp Laminatproduktion AB) will be transferred to Pergo. It is
proposed that the spin-off take the form of a cost-free distribution of all
shares in Pergo, supported by the Swedish legal precedent known as Lex Asea,
which means that the spin-off may be undertaken without immediate tax
consequences in Sweden for Perstorp's shareholders. It is proposed that Pergo
will have a single series of shares.
A stock-exchange listing of Pergo is expected to create greater value for
Perstorp's shareholders, since the company will become more focused and it
will be able to achieve greater responsibility and commitment among employees.
Kurth Augustsson, Michael Boris-Moller, Gunnar Brock, Christer Gardell, Karl
Stenstrom, Thomas Svensk and Katarina Wendt-Englund have been appointed
members of Pergo AB's Board of Directors by Perstorp's Board. It is proposed
that Christer Gardell be Chairman of the Pergo Board. Major shareholders,
representing more than 70% of the votes in Perstorp AB, support the proposal.
Michael Boris-Moller will assume office as President of Pergo during spring
2001.
The operations that are intended to be spun-off to shareholders had sales of
approximately SEK 3,700 m in 2000, with 1,100 employees.
Structural costs ahead of the planned
exchange-listing of Pergo
It was explained in Perstorp AB's nine-month report that further corrective
measures within Pergo will be required in the coming fiscal year, due to a
rapid technology switch towards direct laminate flooring featuring a different
type of base. Ahead of the planned stock-exchange listing of Pergo, this work
has been further accelerated and the costs have been quantified within the
framework of a concrete action plan. Accordingly, the final accounts for 2000
include the bringing forward of structural measures for the write-down of
fixed assets related to Pergo and Perstorp Declam in a total amount of SEK 214
m, including SEK 41 m reported earlier in the nine-month report. These costs
have no effect on cash flow.
As a result, Perstorp's earnings are affected by the following cost and
revenue items affecting comparability, which resulted in a net expense of SEK
190 m:
SEK m Total of which Q4
Write-down of fixed assets in Pergo -117 -76
Write -down of fixed assets in Perstorp Declam 1) -97 -97
Other non-comparable costs in Pergo and Perstorp Declam 1) -91 4) -26 2)
Costs related to the takeover process in 2000 3) -16 -16
Other items affecting comparability -28 5) -28
Total costs affecting comparability -349 -243
Non-recurring revenues resulting from 89 14
sale of Perstorp Surface Materials
Repayment of SPP pension funds 61 -
Other non-comparable revenues 9 9
Total revenues affecting comparability 159 23
Total Non-comparable items -190 -220
1) The operations will be transferred to the Pergo subgroup during the
first quarter of 2001.
2) Bonus and other incentive programs resulting from the decision to
demerge Pergo from the Perstorp Group and from the takeover process. The
program comprises about 20 senior executives stationed in or outside Sweden.
3) Includes legal expenses and fees to financial advisors.
4) This item includes incentive programs (see Note 2), restructuring
and employment-termination measures (SEK 50 m) and costs for the termination
of distributor contracts.
5) Essentially, all of these costs pertain to Perstorp Chemicals.
Operations in 2000
The Group continued to pursue its streamlining strategy during the fiscal year
and now operates primarily through the two subgroups Perstorp Chemicals and
Pergo (formerly, Perstorp Flooring).
Perstorp Surface Materials Group, which was divested during the year, is
included in the accounts up to March 24. Perstorp Declam AB, which will be
transferred to the Perstorp Group during the first quarter of 2001, is
reported as a separate unit in this report.
With the aim of expanding in the chemical and flooring markets, Perstorp
completed three strategic acquisitions during the year, which significantly
strengthened the Group's market positions. The acquired operations are the
Degussa-Huls group's polyol operations, Plasta Erkner's phenolic resin
operations and a 25.1% partnership in the laminate flooring manufacturer
Witex. These companies are included in the consolidated accounts as of the
takeover date.
Net sales amounted to SEK 9,229 m (10,352). Adjusted for demerged business
units - that is, the divestment of Perstorp Surface Materials during the first
quarter of 2000 and the spin-off of Perbio Science in the preceding year - net
sales rose 15%, of which increased volume accounted for 11 and price/
exchange-rate effects for 4 percentage points. Acquired companies accounted
for 4 percentage points of the increase.
Perstorp Chemicals' sales rose by 26%, mainly due to a favorable volume trend.
Pergo's net sales, which increased by 2%, were affected positively by a
stronger US dollar and negatively by lower prices in Europe.
