Headline:
Annual Report 2007 released
Ingress:
The Board of Directors and the Executive Board of Brødrene Hartmann A/S today
adopted the Annual Report 2007.
Main body:
Peter Arndrup Poulsen, CEO of Brødrene Hartmann A/S makes the following
statements about 2007 in general:
”Total performance in 2007 was not satisfactory, but it is comforting to see
that the negative development in earnings has now turned around. Also, several
initiatives have been rolled out that provide a basis for improved earnings
going forward.”
”We have abandoned the previous growth strategy and pulled out of the South
American and Asian markets. The pullback involved a lot of nonrecurring costs
and impairment, and they left their mark on the consolidated financial
statements for the financial year 2007.”
Peter Arndrup Poulsen says about the future:
” We are beginning to see the results of our efforts, but there is still room
for improvement. The fourth quarter ended 2007 on a positive note and the
budgets for 2008 look promising. We must definitely increase the earnings in
2008.”
“Our financial gearing is at an unsatisfactory high level. We have responded by
planning a share issue that will provide the Group with a stronger financial
platform for the development of our core business.”
Revenue and profit/(loss)
Hartmann posted revenue of DKK 1,492 million in 2007, up 1% from last year.
Operating profit/(loss) came to DKK -146 million against DKK 62 million last
year.
The consolidated financial statements are influenced by several non-recurring
items, such as the impairment of assets etc. in Asia (DKK 49 million) and North
America (DKK 115 million) and reorganisation costs (DKK 35 million).
After allowing for these non-recurring items, the Group achieved a normalised
operating profit/(loss) of DKK 53 million, which is somewhat above the
year-earlier level of DKK 17 million.
Impairment of tax assets North America DKK 48 million and Asia DKK 14 million
respectively.
Profit/(loss) on discontinued operations relates to the divestment of the
Group's operations in South America and amounts to DKK -242 million.
The total profit/(loss) of the Group (EAT) for 2007 came to DKK -513 million
against DKK -77 million last year.
Egg Packaging Europe
Egg Packaging Europe returned DKK 1,043 million in revenue and DKK 64 million in
operating profit/(loss). Normalised EBIT for this business area comes to DKK 69
million against DKK 83 million last year.
Developments in this segment were negative in 2007, reflecting the first effects
of efforts to trim the product and customer portfolios, as well as steeply
increasing prices of paper and energy. On the other hand, the segment reported
continued growth in the demand for high-value packaging. Management believes
that Egg Packaging Europe has a potential for improving its results, as is also
reflected by the profit/(loss) for Q4.
Egg Packaging North America
Egg Packaging North America posted revenue of DKK 147 million and DKK -144
million in operating profit/(loss). Normalised EBIT for this business area comes
to DKK -28 million against DKK -44 million last year.
The result is still unsatisfactory, the main reason being the continued
unfavourable cross rate between the Canadian dollar (CAD) and the US dollar
(USD). However, the operating performance of Egg Packaging North America in 2007
showed clear improvement over last year. Achievements made during the year
include more production automation and an improved cost structure. Management is
still monitoring developments in this segment closely.
Industrial Packaging
Industrial Packaging posted revenue of DKK 220 million and an operating profit/
(loss) of DKK -16 million. Normalised EBIT for this business area comes to DKK
40 million against DKK 9 million last year.
Industrial Packaging achieved increased productivity and growth in European
sales in 2007. Earnings were clearly reflective of the positive effects of the
trimming of the customer and product portfolios. Industrial Packaging will focus
on Europe going forward, and its performance in 2007 was characterised by
one-off items such as the closing-down of production plants in Asia and of sales
offices in Japan and the USA, and the restructuring of the European sales
organisation. Management will focus on efforts to retain and increase the
improvements achieved as a result of the restructuring.
Turnaround activities
Hartmann has launched a turnaround process, ‘Forward to basics', to redirect its
development trend. In 2007 the new Management launched and carried out an array
of activities to stabilise and consolidate the business, and the full effect is
likely to show in 2009.
Management has carried out a partial global pullback by winding up the Group's
loss-making operations in South America and Asia.
The organisation was restructured so as to match the current situation. A new
management team took over, the organisational structure was changed, departments
were restructured and the number of employees was reduced.
Focus was shifted from growth to earnings. Loss-making activities, declining
earnings and defective processes between sales and production represent the
biggest challenges for Management at present. Management is responding by
launching activities relating to further production efficiencies, such as lean
activities, automation and reduced wastage. Also, it is crucial to achieve a
further reduction of production complexity and to continue the slimming of the
customer and product portfolios.
Planning a capital increase
Due to the many non-recurring costs and impairment, the Group's equity has been
reduced from the opening level of DKK 544 million to DKK 220 million at 31
December 2007.
Because of the current high gearing, the Group needs new capital for major
investments and further developments. Against that background the Board of
Directors has decided to start planning a share issue in 2008. The issue is
expected to involve preemptive rights for existing shareholders.
In connection with the possible increase of the capital it is possible to merge
the three classes of shares in the Group. It has long been a wish among
shareholders to introduce the principle of ‘one share - one vote'.
Outlook for 2008
Hartmann expects revenue in 2008 in the range of DKK 1,460 million. Operating
profit/(loss) (EBIT) is forecast at around DKK 70 million and profit/(loss)
after tax (EAT) at around DKK 20 million.
Foreign exchange losses from prior years relating to the operations in Asia
(approx. DKK 16 million at 31 December 2007) will be reclassified from equity to
the income statement upon completion of the closing-down process. The outlook
does not factor in this effect.
As announced earlier, the Board of Directors has decided to start planning a
share issue in 2008. The issue will have a positive impact on net financial
expenses and, thus, also on the consolidated profit/(loss) after tax. The
outlook does not factor in this effect.
Strategy 2008-2010
The turnaround process initiated in 2007 continues in 2008 with focus on a
stabilisation and improvement of the Group's core business.
Moving towards 2010, Hartmann will restore an attractive earnings level by
optimising its core business in Europe, adjusting the activity level of
Industrial Packaging and, at the same time, growing profitability in operations
in North America. The objective is to create a strong Hartmann capable of acting
as a platform for future growth.
Changes to financial calendar
The date for publication of the report for Q3 2008 has been changed to 17
November 2008.
Further information, please contact
Peter Arndrup Poulsen
CEO
Tel: +45 45 87 50 30
Mobile: +45 51 51 40 69
