Sapa Group: Year-End Report for 2000
STOCKHOLM, Sweden--Jan. 25, 2001--Strong expansion
* Net sales increased by 26 percent to MSEK 15 395 (12 220)
* Operating profit rose by 13 percent to MSEK 893(1)
* Profit before tax totalled MSEK 705(1) (700)
* Earnings per share were SEK 12.75(2) (13.0)
* Profile operations expand strongly through acquisitions and organic growth in Europe and US
* The Board of Directors propose an increase of dividend by 25 ore to SEK 5.00 per share.
Sapa in brief Oct- Oct- Jan- Jan-
Dec % Dec Dec % Dec
2000 1999 2000 1999
Net sales, MSEK 4 381 +31 3 347 15 395 +26 12 220
Operating profit, MSEK 258 -6 275 893(1) +13 789
Profit before tax, MSEK 193 -24 254 705(1) +1 700
Operating margin, % 5.9 8.2 5.8(1) 6.5
Return on capital employed, 14.1(1) -4% 18.1
%
Return on shareholders' 15.2(1)-3.4% 18.6
equity, %
Debt/equity ratio, % 119 66
1. Excluding capital gain of MGBP 16.6 (about MSEK 230) during Q1 and the surplus funds of about MSEK 100 from SPP during Q2. Including these items operating profit amounted to MSEK 1 224 and profit before tax to MSEK 1 036.
2. Excluding capital gain and SPP funds. Including these items earnings per share were SEK 21.0.
This report is also available on the Sapa website: www.sapagroup.com
STRONG EXPANSION
Full-year 2000
Sapa is continuing to expand within all three business areas and the Group's net sales rose by 26 percent to MSEK 15 395. Out of the increase in net sales, the net of acquired and divested units accounted for around 8 percentage points and increased metal prices for approximately 6 percentage points. Operating profit improved by 13 percent to a total of MSEK 893. Group earnings were charged with substantial start-up and discontinuation costs for Autoplastics and costs related to an approximately 20-percent reduction in personnel at the Profiles company in the UK. Operating profit has also been negatively effected by changes in currency exchange rates, primarily a strong USD and GBP, and a weak Euro.
The operating margin was 5.8 percent, compared with 6.5 percent in 1999. The higher metal prices compared to previous year has increased net sales which had a negative impact on the calculation of the operating margin. Adjusted for the metal price effect and the insurance compensation in 1999, the margin was well in line with last year.
Profiles operations continue to show strong growth, both organically and through acquisitions. Net sales in 2000 amounted to MSEK 8 280 (6 441), an increase of 29 percent, of which the net of acquired and divested units accounted for around 15 percent. Operating profit increased by 18 percent to MSEK 671. Operations in Portugal contributed positively to earnings in 2000. The operations of the US company Anodizing Inc. were in line with expectations. The UK profiles company maintained its market share in a weak market with lower sales prices. Sales in Scandinavia developed favourably in an expanding total market.
Autoplastics reported full-year earnings of MSEK 75, an improvement of 67 percent, in spite of substantial restructuring costs related to the start-up of the newly constructed plants in Belgium and Poland and the closure of plants in Kristinehamn and Olofstrom in Sweden.
Heat Transfer & Foil net sales increased by 26 percent. Operations developed positively, with strong demand and improved production efficiency. Full-year earnings are in line with the preceding year and rose by 30 percent after adjustment for insurance compensation (MSEK +50) in 1999.
Sapa delivered approximately 339 300 (285 500) tonnes of value-added aluminium products during the period, an increase of 19 percent. (For comparable operations, the volume increase was 10 percent). During the same period, the European market for profiles and rolled aluminium rose by around 5 percent.
Profit after tax amounted to MSEK 467 (478), resulting in earnings per share of SEK 12.75 (13.00) and a 15.2 (18.7) percent return on shareholders' equity. The return on capital employed was 14.1 (18.3) percent. The lower return on capital employed was due to the capital turnover rate declining to 2.4 from 2.8, as a result of company acquisitions.
