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Please find below all Forbo media releases listed by year.
Eglisau, October 28, 2003
Forbo's business development picked up slightly in the third quarter. Combined with cost-cutting measures this led to somewhat better results compared with the first two quarters of the current business year, but the results of the previous year could not be matched. Total sales in the first nine months of the business year were CHF 1,204.6 million (+6% compared with the previous year), and the operating profit after depreciation and amortization was CHF 55.6 million (previous year: CHF 74.0 million). In the context of further cost optimization measures, 220 jobs will be reduced by the end of March 2004.
Higher sales, lower operating profit
Forbos's business development picked up slightly in the third quarter. Especially in September there have been encouraging indications. Combined with cost-cutting measures this led to somewhat better results compared with the first two quarters of the current business year, but the results of the previous year could not be matched. This applies for all three businesses. At CHF 412.8 million, sales decreased slightly in the third quarter, on a comparable basis, by 0.1% or 1.0% at constant exchange rates compared with the third quarter of the previous year.
The operating profit before depreciation and amortization (EBITDA) reached CHF 48.1 million in the third quarter, corresponding with 11.7% of sales. The result after depreciation and amortization is CHF 20.8 million, i.e. the best quarterly result in this year, but still CHF 8.8 million below the previous year's.
The profit decrease is mainly due to difficult market conditions in all the three businesses. Apart from strong price pressure, higher raw material costs and a shift of the product mix towards products with lower margins have contributed to this development which could be countered to some extent in the third quarter. However, the weak US Dollar continues to impair the results, having a negative impact not only on currency translation but also on margins since the Forbo Group is generating a considerable part of its sales in North America and Asia on the basis of exports from the Euro region.
In the first nine months of the business year, total sales of the Forbo Group were CHF 1,204.6 million or 6% higher than in the previous year. The operating profit after depreciation and amortization was CHF 55.6 million (previous year: CHF 74.0 million). The lower operating profit, higher financing costs as a result of last year's acquisition, and a higher tax rate led to a consolidated profit of CHF 22.6 million which is below the previous year's level.
With a shareholders' equity ratio of some 37%, the balance sheet by the end of the third quarter continues to remain strong; the liquidity could be increased by CHF 29.9 million to CHF 176.7 million through the efficient management of net current assets in the quarter under review.
In the flooring business, encouraging sales growth in France, Southern and Eastern Europe, North America, Japan and China was partly offset by a further decrease in key European markets. As to linoleum, the reluctance of public spending for new buildings and renovation projects is obvious in these markets, e.g. for hospitals, schools and other public buildings. The reorganization of the flooring business started at the beginning of 2003, leading to similar organizational set-ups of sales companies in the individual countries, resulted in significant cost savings. The erosion of market prices could partly be offset by successful efforts for reducing manufacturing costs and by improved logistics.
The adhesives business improved somewhat in terms of sales compared with the first two quarters, partly due to new businesses in attractive segments of application. Sales growth was recorded notably in North America, Southern and Eastern Europe. There are signs of a slight easing of raw material prices. The projects launched in Europe for improving the Group's business structure in the wake of the integration of the Swift business have been making good progress, resulting in lower fixed costs. For instance, the parallel business organizations in France, the Netherlands and in Spain were consolidated successfully.
Sales of the belting business stayed on growth course in the third quarter. The increase in the first nine months over the previous year is 3% in local currencies. In recent months, major individual projects were increasingly commissioned indicating a slight market recovery. Forbo succeeded in winning some of these projects. Asia and notably China, but also North America and Southern Europe recorded brisk demand, but with lower margins than in the previous year. The key Western European markets are characterized by over-capacities and will thus continue to be difficult. Consequently, profits were not able to keep up with sales and remained unsatisfactory as a result of both prices and currency exchange rates. Further market stimuli will be necessary to improve the price situation.
Forbo has sustainably optimized its three core businesses by various moves in recent years. On a comparable basis, for instance, the structural costs were reduced in the first nine months of 2003 alone by about 2%. Additional cost-cutting measures have been initiated in response to the unsatisfactory result development. Among others, another 220 jobs will be cut back Group-wide by the end of March 2004. Half of this reduction has been already completed. The costs of these measures will partly be charged to the accounts in 2003 and 2004 unless already existing provisions can be used for this purpose.
Lower profit than in the previous year
Although all the three businesses recorded declining results in the first nine months of 2003, Forbo adheres to its three core businesses and expects to benefit more than proportionally from improving market conditions.
Based on the economic situation and the seasonal business development it can be expected that the results of the fourth quarter will be weaker than in the third quarter. For the total business year 2003, the Group is expecting clearly lower profits than in the previous year. The cost-cutting measures underway have created the preconditions for improving the results in 2004 even if the difficult economic conditions should continue.
Head of Corporate Communications
Tel: + 41 1 868 25 69
Fax: + 41 1 868 35 69
Chief Financial Officer
Tel: + 41 1 868 25 25
Fax: + 41 1 868 25 26