Pergo Posts Nine Month Results

Trelleborg, Sweden, October 22—Pergo, reported it results of the first nine months of 2004. Sales during the nine month period amounted to SEK 2,098 M (US$291.6M) (2,067), an increase of 8% compared with the year earlier period after adjustment for currency effects. Sales in the North American market rose 9% in local currency, which was due mainly to increased sales to Lowe’s. In Europe, sales rose by 5%, adjusted for currency effects. Sales during the third quarter amounted to SEK 681 M (US$94.6M) (723). Excluding currency effects, this was a decline of 1%. While sales continued to increase in Europe, sales declined in North America due mainly to the previously announced reduction of Pergo’s store space at The Home Depot. An operating loss of SEK 207 M (US$28.8M)(loss: 141) was reported for the nine-month period. Excluding items affecting comparability, operating profit of SEK 46 M (23) was reported. These items mainly consisted of SEK 250 M for the restructuring in Europe. The operating loss for 2003 was adjusted in a corresponding manner primarily for Witex related items amounting to an expense of SEK 168 M. For the third quarter, operating profit amounted to SEK 15 M (18). While Europe reports improved operating profit compared with a year earlier, results from North America were lower than in the preceding year. Earnings were affected adversely by a weaker product mix, due among other factors to the loss of Pergo’s premium product PERGOProdigy at The Home Depot, and market investments. Compared with the corresponding period of the preceding year, currency movements had a negative impact of about SEK 28 M on earnings. North America Sales in North America amounted to SEK 1,256 M (US$174,6M)(1,266) during the nine-month period, 9% higher than the year-earlier period, excluding currency effects. The growth in sales was primarily a consequence of increased sales to Lowe’s. Sales in the third quarter amounted to SEK 400 M (US$55.6M)(455), corresponding to a decline of 4% excluding currency effects. The decline was due mainly to the previously announced reduction of Pergo’s store space at the Home Depot. Sales to the specialty segment were lower during the quarter compared with the corresponding period previous year. The cooperation with Lowe’s was further strengthened through the launch of PERGO Hardwood (wood flooring). PERGOHardwood has initially been launched in 75 of Lowe’s 950 stores. Operating profit in North America for the nine-month period amounted to SEK 47 M (69). The lower earnings were attributable entirely to the third quarter. The decline was due to lower margins on sales, both to The Home Depot and the specialty segment, as well as market investments in conjunction with the launch of new products and to strengthen the company’s position in the specialty segment. Europe Sales in Europe during the nine-month period amounted to SEK 750 M (716), an increase of 5% excluding currency effects. The sales increase was due primarily to increased sales of premium products and an expanded product range in the medium-price segment. The operating margin and operating profit have improved continually in Europe. Excluding items affecting comparability the operating profit for the nine-month period was SEK 41 M, an increase of 46% compared with the year earlier period. Product supply and investments In preparation for the autumn campaign at The Home Depot, the capacity utilization has been high at the plant in Garner, North Carolina. Due to the customer’s changed purchasing routines, the sell-in of the campaign was delayed, which resulted in a substantial build-up of inventory during the period. In Europe, the focus continued to be on concentrating the European production to Trelleborg. The restructuring project is proceeding according to plan.