Including nonrecurring gains, profit after tax amounted to MSEK 770, resulting in earnings per share of SEK 21.00 and a 25.0 percent return on shareholders' equity. The return on capital employed was 19.3 percent. Tax costs amounted to 34 (34) percent.
Fourth quarter
Net sales for the fourth quarter rose 31 percent to MSEK 4 381 (3 347). Operating profit declined to MSEK 259 (275), and operating margin was 5.9 (8.2) percent. Sold volumes of value-added aluminium products increased by 26 percent. Operating profit was adversely affected by costs related to personnel reductions in the UK, start-up and closure costs for Autoplastics and higher goodwill amortization.
Profiles operations continued to show a favorable trend of earnings in most markets. Operating profit rose 17 percent to MSEK 189 (162) while the operating margin narrowed to 8.0 percent (9.5).
Heat Transfer & Foil continued its favorable growth, and achieved an operating profit of MSEK 65 (85). The operating margin rose to 6.6 percent compared to 4.8 in 1999 (excluding insurance compensation of MSEK 50).
FINANCING, LIQUIDITY AND SHAREHOLDER'S EQUITY
The Group's debt/equity ratio was 1.19 (1.32 at the beginning of Q4). The debt/equity ratio is well in line with the ambition to reach a maximum of 1.0 at the end of Q2 of 2001. Interest expenses during the year were higher than in 1999 due to the acquisitions of the minority interest in Autoplastics, the Portuguese company Anodil and the US company Anodizing Inc. The interest coverage ratio was 4.1.
Excluding acquisitions and divestments Sapa had a negative cash flow of MSEK -257 in 2000. Cash flow was affected negatively by a continuously high level of investment. Working capital as a percentage of net sales has increased during the year, mainly due to a higher ratio in acquired companies.
During the year, shareholders' equity increased by MSEK 713. Translation differences had a positive effect on shareholders' equity in an amount of approximately MSEK 120.
INVESTMENTS
Group investments (new and replacement investments) during the year was in total MSEK 829 (877), of which MSEK 323 within the Profiles business area, MSEK 254 within Heat Transfer & Foil and MSEK 230 within Autoplastics. Investments in Profiles were dominated by the expenditures on processing machinery at Vetlanda in Sweden, a large new press in Albi, France, and a new powder paint plant in the Netherlands. Heat Transfer & Foil investments were mainly an upgrade of the Finspang rolling mill in Sweden. Autoplastics' investments have been continuously high relating to investment decisions from previous years. Main investments were in Gent, Belgium, in Gothenburg, Sweden, and in Gliwice, Poland, while the remainder was evenly divided.
During the fourth quarter, investments totalled MSEK 330 (275).
FINANCIAL TARGETS
Sapa has established the following financial targets and limits. The table below also shows the results achieved in year 2000.
PERSONNEL
Heat Transfer & Foil
Net sales totalled MSEK 3 569 (2 828), up by 26 percent. Operating profit amounted to MSEK 201 (204), corresponding to an operating margin of 5.6 (7.2) percent. The operating margin in 1999 excluding insurance compensation gain of +MSEK 50 was 5.4 percent.
During the fourth quarter, net sales rose by 37 percent to MSEK 996. The operating profit reached 65 (85) MSEK, equal to an operating margin of 6.6 percent (11.8). The operating result in 1999 included an insurance compensation gain of MSEK 50. The operating margin was 4.8 percent if this item is excluded. The good profitability is a result of strong demand, an improved product mix and increased efficiency.
Demand for the business area's products was very favourable and a total of 117 700 (108,300) tonnes of aluminium strip and foil were delivered during the year. Heat Transfer continues to show strong growth, with a 17 percent rise during 2000, +8 percent in Q4. The heat exchange plant in Shanghai reached break-even during the fourth quarter of 2000. The foil business had total volumes which remained unchanged in 2000, but growth by +38 percent in Q4 due to favourable market demand and the restart of the rolling mill in Skultuna, Sweden.
In July, Sapa acquired an additional 20.27 percent holding in Granges (Shanghai) Aluminium Ltd through the purchase of shares from the minority owner Shenjia Aluminium. As a result, Sapa now has a 95.95 percent holding in the Shanghai company.
