04/11/2004
- Operating income MSEK 64.1 (1.5) including items affecting comparability
- Operating income MSEK 38.0 (11.4) excluding items affecting comparability
- Operating cash flow MSEK 113 (12)
- Net sales 2 259 (2 216)
- Joint venture with Böwe Systec as regards Lasermax operations Commencement of programme of economy measures
- Net income after tax MSEK 43.7 (-8.0)
- Earnings per share SEK 2.05 (-0.37)
The Third Quarter
During the third quarter, sales amounted to MSEK 704, an increase of 5% compared with the same period last year (670). All areas report improved sales. The operating income, excluding items affecting comparability, amounted to MSEK 10.6 (7.4) during the third quarter. The Information Logistics Division reports a clear improvement in earnings during the third quarter, while Business Areas Labels (The Graphic Solutions Division) and Supplies (the SPI Division) report lower results than during the same period last year.
For the full interim period, turnover of MSEK 2 259 (2 216) is reported. Within Business Areas Graphics and Information Logistics sales increased, while other areas show somewhat lower sales than during the same period last year. Operating income, excluding items affecting comparability, amounted to MSEK 38.0 during the interim period (11.4). Improvements in earnings are shown by the Graphic Solutions and Information Logistics Divisions, while the SPI Division reports a lower result.
During the interim period, reversal of items affecting comparability of a net MSEK 26 is reported, of which MSEK 56 referred to capital gains in connection with the establishment of a joint venture with Böwe, and MSEK 30 refers to the cost of economy measures and write-down of assets.
Operating cash flow has developed well, and for the interim period amounted to MSEK 113 (12).
Joint Venture with Böwe Systec as regards Lasermax Operations
Böwe Systec and Stralfors have formed a jointly controlled company, as of 30 September. This has taken over Böwe's subsidiary company, Roll Systems Inc in the USA and Stralfors' Lasermax operations. With this, the leading global suppliers of pre-processing and finishing machines for high-speed printers have amalgamated. Böwe and Stralfors, each owns half of the new company Lasermax Roll Systems AB, which has its head office in Ljungby.
Roll Systems and Stralfors' Lasermax operations complement one another geographically. With a strong market position and joint know-how within the product area, more rapid launches of new solutions onto the market and improved cover of both existing and potential markets are made possible. The new joint company will have sales of some MSEK 400, with about 200 employees.
The deal has given Stralfors capital gains of MSEK 56.
Programme of Economy Measures
A programme of economy measures was initiated during September. Stralfors is meeting new customer requirements and stiffer competition with product development, higher productivity, efficiency and specialisation. This involves a reduction in manning requirements, and at the same time impose increasing demands on the competence and flexibility of the personnel.
The various activities within Stralfors are in various phases of development. The Information Logistics Division is expanding due to several new business deals, and requires further employees, while resources must be reduced within other areas, primarily within Business Area Labels. Against this background, Stralfors has decided to carry out a programme of economy measures becoming effective as from the first quarter of 2005, which it is estimated will give an annual cost reduction of between MSEK 40 and MSEK 50. The cost of the total programme of measures has been charged to the third quarter with MSEK 28.
New Business
Scandinavian PC Systems in Växjö launched an EDI solution in October. It is based on Stralfors' invoicing and information service, eBusiness Communication. For a long time, large companies have sent and received invoices, bookings, orders and order acknowledgements electronically. With the new solution, this will also be possible for smaller companies.
Business Area Supplies has signed an agreement with IBM regarding delivery of their total requirements of office and computer accessories in the Nordic Area. The delivery solution, which is based on electronic communication, contributes to making IBM's administration costs more efficient.
Outlook for the remainder of the Year
The assessment given earlier this year stands. The conditions for continued improvements in earnings during 2004 are good.
Graphic Solutions
The Graphic Solutions Division, consisting of Business Areas Graphics and Labels, reports an operating income of MSEK 39.1 (30.4) during the first three quarters of the year. The improvement in earnings derives from Business Area Graphics, while Business Area Labels reports a lower result than last year.
The improvement in earnings within Business Area Graphics is due to both increased turnover and lower costs. New products and supply solutions have compensated for volume reductions within the traditional forms range.
Business Area Labels has, at present, a negative earnings trend, primarily due to reduced demand in Switzerland and squeezed margins. The ongoing economy programme essentially refers to the label operations in Sweden and Switzerland. Additionally in Switzerland, new production capacity is being invested in for the so-called Multi-Label, a label for large amounts of information. This product is assessed to have considerable sales potential. The assessment is that the measures ongoing at present will contribute to breaking the negative result trend during the first half of 2005.
Information Logistics
Both turnover and earnings continue to improve within the Information Logistics Division. Sales for the interim period amounted to MSEK 533, an increase of 11% compared with the same period last year, (480). Operating income amounted to MSEK 25.8, an improvement of MSEK 20 compared with the same period last year, (5.8).
The Division continues to be dominated by paper-based output data production, but other areas also show improvements in sales and earnings, these being cards, logistic solutions and electronic Information Transfer. Activity in the market is high at present, with several new assignments coming in, for example, Telenor, which guarantee continued positive development for the Division.
SPI, System and Product-related Information Transfer
The SPI Division, which embraces Business Areas Supplies, Lasermax, the company Strålfors TradeCom Solutions AB and other operations, reports somewhat lower sales and a lower result for the interim period than for the equivalent period last year. The negative trend has been halted during the third quarter, and is forecast to turn during the fourth quarter of this year.
