Pergo Down In First Half

Trelleborg, Sweden, July, 21--Pergo AB said Monday that the net sales for the first half of the year amounted to SEK1.344 billion compared to SEK1.740 billion for the same period last year. The operating loss for the first half of the year amounted to SEK159 million compared to a profit of SEK13 million in 2002. The company's net loss after tax amounted to SEK153 million compared to a profit of SEK3 million in the previous year. Sales in North America amounted to SEK811 million compared to SEK1.093 billion in 2002. The decline, is largely a result of price reductions initiated in 2002, which are now having their full impact. The market for laminate flooring is estimated to have had modest growth in a generally soft market for flooring products. The growth was achieved mainly in the low price segment by aggressive price promotion and a zero-percent financing program. The Specialty Retail segment is estimated to have had modest declines in volume. A number of competitors who largely depend on imported material from Europe need to compensate for the effects of the weakened U.S. dollar versus the Euro. Sales to The Home Depot in the first six months were lower than the comparable period last year. The decrease is attributable to The Home Depots sell-out of competitors' excess inventory during the first quarter, lower accessory sales, the absence of a summer campaign like the one carried out last year, and reduced pricing. During the spring, one of Pergo's distributors went bankrupt and is undergoing liquidation. This has had a negative effect of SEK17 million. The bankruptcy has caused market disruption and has had an impact on sales. Pergo has established new distributor relationships. The phasing-in of the new distributors is ongoing. During the first quarter, Pergo launched its own product range at Lowes. The products were introduced in more than two thirds of Lowes total number of stores. During the second quarter, sales were lower than the first quarter, due to the fact that the major launch is now complete. Lowes retail sales from their initial launch have continued to increase on a weekly basis, indicating that the products have been well received in the market. The launch will be carried through in an additional 50 stores during June and July with another 150 by fall. In the second quarter, Pergo relaunched a large portion of its range with the so called Compact Soundbloc, which is a preglued sound-absorption underlayment. Due to the usual readjustment of customer inventories, sales declined somewhat compared with the first quarter of this year. Lower sales volumes in North America affected both the plant in Garner and the laminate plant in Perstorp. During the interim period, two further additions to Pergo's product range progressed to full-scale production: In Garner, Select was the last product to make the transition to click joint; in Trelleborg, Compact Soundbloc was introduced in large portions of the European range, for instance Pergo Naturaltouch.