Pergo Reports 2Q Results, Accelerates Improvement

Trelleborg, Sweden, July 22--Pergo reported net sales for the second quarter of 2005 of SEK 717 million ($92.2M) up from the SEK 671 million ($86.3M) reported in the year ago period. Operating profit for the first six months was SEK 20 million ($2.6M), compared with a loss of SEK 222 million (-$28.5M) last year. Excluding items affecting comparability, last year's result was SEK 31 million ($4M). Profit after taxes for the period was SEK 15 million ($1.93M )verses a loss of SEK 222 million($28.5M) last year, earnings per share (EPS) for the period were SEK 0.27 ($0.03), compared with a loss of SEK 4.17 ($0.54) reported in the year ago period. Cash flow from ongoing operations during the period was SEK -90 million ($11.6M) compared with SEK12 million ($1.5M) last year. Cash flow for Q2 amounted to SEK -23 million ($2.96M) verses SEK103 ($13.2M). In April, Tony Sturrus was named to the position of President and CEO in April. Also in April, at the Annual General Meeting, a resolution was adopted to implement a stock option scheme for senior management. Since the close of the second quarter the company said an action plan to improve profitability in the European operation will be initiated. Management has identified annualized savings of approximately SEK 100 million to be realized in 2006 within corporate overhead, improvement of productivity and the creation of global synergies in purchasing, information technology, product development and design. The Board of Pergo has approved the management's recommendation to hasten the restructuring of its European operations. After having recently completed the consolidation of its manufacturing facilities in Sweden, the company will now look to further optimize its cost structure. The program will focus on reducing corporate and fixed overheads, improve productivity and create global synergies in purchasing, information technology as well as product design and development. The changes planned in the business model will produce approximately SEK 100 million in annualized savings. The impact of these actions will be fully realized in 2006. Additional costs associated with the improvement program will be absorbed in the company's current operating outlook and are not expected to have any material effect on 2005 anticipated results. "The right sizing of the European business model," says Tony Sturrus, CEO of Pergo AB, "is consistent with the commitment to improve competitiveness and financial performance. It will enable us to move more quickly and drive to achieve our targets of 8% profitability and 20% return on Capital Employed." The Board has decided to hold an extraordinary general meeting on August 17 to discuss the earlier agreed upon stock option scheme. Commenting on the results for the quarter Sturrus said, "The modest loss in the second quarter is mainly attributable to one-time, non-operating costs. The operating business units are profitable and fundamentally sound. We remain confident that our previous statement to significantly improve our result during the latter part of 2005 will be achieved. Also our operating cash flow will substantially strengthen throughout the rest of the year as our capital investment program is nearly complete." Surrus added, "With the action plan in Europe, together with increased focus on global synergies and growth in North America, we believe our year-over-year result will show significant improvements going forward."