Operating earnings amounted to SEK 411 m, down SEK 240 m compared with 1999.
The operating margin declined from 6.3% to 4.4%. Items affecting comparability
had a net negative impact of SEK 190 m (neg: 86) on earnings. In total, costs
affecting comparability amounted to SEK 349 m and resulted mainly from Pergo's
ongoing switch to direct lamination as its main technology for producing
laminate flooring. Write-downs of fixed assets, which have no effect on cash
flow, accounted for SEK 214 m of these costs (see table).
Revenues items affecting comparability include a capital gain of SEK 89 m on
the sale of Perstorp Surface Materials and SEK 9 m for the reversal of
structural reserves, mainly relating to previous divestments of operations.
Both of these items are included in "Other, excluding elimination" in the
table Operating earnings by division. The SEK 61 m refund of pension
contributions from SPP is also included in revenues affecting comparability,
distributed as follows: Perstorp Chemicals SEK 45 m, Pergo SEK 5 m, Perstorp
Declam SEK 5 m and other units SEK 6 m.
Operating earnings after adjustments for items affecting comparability and
demerged units amounted to SEK 600 m (531). Based on this, the operating
margin remained virtually unchanged compared with 1999 at 6.8% (6.9).
Perstorp Chemicals' operating earnings were higher than in the preceding year,
due mainly to increased volumes and a larger proportion of specialty products.
The division's operating margin was 9.4% (9.3).
Pergo's operating earnings were lower than in 1999, due to the adverse impact
of falling prices and delayed product launches, as well as costs affecting
comparability, particularly those noted above for changes in the product range
and production techniques.
Earnings from participations in associated companies, which pertained mainly
to Perstorp Clariant AB, a manufacturer of water-borne dispersions, amounted
to SEK 8 m (18). These earnings were affected adversely by depressed margins.
Perstorp Surface Materials, which was part of the Group until March 24,
reported net sales of SEK 474 m and operating earnings of SEK 1 m for that
period.
The operations acquired during the second quarter made a favorable
contribution to the Group's operating earnings.
Net financial items amounted to an expense of SEK 72 m (expense: 100). The
improvement compared with 1999 was due in part to lower indebtedness following
the sale of Perstorp Surface Materials, although this was counteracted by
higher interest rates than in 1999. In addition, other financial expenses
declined to SEK 4 m (expense: 20), mainly because the figures for 1999 were
affected by negative currency effects in Brazil.
The interest-coverage multiple was 3.9 (5.1).
Tax costs totaled SEK 122 m (281). The tax rate was 36% (51). If tax related
to the incorporation project conducted during 1999 is excluded, the tax rate
for that year was 40%.
Earnings per share after full conversion amounted to SEK 3.16 (3.87).
The Group's commercial paper program was expanded during the year and now
amounts to EUR 300 m.
Performance during the fourth quarter
Net sales excluding demerged business units rose during the fourth quarter,
compared with the year-earlier period, and amounted to SEK 2,407 m (1,937).
The increase was largely attributable to increased volume within Perstorp
Chemicals, although a favorable sales trend was also noted for Pergo's
American operations.
Operating earnings before demerged business units and excluding items
affecting comparability declined during the fourth quarter to SEK 115 m (162).
Perstorp Chemicals' operating earnings excluding items affecting comparability
amounted to SEK 97 m. This was a decrease compared with the SEK 110 m reported
in the fourth quarter of 1999 and in relation to the earnings reported for the
previous quarters of 2000. This decline was attributable to depressed margins
for several products and a slight downturn in business conditions in the
chemical market towards the end of the year. Pergo's operating earnings,
excluding items affecting comparability, amounted to SEK 7 m, which was also
lower than the SEK 54 m reported in the fourth quarter of 1999 and the
earnings reported for the previous quarters of 2000.The decline was due mainly
to depressed prices in the European market. Excluding items affecting
comparability, Perstorp Declam reported an operating loss of SEK 5 m (profit:
23).
Net financial items during the fourth quarter amounted to an expense of SEK 26
m (expense: 25). The improvement compared with the year-earlier period was
attributable to the sale of Perstorp Surface Materials, while, on the other
hand, interest rates increased. The fourth quarter of 1999 included SEK 4 m
for positive currency-exchange effects in Brazil.
