Eglisau, Switzerland, Oct. 28--Forbo's business development picked up slightly in the third quarter. Combined with cost-cutting measures this led to somewhat better results compared with the first two quarters of the current business year, but the results of the previous year could not be matched.
Total sales in the first nine months of the business year were CHF 1,204.6 million (+6% compared with the previous year), and the operating profit after depreciation and amortization was CHF 55.6 million (previous year: CHF 74.0 million). In the context of further cost optimization measures, 220 jobs will be reduced by the end of March 2004.
Higher sales, lower operating profit
Forbos's business development picked up slightly in the third quarter. Especially in September there have been encouraging indications. Combined with cost-cutting measures this led to somewhat better results compared with the first two quarters of the current business year, but the results of the previous year could not be matched. This applies for all three businesses.
At CHF 412.8 million, sales decreased slightly in the third quarter, on a comparable basis, by 0.1% or 1.0% at constant exchange rates compared with the third quarter of the previous year.
The operating profit before depreciation and amortization (EBITDA) reached CHF 48.1 million in the third quarter, corresponding with 11.7% of sales. The result after depreciation and amortization is CHF 20.8 million, i.e. the best quarterly result in this year, but still CHF 8.8 million below the previous year's.
The profit decrease is mainly due to difficult market conditions in all the three businesses. Apart from strong price pressure, higher raw material costs and a shift of the product mix towards products with lower margins have contributed to this development which could be countered to some extent in the third quarter.
However, the weak US dollar continues to impair the results, having a negative impact not only on currency translation but also on margins since the Forbo Group is generating a considerable part of its sales in North America and Asia on the basis of exports from the Euro region.
In the first nine months of the business year, total sales of the Forbo Group were CHF 1,204.6 million or 6% higher than in the previous year. The operating profit after depreciation and amortization was CHF 55.6 million (previous year: CHF 74.0 million).
The lower operating profit, higher financing costs as a result of last year's acquisition, and a higher tax rate led to a consolidated profit of CHF 22.6 million which is below the previous year's level.
With a shareholders' equity ratio of some 37%, the balance sheet by the end of the third quarter continues to remain strong; the liquidity could be increased by CHF 29.9 million to CHF 176.7 million through the efficient management of net current assets in the quarter under review.
In the flooring business, encouraging sales growth in France, Southern and Eastern Europe, North America, Japan and China was partly offset by a further decrease in key European markets. As to linoleum, the reluctance of public spending for new buildings and renovation projects is obvious in these markets, e.g. for hospitals, schools and other public buildings.
The reorganization of the flooring business started at the beginning of 2003, leading to similar organizational set-ups of sales companies in the individual countries, resulted in significant cost savings. The erosion of market prices could partly be offset by successful efforts for reducing manufacturing costs and by improved logistics.
