Nolato AB (publ), Year-End Report January 1 December 31, 1999.

Transcription

1 Nolato AB (publ), Year-End Report January 1 December 31, Income after financial items rose by 36 percent to sek 226 m including nonrecurring items.

2 Income after financial items rose by 36 percent to sek 226 m including nonrecurring items, and to sek 200 (166) excluding nonrecurring items, respectively. Operating income increased by 17 percent to SEK 210 M (180) excluding nonrecurring items The fourth quarter was the best quarter ever: income after financial items increased by 29 percent to SEK 62 M (48) Earnings per share increased by 40 percent to SEK 8.65 (6.20) including nonrecurring items, and to SEK 7.65 (6.20) excluding nonrecurring items Sales rose by 14 percent to SEK 2,145 M (1,888) The Mobile Communication business area increased its sales by 68 percent during the fourth quarter and income after financial items rose by 33 percent to SEK 134 M (101) for the full year 1999 The Board of Directors is proposing that the dividend be increased by 22 percent to SEK 2.20 (1.80) Earnings for the full year 2000 (excluding nonrecurring items) are expected to be better than for 1999 THE FOURTH QUARTER OF 1999 Sales increased by 38 percent to SEK 711 M (514), compared to the fourth quarter of Sales of the Mobile Communication business area increased by 68 percent to SEK 456 M (271). Growth accelerated substantially during the quarter, primarily due to an increasing pace of deliveries of new products to major customers. Sales were also favorably affected by the inclusion of ongoing customer projects in sales. Sales include such projects in the amount of SEK 55 M (17). Sales of the Industrial Components business area were SEK 180 M (162). Sales increases continued in the fourth quarter. All companies in the business area experienced strong demand and sales thus grew favorably. In late December 1999, a certain slowdown in sales was noted. This was normal considering the season and was due to reduced demand in connection with the Christmas holidays. Operating income increased by 26 percent to SEK 63 M (50) Income after financial items increased by 29 percent to SEK 62 M (48) the best earnings for a single quarter in Nolato s history. Earnings excluding nonrecurring items were affected by several factors. Sales increases in the Mobile Communication business area affected earnings favorably. Meanwhile, production costs in the Mobile Communication business area declined, relatively speaking, compared to the third quarter of These costs primarily for rejects and manual labor input were temporarily elevated during the third quarter 1999 due to the start-up of manufacture of new products. At the same time, new products contain a larger proportion of purchased components than before. This reduces profit margins since the gross margin on sales of purchased components is lower than that for products made in-house. The large proportion of project income included in sales for this quarter also squeezed margins, since this project revenue normally generates lower margins than product sales. Earnings were also affected by the negative income of Nolato Texas, which amounted to SEK -9 M (0) for the fourth quarter. Prices did not change materially during the fourth quarter. This is normal, considering that most price agreements are negotiated around the beginning of the year. JANUARY-DECEMBER 1999 SALES Sales increased by 14 percent to SEK 2,145 M (1,888), compared to This growth was entirely organic. Growth accelerated substantially toward the end of the year, amounting to 38 percent during the final quarter. During the year, sales of the Mobile Communication business area increased by 34 percent, while other business areas experienced somewhat lower sales. JANUARY-DECEMBER 1999 EARNINGS Consolidated operating income rose by 17 percent to SEK 210 M (180), excluding nonrecurring items. Operating income including nonrecurring items was SEK 236 M (180). Income after financial items rose by 20 percent to SEK 200 M (166), excluding nonrecurring items. Income after financial items including nonrecurring items was SEK 226 M (166). Earnings per share reached SEK 7.65 (6.20), excluding nonrecurring items. Including nonrecurring items, earnings per share totaled SEK 8.65 (6.20). The operating margin increased to 9.8 percent (9.5), excluding nonrecurring items. Return on capital employed was 22.6 (22.3) percent, excluding nonrecurring items. Return on operating capital was 22.9 (22.6) percent, excluding nonrecurring items. Nonrecurring items contributed SEK 26 M (0) to earnings during The nonrecurring items consisted of capital gains. The sale of the heating, plumbing and sanitation company Nolato VVS on June 29, 1999 yielded SEK 24 M. The sale of all of the Group s shares in the associated company Curver Scandinavia AB, and associated production tooling, yielded SEK 10 M. In connection with the sale of Curver Scandinavia AB, provisions of SEK 8 M were made to a restructuring reserve for future expenses. The net income from the sale was therefore SEK 2 M. Nolato VVS oper-