PERSTORP CHEMICALS
SEK m Q4 Q4
2000 1999 2000 1999
Net sales 5,246 4,157 1,403 1,061
Operating earnings 493 385 69 124
Operating margin, % 9.4 9.3 4.9 11.7
Depreciation 284 249 82 56
Investments 867 401 113 54
Demand for several of Perstorp Chemicals' products was favorable
during the year, due to buoyant market conditions. However, increases in
raw-material prices, which could only be offset to a limited extent by
increasing Perstorp's own prices, imposed pressure on the gross margin. A
certain slackening of business conditions became noticeable, mainly during
December 2000. New TMP-polyol capacity will enter the market during 2001,
which could result in increased competition for sales of this product.
Net sales rose by 26%, due to a favorable volume trend for most
products. Company acquisitions accounted for 8 percentage points of the
increase. Continued strong growth was noted for several specialty products,
particularly special polyols, formalin plants, formalin catalysts and
composites. Accordingly, the previously noted trend towards an increased
proportion of sales of specialty products was reinforced, which is expected to
have a beneficial impact on the long-term earnings pattern.
Operating earnings rose sharply to SEK 493 m (385), due mainly to the
increase in net sales.The operating margin rose to 9.4% (9.3).
Effective June 1, Perstorp acquired the Degussa-Huls group's polyol
operations, with production activities in Bruchhausen, Germany. The
acquisition enabled Perstorp Chemicals to strengthen its world-leading
positions in the markets for Penta and di-Penta and added an attractive new
product, calcium formate, to the range of specialty chemicals.
Perstorp will comprehensively restructure its polyol operations during
2001, to further increase their profitability. As a result of the acquisition
of the unit in Germany, the plant in Castellanza, Italy, can be adapted for
the production of specialty polyols, thus enabling the transfer of Penta
production at this unit to the plants in Germany, Sweden and the US. At the
same time, capacity for specialty products in the US is being expanded. An
action program is being planned for the majority-owned unit in India, which is
currently showing unsatisfactory profitability.
Effective May 1, Perstorp acquired the operations of Plasta Erkner
GmbH, based in Erkner, close to Berlin. The company, which is one of Germany's
leading manufacturers of phenolic resins, strengthens Perstorp Chemicals'
position as one of Europe's leading producers in this market segment.
Perstorp Chemicals, via Perstorp Chemitec, concluded an agreement with
Penn Specialty Chemicals Inc. of the US regarding the acquisition of two resin
product lines. The product lines currently generate annual sales of
approximately SEK 40 m.
During the year, Perstorp signed agreements regarding the construction
of six formalin plants, in Venezuela, China, Germany, Chile, South Africa and
Thailand. The combined value of the orders was approximately SEK 170 m. These
orders strengthen Perstorp's position as the world's leading supplier of
plants for the production of formalin. In total, 11 plants were either
delivered during 2000 or will be delivered during 2001.
A newly constructed formaldehyde plant for DuPont de Nemours
(Nederland) B.V., in Dordrecht, the Netherlands, was put into operation in
January 2000.
As of the 2001 fiscal year, Perstorp's operational activities in the
chemical sector are organized in four divisions and the former Perstorp
Chemicals subgroup no longer exists. The new divisions in the chemical sector
are Perstorp Specialty Chemicals, Perstorp Chemitec, Perstorp Composites and
Perstorp Formox. These will be become legal subgroups during spring 2001.
PERGO
SEK m Q4 Q4
2000 1999 2000 1999
Net sales 3,699 3,627 1,047 908
Operating earnings -74 184 -94 54
Operating margin % Neg 5.1 Neg 5.9
Depreciation 94 80 24 22
Investments 263 87 34 34
The market for laminate flooring continues to grow in Europe and the
US, at the same time as competition has intensified. The fact that directly
laminated flooring, which is based on a more cost-effective production
technique, is rapidly increasing its share of the total market is exerting
pressure on prices. Flooring featuring glue-less joint systems (click joints),
which simplify the laying process, is in increasing demand among consumers.
In the European laminate flooring sector, the distribution level is
strongly fragmented and several distribution channels are national. Pergo is
one of the largest players, although its market shares vary from country to
country. In the US market, the distribution level is well consolidated, with
specialist retailers competing with a limited number of large building
supplies chains. Pergo's products are mainly distributed by The Home Depot,
the largest chain of building supplies stores, which is also Pergo's largest
customer. Competition between specialist retailers and building supplies
chains is sharpening progressively, as the latter category increases its
market shares.
Pergo has met these changes by intensifying its product development,
launching new products and initiating the switch to direct lamination as its
main production technique. Accordingly, Pergo introduced several new products
during 2000, including directly laminated flooring and flooring with glue-free
joint systems. The widespread launches of new products were delayed by several
months, due to the comprehensive manufacturing and distribution adjustments.