As mentioned above, as from 30 September, Business Area Lasermax is incorporated in the new company, Lasermax Roll Systems AB, half-owned with Böwe Systec. The new company will report in accordance with the so-called proportional method, which involves half of the result and balance sheet items being included in Stralfors' consolidated accounts. Because the amalgamated operations, both as regards result and balance sheets are roughly double the size of Stralfors' Lasermax operations, the effects on the Stralfors Group's reporting will be minor.
Joint Resources
Joint resources at present, apart from traditional Group management functions, consist of Group resources for such things as development, e-commerce, IT, environment, quality, safety and security and management of foreign exchange, together with the Group's operational real estate and Group-strategic goodwill. The joint resources have charged the interim period's operating income to the extent of MSEK 30, a reduction of MSEK 15 compared with the same period last year (45). The reduction is primarily due to improved outcome from central foreign exchange management, which last year was hit by falls in the exchange rate against the US dollar and Norwegian krona.
Items affecting Comparability
As from 2004, items affecting comparability are not reported on a separate line in the Income Statement. The items affecting comparability for the interim period, MSEK 26.1, refer to capital gains from the establishment of the new half-owned company, Lasermax Roll Systems, of MSEK 55.8, together with the costs of structural measures amounting to MSEK 29.8. In the Income Statement, the capital gains are reported in the profit item, Other Operating Income and Expenses, while the structural costs are included to the extent of MSEK 16.1 in Cost of Goods Sold and MSEK 13.7 for Sales and Administration Expenses. Last year's items affecting comparability have not been reclassified in the Income Statement.
Group Result
The operating income for the interim period of MSEK 64.1 (1.5) has been charged with financial items of MSEK 6.3 (6.7). The result before tax thus amounts to MSEK 57.8 (-5.2). Tax on the interim profit for the year amounted to 14.1, which is the equivalent of a tax rate of only 24%. The reason for the low tax rate is that only a small part of the capital gains, in connection with the establishment of Lasermax Roll Systems, is subject to income tax. The result for the interim period after tax, MSEK 43.7 (-8.0) is the equivalent of earnings per share of SEK 2.05 (-0.37).
Investments, Cash Flow, Liquidity and Financing
The operating cash flow for the interim period amounted to MSEK 113 (12). The most important components of the operating cash flow are operating income excluding non-recurring items, MSEK 38 (11), depreciation in excess of investment, 36 MSEK (13) and a reduction in working capital, 34 MSEK (-14). The positive cash flow has been mainly used for distribution of dividends, MSEK 37, and amortisation of financial liabilities, MSEK 68.
Investments for the interim period amounted to MSEK 67 (90).
The Balance Sheet at the end of the period includes receivables of MSEK 82 as regards the establishment of the new half-owned Lasermax company. These receivables were settled at the beginning of October. Apart from this, establishment of the new company has not had any marked effect on the Stralfors Group's Balance Sheet.
At the end of the interim period, liquid funds amounted to MSEK 167, i.e., roughly the same amount as at the beginning of the year (170). Over and above this amount, there were unutilised credit facilities of about MSEK 681 at the close of the interim period.
Non-interest-bearing provisions during the interim period increased by MSEK 16 to MSEK 124, primarily due to the provisions for structural measures made in the Balance Sheet as at 30 September.
Financial liabilities during the interim period decreased by MSEK 52 to MSEK 208. As mentioned above, amortisation amounted to MSEK 68, while establishment of the new 50%-owned company gave liabilities of MSEK 15.
Financial Information from Stralfors
Questions concerning the content of this report may be directed to:
Per Samuelson, President and CEO, telephone +46(0)372 854 40, or Kjell Åke Jönsson, Vice President, telephone +46(0)372 852 34.
The next report, Closing Statement for 2004, will be published on 11 February 2005, which involves an alteration to the date previously given (10 February). The date for the next Annual General Meeting has been fixed for 3 May 2005. The interim report for January – March 2005 will be published on the same day.
Accounting Principles
This report has been prepared in accordance with Recommendation RR 22 (Formulation of Financial Reports) of the Swedish Financial Accounting Standards Council. Recommendation RR 29 (Remuneration to Employees) of the Swedish Financial Accounting Standards Council has been applied from 1 January 2004. As a result of this, MSEK 5 has reduced the total pension liability of the Stralfors Group. This amount will, after deduction of deferred tax, be reported directly against shareholders’ equity, see Changes in Shareholders’ Equity, above. Apart from that, the accounting principles and methods of calculation presented in the Annual Report for 2003 have been applied.
In 2005, stock exchange listed companies in the EU will change over to reporting in accordance with IFRS (International Financial Reporting Standards). Not all recommendations have been established yet. Stralfors is following developments continually, but the assessment is that transition to reporting in accordance with IFRS will not have any marked effect on Stralfors’ accounting.
General audit
This report has not been examined by the Company’s auditors.
Addresses and corporate identity number
Strålfors AB (publ). Corporate identity number: 556062-0618.
Postal address: SE-341 84 Ljungby. Visitors’ address: Helsingborgsvägen 20, Ljungby. Tel: +46 (0)372-850 00.
Web address: www.stralfors.com
Ljungby, 4 November 2004
Per Samuelson
President and CEO
Business Concept and Corporate Description
Stralfors is an IT-focused Business-to-Business company with a print heritage providing total solutions within the field of information transfer. Stralfors develops, produces and delivers systems, services and products for the efficient communication of information crucial to operating a business. The Group has net sales of SEK 3 billion and operates in 12 countries with a total of 1725 employees. Stralfors “B” shares have been quoted on the Stockholm Stock Exchange since 1984.