3 ating income through June 29, 1999 is included in the consolidated income statement in the amount of SEK 3 M (5). The shareholding in Curver Scandinavia AB did not result in any income during the current or previous year. Nolato has been notified that its allocation of surplus premium funds to be repaid by the Swedish Staff Pension Society (SPP) and its life insurance arm SPP Liv to their client companies will total approximately SEK 20 M. Because the form of payment of these funds to Nolato remains uncertain, this amount is not reflected in the 1999 financial statements. MOBILE COMMUNICATION Sales increased by 34 percent in 1999 to SEK 1,241 M (927), or 58 percent of total Group sales. Volume increased sharply compared to 1998, especially during the last quarter. Income after financial items rose by 33 percent to SEK 134 M (101) corresponding to 67 percent of total Group earnings. The improvement in earnings compared to the same period in 1998 was achieved primarily through volume increases, which resulted in higher capacity utilization and improved economies of scale in relation to fixed costs. Nolato Texas Inc. has arranged to lease more space, effective April 15, 2000, in order to handle expected expansion. The plant currently occupies 4,000 m 2 (43,000 sq ft). With the increase, the plant will occupy 13,000 m 2 (140,000 sq ft). Company sales for 1999 were SEK 30 M (0). Due to expenses for large projects that have not yet started generating sales, the year resulted in a loss that impacted Group earnings unfavorably by SEK 17 M (0) for Nolato s new plant in Tallinn, Estonia (see earlier press release, dated January 20, 2000) is contributing to increased mobile phone component manufacturing capacity and reduced production costs. Following an intensive period of preparation during the autumn of 1999, the new Nolato plant is now in full operation. The plant assembles plastic components for mobile phones. It has 50 employees and runs in three shifts. Following a quality audit, it has been approved by the customers and is initially being used for the assembly of fronts for mobile telephones. During the second quarter of 2000, production will be expanded to include injection moulding of plastic components. Nolato Mobile AB has decided to expand its operations in Norrköping, Sweden, where today it assembles components for Ericsson mobile telephones (see earlier press release, dated February 3, 2000). The expansion will involve the creation of 25 new jobs, mainly for technicians, and a tripling of the factory area. For the past two years, Nolato Mobile in Norrköping has performed final assembly of mobile telephone fronts, which are then delivered to Ericsson s factories in Kumla and Linköping, Sweden; and in Malaysia. Until now, the fronts have been manufactured only at the Nolato Mobile plant in Kristianstad, Sweden, but the company has now decided to expand production in Norrköping to also include injection moulding, that is, the actual manufacturing of the subcomponents. As part of the expansion, about ten injection moulding machines as well as automated assembly equipment are being moved from Kristianstad. This will also create further expansion potential for the growing mobile telephone operations at the Kristianstad factory. The accounting principles for reporting of results by business area have been changed. See the section entitled Sales and earnings by business area on the last page of this report. The Mobile Communication business area was impacted by higher costs, which reduced earnings by SEK 16 M (6). Historic comparative figures have been restated according to the same principle. INDUSTRIAL COMPONENTS Sales declined by 5 percent during 1999 to SEK 618 M (652), amounting to 29 percent of total Group sales. Sales in the fourth quarter increased by 11 percent to SEK 180 M (162), compared to the same period in Sales volumes were low during the first and second quarters of However, volume increased again during the third quarter compared to the beginning of the year, due to the general strength of the economy and the fact that after temporary volume problems, Nolato Alpha returned to normal volume during the third quarter. Income after financial items increased to SEK 51 M (47). Earnings were primarily affected by the streamlining implemented at Nolato Alpha, which had its full impact on earnings as of the third quarter. These measures, together with streamlining and efficiency measures at other units in the business area, resulted in improved margins compared to 1998, despite weak sales volume early in the year. The accounting principles for reporting of results by business area have been changed. See the section entitled Sales and earnings by business area on the last page of this report. The Industrial Components business area was impacted by higher costs, which reduced earnings by SEK 6 M (3). Historic comparative figures have been restated according to the same principle. BRANDED PRODUCTS Sales declined by 4 percent during 1999 to SEK 171 M (179), or 8 percent of total Group invoicing. Income after financial items declined by 12 percent to SEK 14 M (16). The decline in earnings was mostly due to the fact that Nolato VVS was sold at mid-year. Therefore only its earnings from the first six months are included for Earnings of Nolato VVS for the first six months of 1999 were SEK 3 M, compared to SEK 5 M for the full year Nolato Sunnex Equipment is carrying out a three-year investment program totaling SEK 30 M. These investments are expected to have been largely completed by year-end In keeping with the accounting principles that the Nolato Group follows, these marketingrelated costs were expensed directly during Such costs reduced earnings at Nolato Sunnex Equipment by SEK 7 M (6) during MEDICAL COMPONENTS Sales declined by 3 percent during the first quarter of 1999 to SEK 62 M (64), or 3 percent of total Group invoicing. Volume declined slightly compared to the same period of Product usage by certain important customers was low during the third quarter, but increased to more normal levels during the fourth quarter. Income after financial items declined to SEK 8 M (11), primarily due to lower volume during the third quarter. As previously announced, Nolato Gejde s mobile and medical operations have been split by turning the medical operations into a separate unit. Sales and earnings are therefore included in this business area for Comparative figures for the prior year have been restated according to the same principle These medical operations have been spun off and incorporated as of January 1, STRATEGIC ACQUISITION IN THE U.S. Nolato has signed a definitive agreement to acquire the American plastic component manufacturer Shieldmate Robotics of Itasca, Illinois (Chicago). (See earlier press release, dated February 7, 2000) The company focuses exclusively on customers in the mobile telephone field. It employs 450 people and has estimated sales of USD 40 M per year. The acquisition is entirely consistent with the strategy that was presented in the spring of 1999 of being a global systems supplier of plastic components to leading manufacturers of mobile telephones. Through Shieldmate, the Nolato Group will now also gain Motorola, Qualcomm and Denso as important customers.