Net sales rose by 2% during 2000, due to lower prices and delayed
product launches. Currency-exchange effects were positive (+5%). Sales
declined in Europe but rose in the American market, despite a slight decrease
in prices. During the autumn, The Home Depot initiated the launch of Pergo
flooring with glue-free joint systems at its 1,100 sales outlets. This had a
favorable impact on Pergo's sales and earnings in the US during the fourth
quarter. In Europe, these launches are not expected to generate effects until
after midyear 2001.
The operating result declined to a loss of SEK 74 m (profit: 184), due
mainly to restructuring costs of SEK 186 m resulting from the initiated
transition to direct lamination as the main production technique and also to
the delayed product launches. Write-downs of fixed assets, which have no
effect on cash flow, accounted for SEK 117 m of the total restructuring costs.
A refund of pension contributions from SPP had a positive impact of SEK 5 m on
earnings. Adjusted for these items affecting comparability, operating earnings
declined to SEK 107 m (209), due mainly to lower prices in Europe, which were
not fully offset by cost reductions during the year. The operating margin was
negative, declining from 5.1% in 1999.
At the beginning of 2001, Pergo introduced a large number of new
products that enjoyed a favorable market reception at the world's largest
trade fairs in Europe and the US and in various tests by major customers.
As part of the ongoing technology shift, Perstorp acquired 25.1% of
the German laminate flooring manufacturer Witex and may increase its
shareholding to 49% in 2002, under certain conditions. Witex is reported as an
associated company in the financial accounts. Within the framework of a
long-term delivery agreement, the two companies have commenced close
cooperation, which is expected to result in stronger market positions and
increase the efficiency of Pergo's production and distribution operations in
Europe, the US and Asia.
The cooperation with Witex broadens Pergo's product range by adding
directly laminated flooring. During the year, Pergo replaced a part of the
production operations at its own plant in Trelleborg, Sweden, with production
at the Witex plant in Augustdorf, Germany. This is resulting in lower
manufacturing costs for the products concerned and is enhancing Pergo's
competitiveness. In connection with this transfer, 90 employees were made
redundant at the plant in Trelleborg.
Laminate flooring featuring glue-free joint systems is considered to
have healthy growth potential in the market. During the year, Pergo introduced
a broad product assortment based in part on its proprietary Cliq-lock(R)
system and in part on Unilin's Uniclic(R) joint system. As a result of these
product launches and a joint development work with Unilin, Pergo expects to
strengthen its positions in various market segments. Several types of
glue-free joint systems for both laminate flooring and other types of flooring
have been introduced in the market in a short period of time. Various players
- including Pergo - are currently involved in a number of disputes regarding
patents. At this stage, these disputes are not expected to affect Pergo's
sales and future prospects to any significant extent.
Divestment of Perstorp Surface Materials
As part of the Group's continued streamlining, the Perstorp Surface Materials
AB subgroup was sold to Decorative Surfaces Holding AB in March 2000.
Decorative Surfaces Holding is an investment company formed by DLJ Merchant
Banking Partners and CVC European Equity Partners.
The sales price of approximately SEK 1,500 million, including the transfer of
loans, generated a capital gain estimated at SEK 89 m. The subgroup's
operations are included in the accounts up to March 24 and its net sales and
operating earnings for that period amounted to SEK 474 m and SEK 1 m,
respectively.
Other operations
In addition to the Perstorp Chemicals and Pergo subgroups, Perstorp's business
operations consist primarily of Perstorp Declam AB. These operations, which
are conducted at the complex in Perstorp, Sweden, and have slightly more than
300 employees, were part of Perstorp Surface Materials during the preceding
year and will be transferred to the Perstorp Group during the first quarter of
2001.
Perstorp Declam AB is primarily a supplier of flooring laminate to Pergo. Due
to the changes in the product range currently under way, the company reduced
the number of employees in Perstorp, Sweden, by 125 during the fiscal year and
initiated a broadening of its product range to include various applications
outside the flooring sector.
Net sales from other operations amounted to SEK 582 m (761) and an operating
loss of SEK 88 m (86) was reported for the year, after charges of SEK 21 m for
costs related to the aforementioned changes and SEK 97 m for write-downs of
fixed assets, which have no impact on cash flow. In addition, a refund of SPP
pensions contributions amounting to SEK 5 m had a favorable impact on
earnings. After adjustments for items affecting comparability, operating
earnings amounted to SEK 25 m (86).
The capital gain from the divestment of Perstorp Surface Materials, Group-wide
costs, the business development company Pernovo, the results of in-house
service companies and changes in Group provisions are also reported under
"Other, including eliminations."