In February 2000, an agreement was signed with the German group VAW regarding the divestment of Eurofoil. The agreement was subject to the approval of the competition authorities concerned. The necessary approvals were obtained from the authorities in Sweden, Italy, Austria and the US. In June, however, it became clear that the German competition authority was unlikely to approve the VAW application and Sapa and VAW agreed that VAW should withdraw its application.
Accordingly, the agreement between Sapa and VAW was cancelled.
The three-year investment program at the Heat Transfer rolling mill in Finspang, which was approved by the Sapa Board at the end of 1999, proceeded as planned. Important measures were already implemented in 2000, which resulted in more efficient production and improved utilization of the raw material. The effects of these measures were mainly achieved during the fourth quarter. Through to the end of December 2000, MSEK 134 of the total amount of MSEK 260 had been invested.
The Eurofoil plant in Skultuna, which was partially damaged by fire in September 1999, was restarted during the year. By year-end, the plant had regained the same production rate in force prior to the fire.
Autoplastics
Sales volumes for plastic components and systems for the automotive industry developed strongly during the year. Net sales for the business area rose by 21 percent to MSEK 3 376 (2 793), with merged operations from Norsk Hydro accounting for approximately half of the increase.
Operating profit for the full year improved to MSEK 75 (45), and the operating margin for the year was 2.2 (1.6) percent. During the year, Autoplastics' earnings were affected by start-up and restructuring costs attributable to the new plants in Belgium and Poland, and costs related to the closure of the plants in Olofstrom and Kristinehamn in Sweden. Operating profit for the fourth quarter amounted to MSEK 10 (29), corresponding to an operating margin of 1.0 (3.3) percent. On July 1, 2000, Sapa acquired Norsk Hydro ASA's shares in Sapa Autoplastics. Accordingly, Sapa Autoplastics, which had been 60-percent owned by Sapa and 40-percent owned by Norsk Hydro since May 1999, became a wholly owned Sapa subsidiary. The transaction was based on the valuation principles established when the jointly owned company was formed. The motive for the acquisition was to create freedom of action for Sapa to participate in the future restructuring of the automotive plastics industry.
During the year, the restructuring of Sapa Autoplastics has continued. The closures of the production units in Olofstrom (door panels) and Kristinehamn (production of bumpers using RIM technology and painting) were concluded.
The new injection molding and paint plant in Gent, Belgium, was commissioned during the second half of 2000. Problems with the production equipment were encountered during the start-up phase, which led to substantial costs. The trimming-in activities are not expected to be completed until the first quarter of 2001. The plant primarily produces bumpers for the Volvo S60. The total investment amounts to MSEK 275, of which MSEK 60 was expended in 2000.
A RIM technology-based line for the production and painting of bumpers was installed at the Sapa Autoplastics plant in Gothenburg, Sweden. The RIM equipment was transferred from the Sapa Autoplastics' production line in Kristinehamn, which has now been shut down, while MSEK 21 was invested in a new paint plant. The Gothenburg unit batch produces bumpers for special Saab models, among other vehicles.
Outlook for 2001
For 2001 the European organisation EAA predicts a continued growth in consumption of aluminium based products, however at a lower rate than in 2000. Demand from the engineering and construction related sectors is most favourable, while the demand from the automotive sector is predicted to stagnate.
Dividend proposal
The Board of Directors of Sapa AB have decided to propose to the Annual General Meeting a dividend for 2000 of SEK 5.00 (4.75) per share, equal to a total of MSEK 183.1 (173.9).
Sapa AB (publ) Stockholm January 25, 2001
STAFFAN BOHMAN President and Chief Executive Officer
Appendices: Summary of Consolidated Income Statements Summary of Consolidated Balance sheets Summary of Key Figures Financial Information by Business Area Consolidated Cash Flow FINANCIAL REPORTING DATES 2001 Annual General Meeting 2001 April 6, at 3 pm Interim Report Jan-March May 2 Interim Report Jan-June July 20 Interim Report Jan-Sept October 24
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