4 The company, which under Nolato Group ownership will be named Nolato Shieldmate, employs about 450 people and expects sales of some USD 40 million (about SEK 340 M) this year. The purchase price is USD 25.5 M (about SEK 215 M), which will be paid in cash on the estimated closing date on March 15 this year. The acquisition is conditional upon approval by American antitrust authorities. In our judgment, the acquisition will mean that earnings per share this year will be lower than they would have been if the acquisition had not occurred, due to goodwill depreciation and financing costs. Torsten Nilson, currently president of Nolato Texas, has been appointed president of the acquired company. He will assume his position on the closing date, but will immediately start planning the integration of Shieldmate into Nolato. At Nolato Texas, he has led the start-up and development of the Mobile Communication business area s first investment in the United States. A search for his replacement at Nolato Texas is underway. PERSONNEL The number of employees in the Nolato Group was 1,869, compared to 1,778 for The increase during the third and fourth quarters of 1999 is primarily the result of the start of important new customer projects in the Mobile Communication business area. CAPITAL EXPENDITURES Total gross investments in fixed assets during the period were SEK 175 M (172). These are mainly related to investments in increased capacity. Divestments of fixed assets amounted to SEK 5 M (7). FINANCIAL POSITION Cash flow before investments was SEK 139 M (207). Cash flow from operations was reduced by increases in accounts receivable. The reason for this is that most of the sales increase relates to customers with longer credit periods than the previous average. Cash flow after investment activities was SEK -11 M (42). Net investment activities included proceeds from divested operations in the amount of SEK 28 M during the second quarter of 1999 and SEK 2 M during the third quarter of 1999, for a total of SEK 30 M (nonrecurring item). Liquid funds on December 31, 1999 were SEK 14 M (SEK 17 M on December 31, 1998). Interest-bearing assets on December 31, 1999 totaled SEK 14 M and interest-bearing liabilities were SEK 282 M, resulting in net liabilities of SEK 268 M (SEK 232 M on December 31, 1998). The equity/assets ratio was 47 percent, unchanged compared to December 31, Shareholders equity on December 31, 1999 totaled SEK 733 M (SEK 603 M on December 31, 1998). THE PARENT COMPANY Nolato AB s operations consist of indirect management, via subsidiaries, of rubber and plastics plants, trading in Group products and Group administrative matters. Sales were SEK 8 M (7). Income after financial items was SEK 45 M (32). Earnings include estimated dividends from subsidiaries and one nonrecurring item with a net favorable effect on earnings of SEK 5 M (0). The nonrecurring item consisted of a capital gain of SEK 5 M from the sale of all shares in the associated company Curver Scandinavia AB. No significant investments were made during the period. Liquidity on December 31, 1999 was SEK 0 M (SEK 10 M on December 31, 1998). DIVIDENDS The Board of Directors intends to propose that the Annual Meeting approve a dividend of SEK 2.20 per share (1.80), an increase of 22 percent. The dividend amounts to 25 percent (29) of earnings per share after full tax. FUTURE PROSPECTS Earnings for the full year 2000 are expected to be better than for 1999 (excluding nonrecurring items), even after taking into account the acquisition of Shieldmate and its impact in the form of goodwill depreciation and financing costs. FINANCIAL INFORMATION SCHEDULE Annual Report for 1999: April Three-month interim report for 2000: April 26, Annual meeting: April 26, Six-month interim report for 2000: August 8, Nine-month interim report for 2000: October 31, ANNUAL MEETING The Annual Meeting will be held at 2:00 p.m. on April 26, at the Grevie sports park, not far from the Group s headquarters in Torekov, Sweden. Current information about Nolato, including interim reports, is always available at ANNUAL REPORT The complete Annual Report will be available to shareholders at Nolato s Torekov headquarters from April 1, The report will also be mailed to shareholders in early April Torekov, February 10, Nolato AB (publ) The Board of Directors SALES (SEK M) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q EARNINGS (SEK M) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Medical Components 3% Branded Products 8% Industrial Components 29% North America SEK 118 M Other Europe SEK 379 M SALES BY Other 2% SALES BY GEOGRAPHIC MARKET Other SEK 219 M Mobile Communication 58% Nordic countries SEK M