Financial development
Total assets decreased by SEK 243 m compared with December 31, 1999 to SEK
7,926 m (8,169) at the end of the year. The sale of Perstorp Surface Materials
reduced total assets by approximately SEK 1,600 m, although this was offset by
investments in new operations, an increase in accounts receivable and a
stronger USD.
Working capital (current operating receivables and inventories less current
operating liabilities), adjusted for the opening balance for Perstorp Surface
Materials, rose during the year by SEK 433 m. Operating assets in Pergo
increased, partly due to higher accounts receivable and a stronger US dollar.
Acquisitions within Perstorp Chemicals during the year also contributed to the
increase in working capital. The turnover rate for working capital rose from
4.7 to 5.5.
Long-term working assets amounted to SEK 3,780 m (3,947), of which intangible
assets accounted for SEK 137 m, including goodwill of SEK 119 m.
Provisions declined by SEK 72 m, due mainly to a reduction in the Group's
deferred tax liabilities.
Net debt declined during the year to SEK 1,509 m (1,754) on December 31. The
decrease was mainly attributable to the sale of Perstorp Surface Materials,
but was limited by the acquisitions in Germany and an increase in the working
capital required for remaining operations. (Changed definition - also see the
cash flow table.)
Shareholders' equity rose by SEK 162 m compared with December 31, 1999 to SEK
3,938 m (3,776). Shareholders' equity was affected positively by exchange-rate
effects in an amount of SEK 221 m and net profit for the period of SEK 227 m
and reduced by cash dividend payments of SEK 286 m. A reversal of the
exchange-rate consequences that arose in Perstorp Surface Materials as of
January 1, 1999 accounted for SEK 53 m of the exchange-rate effects. The
remaining exchange-rate effects were mainly attributable to the Group's
European operations.
The equity ratio rose to 50% from 47% at the beginning of the fiscal year.
The return on shareholders' equity declined by one percentage point to 6%,
largely as a result of the lower profit for the year. The return on working
capital amounted to 8% (11). The decline was due to the lower operating
earnings.
The return on total capital declined from 8% in 1999 to 6%, due to the lower
operating earnings.
The capital turnover rate improved in terms of working capital, but remained
unchanged in terms of total capital.
Investments amounted to SEK 1,198 m, of which SEK 12 m related to Perstorp
Surface Materials. Of total investments, SEK 972 m derived from strategic
investments, meaning major investments that result in a significant increase
in the value of a particular subgroup. Notable investments included Perstorp
Chemicals' acquisitions in Germany of the Degussa-Huls group's polyol
operations and operations within Plasta Erkner GmbH. In addition, Pergo
acquired 25.1% of Witex, a German manufacturer of laminate flooring.
Free cash flow amounted to SEK 233 m (963). The decrease compared with 1999
was attributable in part to the relatively low amount of working capital at
the beginning of 1999, which resulted in a positive cash flow in that year but
had a negative effect on cash flow for 2000. Other reasons for the higher
working capital are the consequences of volume increases within Perstorp
Chemicals, the acquisitions in Germany and the stronger USD. Cash flow from
operations amounted to SEK 414 m (565).
Research and development
Research and development costs for the Group as a whole amounted to SEK 220 m
(224), or slightly more than 2% of consolidated sales revenues. The main
investments were made within Pergo and the Perstorp Specialty Chemicals
business unit.
Within Perstorp Specialty Chemicals, development of the new product group
Boltorn resulted in initial deliveries of products during the year and Boltorn
is expected to achieve its breakthrough during 2001. In addition, several
projects based on Perstorp's expertise in formalin catalysts and in
environmental areas are under way.
As a result of the intensive product development work within Pergo, it is
anticipated that nearly 75% of sales during 2001 will consist of products
launched during 2000 or 2001. A new product development and design center,
which was opened in Trelleborg, Sweden, during spring 2000, is equipped for
the rapid development of new products and prototypes.
The Group submitted 23 patent applications during the year, of which 16
pertained to Pergo, one to Perstorp Declam and six to Perstorp Specialty
Chemicals. Two patents were registered for Pergo and two for Perstorp AB
during the year.
In line with the Group's future orientation towards growth in specialized
segments of the chemical market, business development operations within
Pernovo AB were transferred to the divisions as of January 1, 2001, where
development work will be further focused on organic growth combined with
supplementary acquisitions within selected segments.
