- Year-on-year decline in Q3 EBT due to strike
- print unit on solid level due to strong cost management
- Efficiency improvements in direct marketing
unit will cause positive result in Q4 - EBT forecast for full financial year reaffirmed
Freudenstadt, 26 July 2005. Based on preliminary financial data, schlott gruppe managed to increase earnings before taxes (EBT) by 5.8 per cent in the first nine months (October to June) of the 2004/5 financial year, thus taking EBT from €13.7 million to €14.5 million. Thus, EBT is within the target range of the company’s annual forecast.
At €245.6 million, value-added sales, i.e. sales adjusted for transitory material-related expenses, remained below the figure of €251.3 million recorded the same period a year ago. Revenue totalled €413.0 million, compared with €425.9 million a year ago. The increase in earnings achieved against the backdrop of declining value-added sales bears testimony to the high level of process efficiency and the superior cost management with which schlott gruppe is now operating in its largest business unit, print.
However, on the back of substantial growth in the first half, schlott gruppe had to contend with a marked decline in earnings in the third quarter. With value-added sales of €73.8 million in the current year, after €80.9 million in the same period a year ago, EBT totalled €3.1 million (Q3 2003/4: €4.7 million).
As reported on July 19, 2005, the decline is attributable mainly to production and thus sales shortfalls as a result of industrial action taken during collective wage negotiations. A new wage and salary deal as well as an industry-wide framework agreement have now been negotiated. Alongside a moderate increase in wages and salaries, industry representatives negotiated a more flexible approach to working hours and initial measures to scale back the very high level of special allowances prevalent in the German printing sector. schlott gruppe will benefit from this package in the future. The short-term negative impact of strikes on schlott gruppe’s third-quarter earnings was around two million euros.
Earnings were also affected by the shift of order volumes as a result of changes to customers’ marketing strategies and associated advertising activities. In addition, competitive pressure on prices remains high and limits growth of value-added sales. schlott gruppe copes with this through intensive cost management and ongoing efficiency expansion. Therefore, the company operates successfully, independent from short-term economic stimulus.
Within the print unit, value-added sales amounted to €196.5 million in the first nine months of the current financial year, thus falling short of the total of €199.6 million posted a year ago. Value-added sales for the third quarter declined from €66.4 million to €60.1 million. EBT was propelled upwards significantly in the first nine months, from €17.6 million a year ago to €21.5 million at the end of June 2005. In a quarterly comparison, EBT fell from €7.5 million last year to €5.0 million in 2005.
Within the direct marketing unit, value-added sales declined from €51.8 million to €47.2 million on a nine-month basis. Compared with the third quarter 2003/4, it fell from €14.5 million last year to €12.9 million this year. The loss before earnings amounted to €4.4 million for the first nine months (9M 2003/4: EBT +€0.4 million) and €2.3 million for the third quarter (Q3 2003/4: -€1.4 million). The extensive measures implemented to improve earnings of the direct marketing unit are now taking effect. The business unit will therefore return to profitability in the fourth quarter of the current financial year.
The reduction of the consolidated EBT in the third quarter was less pronounced than the total of the two business units as costs in the business unit corporate services were kept below budget.
Following substantial earnings in the first half, the fourth quarter is expected to produce within the print unit the traditionally solid capacity utilisation. Thus, the third-quarter shortfall in earnings as a result of strikes will not affect the Group’s overall forecast. schlott gruppe therefore reaffirms its consolidated EBT forecast of €25.6 million for the 2004/5 financial year.
Notes to financial data:
Alongside “revenue/sales”, schlott gruppe uses so-called “value-added sales” as a financial indicator – both in its external communications and as part of its internal controlling mechanisms. Revenue is subject to fluctuations that are attributable to the volume of paper supplied by customers as raw material for certain projects. In contrast to paper purchased directly by the company, paper supplied by customers is not included in the accounts of schlott gruppe. In the 2003/4 financial year, the so-called paper provision ratio was 72.3 per cent. As a financial indicator, “value-added sales” eliminates fluctuations relating to paper supplied by customers, thus reflecting the actual sales performance.
The corporate services business unit, which pools internal service functions, as well as the effects of consolidation must be taken into account when assessing the results of the respective business units in relation to those applicable to the Group.
