- VAS rises marginally yoy due to acquisition of biegelaar
- EBT in gravure printing undermined by price erosion; other segments remain on track
- Successful sale of meiller not yet reflected in quarterly results – transaction to be closed by July 31, 2007
- EBT forecast for 2006/7 reaffirmed
Freudenstadt, July 25, 2007. schlott gruppe today announces its preliminary 2006/7 results for the third quarter and the first nine months ended June 30.
In the third quarter business performance within the print segment was impacted above all by seasonal factors: April and May are traditionally considered relatively weak, thus producing below-average capacity utilisation within the industry as a whole. Additionally, collective wage negotiations in May were again accompanied by strikes. In parallel, the company's print segment is having to contend with an ongoing erosion of prices, induced to a large extent by overcapacities within the gravure printing industry. Thus, performance has been adversely affected by price discounts offered in response to market pressure in recent weeks and months.schlott gruppe is currently in negotiations with representatives of its works council and the trade union, the objective being to conclude an agreement on far-reaching reductions to its cost base. At the same time, the company has already initiated measures to streamline its operations and bring its cost structures in line with current market prices. One of these measures currently being implemented includes outsourcing internal logistics at three of schlott gruppe's German gravure printing sites.
Among the key events of the reporting period was the successful disposal of the company's direct marketing unit. As reported, the segment was sold to the Austrian postal operator Österreichische Post AG in May 2007. Thus, schlott gruppe succeeded in executing the sale of its direct marketing business in line with corporate planning announced at the end of January. In doing so, the company has managed to realise hidden reserves, scale back bank borrowings by a considerable margin and unlock management capacities. These resources are to be used for the purpose of gaining additional momentum in the European printing market and thus further extending schlott gruppe's premier position.
In view of the fact that full cartel office approval for the final execution of the transaction was still pending at the end of the quarter, the direct marketing unit disposed of by schlott gruppe will be accounted for as a discontinued operation, in accordance with IFRS 5, in the interim report for the third quarter and the first nine months of 2006/7; the prior-year figures have been adjusted accordingly. The contracting parties received official authorisation after the reporting period, and therefore the transaction will be closed on July 31, 2007.
As reflected in the interim report, the third quarter and the first nine months were buoyed by the inclusion of biegelaar, the recently acquired entity initially consolidated in November 2006.
Value-added sales (VAS) for schlott gruppe amounted to €56.4 million in the third quarter, which is comparable to last year's figure of €54.7 million. Revenue totalled €105.2 million, compared with €88.6 million in the same period a year ago. Against the backdrop of continuing weakness within the area of gravure printing, the loss before taxes amounted to €3.6 million, after a profit of €3.4 million in the previous year. The net loss for the period from continued operations stood at €2,1 million, compared with a net profit of €3,1 million in the same period a year ago. The discontinued direct marketing segment contributed a net profit of €0,3 million, after a net loss of €2,4 million in the third quarter of 2005/6.
In the first nine months VAS totalled €186.4 million, compared with €177.3 million a year ago, while revenue amounted to €350.1 million, after €301.1 million in the first nine months of 2005/6. EBT was €4.3 million, compared with €15.4 million. Due to the statutory capitalisation of corporation tax credits in the amount of €5.0 million in the first quarter of the current financial year, net profit from continuing operations totalled €7.9 million for the first nine months, in contrast to €11.4 million in the same period a year ago. The discontinued direct marketing segment generated a net profit of €1.1 million in the first nine months, compared with a net loss of €3.9 million a year ago, thus raising its profitability levels in line with the company's expectations. Overall, net profit for the first nine months stood at €9.0 million, compared with €7.5 million for the prior-year period.
As outlined on previous occasions, schlott gruppe's current sluggish earnings performance is attributable solely to the gravure printing activities within the print division, while the company's offset printing operations and postpress activities remain encouraging and continue to develop in line with forecasts. Overall, third-quarter VAS in the print segment amounted to €55.3 million, after €53.7 million in Q3 2005/6, while EBT totalled minus €2.7 million, compared with plus €4.4 million a year ago. In the first nine months of the current financial year, VAS was €183.2 million, compared with €174.1 million. EBT stood at €7.1 million, as opposed to €18.2 million in the first nine months of 2005/6.
In the corporate services segment the loss before taxes was €0.2 million in the third quarter, compared with a loss before taxes of €0.8 million in the same period a year ago. The loss before taxes for the first nine months stood at €1.8 million, after €2.4 million a year ago.
The book gain achieved by schlott gruppe from the disposal of its direct marketing unit was in line with the company's expectations. As a result, schlott gruppe has reaffirmed its annual EBT forecast of approx. €23 million for the current financial year – adjusted for earnings attributable to the direct marketing unit.
Future earnings performance will be dependent to a large extent on the company's ability to align its operating costs quickly and decisively with the lasting changed pricing structures within the market as a whole. Within this context, there are several options open to the company, and schlott gruppe is currently negotiating possible measures with its employees and their representatives. The Management Board is looking to reach an agreement on a catalogue of measures aimed at securing a strong competitive position for schlott gruppe, thus allowing the company to leverage its technical and strategic expertise. The company also remains committed to shaping the process of consolidation within the European gravure printing market.
Notes to financial data:
Alongside "revenue/sales", schlott gruppe uses so-called "value-added sales" (VAS) 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 2005/6 financial year, the so-called paper provision ratio stood at 79.9 per cent. As a financial indicator, "value-added sales" eliminates fluctuations relating to paper supplied by customers, thus reflecting the actual sales performance.