Personnel
The average number of Group employees during the fiscal year was 4,003
(6,146), distributed as follows geographically:
2000 1999
Sweden 45% 36%
Other EU countries 27% 28%
US 13% 17%
Other regions 15% 19%
The actual number of Group employees at the end of the year was 3,523 (5,379).
The decrease in the number of employees was due mainly to the divestment of
-Perstorp Surface Materials.
The Board of Directors intends to initiate warrants programs for senior
executives of both Perstorp and Pergo.
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, Perstorp's total
transaction exposure, expressed as the sum total of the absolute
counter-values for each exposed currency, amounted to SEK 2,077 m, for the
2001 fiscal year. After hedging, exposure amounts to SEK 2,045 m. 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 3,102 m, of which SEK 815 m was hedged
through loans in the same currency. Perstorp's policy is that translation
exposure need 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 approximately 54 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, of which USD 174.3 m had been utilized at
year-end. Perstorp's policy is that the 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 financial counterparty. 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 (or an equivalent rating institution). No credit losses have been
incurred to date.
Financial exposure: Perstorp's policy is that loans and investments shall be
undertaken in the basic currency of the particular Group company.
Environment
Work in the field of safety, health and the environment (SHE) continued during
2000. Additional plants received ISO 14001 certification during the year,
including Perstorp Chemitec's operations in France and Italy.
During the year, several of Perstorp's production units in Europe conducted
work on the formulation of safety reports that have to be submitted to
authorities in accordance with laws aimed at preventing, and limiting the
consequences of, serious chemical accidents (based on the Seveso II
directive). As part of this work, the plants' risk assessments were updated.
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 year-end, the prices per Perstorp A and B share were SEK 75 and SEK 66,
respectively, equal to market capitalization of SEK 4,802 m. The corresponding
prices at the end of the preceding year were SEK 79 and SEK 79, respectively,
and market capitalization was SEK 5,815 m. This means that the return per
share was minus 10%, including the cash dividend. The OM Stockholm Exchange's
yield index declined by 10.8% during the year. The Dow Jones European index
for specialty chemical companies decreased by 8.4%.
On February 7, 2001, the price per Perstorp B share was SEK 72, up 9.1%
compared with year-end.
Offer from Industri Kapital
On April 10, 2000, the risk-capital capital Industri Kapital made a public
offer through Perstorp Intressenter AB to acquire all the shares and
convertible debentures in Perstorp AB. After having prolonged the acceptance
period and adjusted the offer on various occasions, Perstorp Intressenter AB
announced at the end of September that it did not intend to complete the its
offer.
In response to requests from three of Perstorp's largest institutional
shareholders, the Swedish Securities Council issued an opinion that clarified
certain matters of principle regarding the criteria and conditions for
withdrawing bids during an acceptance period.
On October 18, the OM Stockholm Exchange - to which the Swedish Securities
Council had referred judgment of Perstorp AB's information activities in this
context - issued a statement in which it was clearly established that Perstorp
AB had complied with the Exchange's listing agreement.
Dividend, Annual General Meeting and reporting dates
The Board of Directors intends to propose that the Pergo subgroup be spun off
to shareholders. Perstorp Declam will be part of this group. A cash-dividend
proposal will be presented when the terms and conditions for Pergo's spin-off
have been established.
At the Annual General Meeting, the Board will propose renewal of the Board's
authorization to make decisions regarding the repurchase of Perstorp shares
corresponding to a maximum of 10% of the shares outstanding. The purpose is to
provide the Board with an additional instrument for use - if considered
necessary - in efforts to boost shareholder value. It is proposed that such
authorization will apply until the following Annual General Meeting.
Any such 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 Swedish legislation, to transfer
repurchased shares.
The Annual General Meeting will be held at Persgarden in Perstorp, Sweden, on
Wednesday, May 9, 2001 (April 3 had previously been indicated as a preliminary
date.)
The Annual Report will be published and distributed to shareholders during
early April.
The preliminary publication dates for quarterly reports during 2001 are as
follows: April 27, July 23 and October 23.
Outlook for 2001
Assuming that the Annual General Meeting votes in favor of the Board's
proposals, Perstorp will become a specialized chemical group.
With respect to 2001, we anticipate a weakening of global conditions in the
chemical market and thus lower demand. It is estimated that part of this
decline will be offset by improved gross margins as an effect of lower raw
material prices. The comprehensive program that will be implemented during the
year, in order to boost the efficiency of the polyols production structure, is
also expected to make a positive contribution to full-year earnings.
Pergo is expected to show a loss during the first half of 2001, due to the
completion of the comprehensive adjustment program required for its technology
shift and to launches of new products, which are expected to start yielding
significant effects during the later part of the year.