5 INCOM E STATEMENTS SEK M Q4-99 Q Oct Dec Oct Dec Jan Dec Jan Dec Jan Dec Net sales ,145 1,888 1,558 Costs of goods and services sold ,691 1,493 1,201 Gross income Sales expenses Administrative expenses Other operating income (nonrecurring items) 26 4 Other operating expenses Operating income Financial items Income after financial items Tax Net income for the period Depreciation included BALANCE SHEETS SEK M Dec 31, 1999 Dec 31, 1998 Dec 31, 1997 Fixed assets Inventory Current receivables Cash, bank deposits and short-term investments Total current assets Total assets 1,566 1,292 1,172 Shareholders equity Interest-bearing liabilities and provisions Non-interest-bearing liabilities and provisions Total liabilities and shareholders equity 1,566 1,292 1,172

6 GROUP HIGHLIGHTS Q4-99 Q Oct Dec Oct Dec Jan Dec Jan Dec Jan Dec Sales growth (%) Percentage of sales outside Sweden (%) Operating income (SEK M) Operating income excl. nonrecurring items (SEK M) 210 Income after financial items (SEK M) Income after financial items, excl. nonrec. items (SEK M) 200 Operating margin (%) Operating margin excl. nonrecurring items (%) 9.8 Profit margin (%) Profit margin excl. nonrecurring items (%) 9.3 Return on total assets before tax **) (%) Ditto excl. nonrecurring items (%) 14.8 Return on capital employed before tax **) (%) Ditto excl. nonrecurring items (%) 22.6 Return on operating capital before tax (%) Ditto excl. nonrecurring items 22.9 Return on shareholders equity after tax *) **) (%) Ditto excl. nonrecurring items *) (%) 20.1 Equity/assets ratio (%) Gross investments (SEK M) Cash flow after investments (SEK M) D:o exkl. engångsposter (SEK M) 41 Earnings per share after full tax *) (SEK) Ditto excl. nonrecurring items *) (SEK) 7.65 Cash flow per share *) (SEK) Ditto excl. nonrecurring items *) (SEK) 2.15 Shareholders equity per share after full tax *) (SEK) Number of shares *) (thousands) 19,145 19,145 19,145 19,145 18,791 Number of employees 1,869 1,778 1,664 *) Adjustments have been made for any new share issues and have been calculated based on full conversion of convertible debentures issued to employees starting in **) Calculated for 1997 as if the Kristianstad factory had been acquired on December 31, 1996.

7 CASH FLOW SEK M Q4-99 Q Oct Dec Oct Dec Jan Dec Jan Dec Jan Dec Cash flow from operations Investment activities *) Cash flow before financing activities Financing activities Other Decrease/increase in liquid funds *) Net investment activities during 1999 included proceeds from divested operations and shares in the amount of SEK 30 M. SALES AND EARNINGS BY SEK M Sales Income Sales Income Sales Income Sales Income aft.fin.it. aft.fin.it. aft.fin.it. aft.fin.it. Q4-99 Q4-99 Q4-98 Q Oct Dec Oct Dec Oct Dec Oct Dec Jan Dec Jan Dec Jan Dec Dan Dec Mobile Communication , Industrial Components Branded Products Medical Components Intra-Group adjustments, Parent Company and Nolato Autec Group total , , The accounting principles for reporting of results by business area have been changed. Joint expenses of the business areas, such as business area management and joint marketing expenses, have been allocated to the respective business areas. The reason for this change of accounting principles is that these expenses are increasing as the management teams for each business area are enlarged, as well as a management decision to centralize certain marketing functions. Previously, these costs have been allocated to the Parent Company, in which the personnel in the business area organizations have been employed. The change affects the Mobile Communication and Industrial Components business areas. Other business areas are not affected. Historic comparative figures have been restated to conform to the current accounting principle. The impact of the change in accounting principle is reported in the sections for the respective affected business areas. Nolato AB, SE Torekov, Sweden Phone Fax info@nolato.se Internet