Pergo Reports 4th Quarter and Year-End Results

Trelleborg, Sweden, Feb. 9--Pergo issued its year-end report for the 12 months ended December 31. (All figures in parentheses refer to the same period in the year before) Sales during the year amounted to SEK 2,799M (3,194), unchanged from 2002, excluding currency effects. In the North American market, sales increased 5%, excluding currency effects. Sales to Lowe’s, increased during the year, compensating for a decline in sales to The Home Depot and to the specialty segment. In Europe, sales declined 7%, excluding currency effects, primarily due to the phasing-out of low-price products during 2002. Fourth quarter sales amounted to SEK 732M (730), an increase of 14%. This increase was largely attributable to continued sales growth in North America. The gross margin for the year was 22%, which was on line with the preceding year. The completed action program, which included measures to reduce costs and improve margins, had a positive effect on margins, while a write-down of SEK 22M of a production line at the Garner plant in the fourth quarter had a negative impact. This also explains the fourth quarter’s gross marginal decrease of 1% to 21% compared to the same period a year ago. Despite the 7% decrease in volume and significantly lower US-dollar, the firm’s operating profit in the USA and Europe improved, mostly through cost reductions. The operating profit during the fourth quarter amounted to SEK 17M (33), excluding SEK 22M due to the write-down of the production line at the Garner plant. The write-down was made as part of the current review of the Group’s production facilities. Operating profit, amounted to a loss of SEK 146M (profit: 61). Items affecting comparability amounting to an expense of SEK 150M included costs related to Witex and the recovery of a customer receivable of SEK 4M that had previously been written down. In connection with Witex being placed in preliminary bankruptcy proceedings at its own request during the second quarter of the year, the entire value of Pergo’s shareholdings in Witex was written down. Including the participation in earnings and costs incurred during the acquisition process Witex-related items reduced Pergo’s earnings during the year by SEK 168M (-7). The effect on earnings of hedging during the year amounted to SEK 6M up to the end of April. The company has not subsequently entered into any forward contracts. Sales in North America amounted to SEK 1,728M (1,989). Excluding currency effects, this represents an increase of 5% compared with the preceding year. Sales to Lowe’s offset a decline in sales to The Home Depot and the specialty segment. The fourth quarter was the strongest quarter of 2003 in terms of sales. Fourth quarter sales amounted to SEK 462M (449), an increase of 22%, excluding currency effects, compared with a year earlier. Here too, sales to Lowe’s more than offset the decline in sales to The Home Depot. Following a successful launch of a selection of Pergo products at Lowe’s during the summer, sales rose during the remainder of the year. Sales to The Home Depot during 2003 were lower than in the preceding year. The decline is mainly attributable to The Home Depot’s sell-out of excess competitor inventory during the first quarter, lower accessory sales, the absence of a summer campaign similar to the one conducted in 2002 and reduced prices. The lower level of sales during the fourth quarter, compared with the year-earlier period, was due to lower sales of accessories and flooring. During 2004, space allocated for Pergo’s products will be reduced as The Home Depot will bring in yet another of their own licensed brands in their stores.