Perstorp, February 9, 2001
Board of Directors
Operating earnings by division
SEK m Q 4 Q 4
2000 1999 2000 1999
Perstorp Chemicals 493 385 69 124
Pergo -74 184 -94 54
Other items including eliminations -9 -109 -80 -2
of which Perstorp Declam -88 86 -102 23
Operating earnings excluding demerged business 410 460 -105 176
units
Demerged business units 1 0 40
191
Group 411 651 -105 216
Net sales by division
SEK m Q4 Q4
2000 1999 2000 1999
Perstorp Specialty Chemicals 3,164 2,355 821 613
Perstorp Chemitec 1,742 1,413 481 363
Perstorp Construction Chemicals 261 279 66 63
Perstorp Support 572 508 143 140
Other items including eliminations -493 -398 -108 -118
Perstorp Chemicals 5,246 4,157 1,403 1,061
Pergo 3,699 3,627 1,047 908
Other items including eliminations -126 -124 -43 -32
of which Perstorp Declam 582 761 105 201
Net sales excluding demerged business units 8,819 7,660 2,407 1,937
Demerged business units and eliminations 410 2,692 - 530
Group 9,229 10,352 2,407 2,467
Operating earnings by division adjusted for items affecting comparability
SEK m Q4 Q4
2000 1999 2000 1999
Perstorp Chemicals 476 371 97 110
Pergo 107 209 7 54
Other items including eliminations 17 -49 11 -2
of which Perstorp Declam 25 86 -5 23
Operating earnings excluding demerged business units 600 531 115 162
Earnings
Consolidated income statement Q4 Q4
SEK m 2000 1999 2000 1999
Net sales 9,229 10,352 2,407 2,467
Cost of goods sold -7,080 -7,357 -1,958 -1,723
Gross earnings 2,149 2,995 449 744
Sales, administration and -1,632 -2,281 -376 -563
R&D costs
Items affecting comparability -190 -86 -220 14
Other operating revenues and expenses 76 5 46 20
Result from participation in associated 8 18 -4 1
companies
Operating earnings 411 651 -105 216
Net financial items -72 -100 -26 -25
Earnings before taxes 339 551 -131 191
Taxes -122 -281 56 -88
Minority share in net profit 10 11 2 2
Earnings after taxes 227 281 -73 105
Earnings per share, SEK 3.17 3.93 -1.02 1.47
Earnings per share after full conversion, SEK 3.16 3.87 -0.96 1.43
Consolidated Balance Sheet
SEK m Dec 31, 2000 Dec 31, 1999
Long-term operating assets 3,780 3,947
Long-term financial assets 517 316
Inventories 1,110 1,387
Current operating receivables 2,427 2,312
Current financial assets 92 207
Total assets 7,926 8,169
Shareholders' equity 3,938 3,776
Minority interests 42 56
Provisions 454 526
Long-term financial liabilities1) 58 271
Current operating liabilities 1,796 1,802
Current financial liabilities1) 1,638 1,738
Total liabilities and 7,926 8,169
shareholders' equity
1 ) Current financial liabilities include a convertible debenture loan in an
amount of SEK 225 m that becomes due for repayment on May 15, 2001, to the
extent that conversion has not previously been effected. This was included in
long-term financial liabilities at December 31, 1999
Key Ratios
Q4 Q4
2000 1999 2000 1999
Turnover rate
- total capital, times/year 1.2 1.2 1.2 1.2
- working capital, times/year 5.5 4.7 5.2 4.7
Operating margin, % 4.4 6.3 -4.4 8.8
Return on
- total capital, % 6 8 -5 11
- shareholders equity, % 6 7 -7 11
- capital employed, % 2) 8 11 -7 15
Debt/equity ratio 1) 0.4 0.5 0.4 0.5
Equity ratio, % 50 47 50 47
Interest-coverage ratio, times 3.9 5.1 -3.4 4.4
Shareholders' equity per share, SEK 55 53 55 53
Free cash flow/net sales, % 3 9 3 12
Number of shares 71,589,720 71,584,341 71,589,720 71,584,341
Number of shares after full 74,114,341 74,114,341 74,114,341 74,114,341
conversion
1)
The definition
for calculating net debt has been changed in order to adapt to the Swedish
Financial Supervisory Authority's recommendations. The figures for comparative
periods have been adjusted.
2) The definition for calculating capital employed has been changed in
order to adapt to the Swedish Financial Supervisory Authority's
recommendations. Since the effect of this change will not be significant, the
figures for comparative periods have not been adjusted.
Cash flow analysis
Q4 Q4
SEK m 2000 1999 2000 1999
Operating earnings 411 651 -105 216
Depreciation and write-downs 699 511 301 120
Change in working capital (excl. tax liabilities) -560 333 -120 101
Current investments in fixed assets -226 -324 -86 -72
Adjustments for divested fixed assets 2) 41 0 41 0
Operating cash flow 365 1,171 31 365
Standard tax related to operating earnings -132 -208 33 -69
Free cash flow 233 963 64 296
Net financial items -72 -100 -26 -25
Reversal of standard tax 132 208 -33 69
Taxes paid/change in deferred tax -23 -365 63 -84
Adjustment item, including exchange-rate differences 144 -141 -6 -18
Cash flow from operations 414 565 62 238
Strategic investments in fixed assets and company -972 -582 -90 -52
acquisitions
Effect of divestments/dividend payments 562 516 0 516
Cash flow before dividend 4 499 -28 702
Dividend to shareholders -286 -814 0 -528
Net cash flow -282 -315 -28 174
Free cash flow per share, SEK 3.25 13.45 0.89 4.13
Net debt at beginning of period1) -1,754 -1,752 1,484 -2,264
Net cash flow -282 -315 -28 174
Net debt in acquired/demerged operations 601 322 0 322
Currency effects -74 -9 3 14
Net debt at end of period 1) -1,509 -1,754 -1,509 -1,754
1) The definition for calculating net debt has been changed
in order to adapt to the Swedish Financial Supervisory Authority's
recommendations. According to the previous definition, net debt would have
amounted to SEK 1,222 m at year-end, SEK 1,597 m at the beginning of 2000 and
SEK 1,200 m at the start of most recent quarter.
2) As of Q4 2000, adjustments are made for divested fixed
assets in the ongoing business. Since it was concluded that the amounts for
this item were not of significance during the comparative periods, no
adjustments have been made for these periods.
Quarterly Data (1998 pro forma)
SEK m 1998 1999 2000
IV I II III IV I II III IV
Net sales 2,346 2,549 2,792 2,544 2,467 2,414 2,215 2,193 2,407
Cost of goods
sold -1,673 -1,830 -1,979 -1,825 -1,723 -1,776 -1,627 -1,719 -1,958
Gross earnings 673 719 813 719 744 638 588 474 449
Sales,
administration
and -634 -572 -605 -541 -563 -476 -416 364 -376
R&D costs
Items affecting -35 -15 -48 -37 14 75 0 -45 -220
comparability
Other operating
revenues and 13 -3 -8 -4 20 3 13 14 46
expenses
Results from
participations 9 4 7 6 1 3 3 6 -4
in associated
companies
Operating earnings 26 133 159 143 216 243 188 85 -105
Net financial items -25 -14 -23 -38 -25 -13 -14 -19 -26
Earnings before taxes 1 119 136 105 191 230 174 66 -131
Taxes -34 -42 -57 -94 -88 -93 -61 -24 56
Minority share
in net profit 3 0 2 7 2 3 4 1 2
Earnings after taxes -30 77 81 18 105 140 117 43 -73
Quarterly Data by division
Net sales 1998 1999 2000
SEK m IV I II III IV I II III IV
Perstorp Chemicals 1,022 1,086 1,060 950 1,061 1,172 1,329 1,342 1,403
Pergo 812 852 980 887 908 865 906 881 -1,047
Other items including -127 -77 -2 -13 -32 -33 -20 -30 -43
eliminations
of which Perstorp Declam 168 182 210 168 201 187 181 109 105
Total excluding
demerged 1,707 1,861 2,038 1,824 1,937 2,004 2,215 2,193 2,407
business units
Demerged business units and 639 688 754 720 530 410 0 0 0
eliminations
Group 2,346 2,549 2,792 2,544 2,467 2,414 2,215 2,193 2,407
Quarterly Data by division
Operating earnings 1998 1999 2000
SEK m IV I II III IV I II III IV
Perstorp Chemicals 90 87 89 85 124 120 140 164 69
Pergo -45 6 66 58 54 38 39 -57 -94
Other items including -18 -11 -54 -42 -2 84 9 -22 -80
eliminations
of which Perstorp Declam 16 20 24 19 23 22 16 -24 -102
Total excluding demerged 27 82 101 101 176 242 188 85 -105
business units
Demerged business units -1 51 58 42 40 1 0 0 0
Group 26 133 159 143 216 243 188 85 -105
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