Pfleiderer Posts Loss on Lower Margins

Neumarkt, Germany, May 7, 2010--Pfleiderer AG, parent company of Pergo, said it generated first-quarter revenue of 355.6 million euros, which is very close to the 358.0 million euros of the prior-year period.

However, profits suffered as the cost of raw materials rose and Pfleiderer sold lower cost engineered wood products.

Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased from 52.7 million euros in the prior-year period to 22.2 million euros in the first quarter of 2010.

The result of continuing operations after taxes amounted to a loss of 16.4 million euros, compared with a profit of 4.0 million euros in the prior-year quarter.

Basic loss per share of 35 euro cents, compared with 0 euro cents profit/loss in the first quarter of 2009.

The proportion of revenue generated outside Germany was 70.9%, compared with 70.6% in the first quarter of last year.

Increasing demand and better capacity utilization led to the price of one cubic meter of raw particleboard rising from its low of approximately 90 euros in summer 2009 to around 135 euros for new orders placed in April 2010.

Gross profit of 74.4 million euros (Q1 2009: 102.6 million euros) was affected mostly by the increase in raw-material prices compared to the prior-year period, especially for wood and chemicals.

For example, wood prices increased year-over-year by 10 to 30%, depending on location and type of wood, and prices of chemical products were about 10% higher than a year earlier.

Increases in the prices of raw materials resulted in a total additional expense of 23 million euros. In combination with the lower sales prices for engineered-wood products, this led to a reduction in the gross margin from 28.7% in the first quarter of 2009 to 20.9% in the period under review.

“Developments in the first three months of the year 2010 show that we are still some distance away from so-called normality. But meanwhile, they also give us good reason for cautious optimism. We are now in a situation of a significant revival of demand, leading to good or very good capacity utilization. This allows us to adjust our prices,” said Chairman Hans H. Overdiek.

Business with home-improvement stores and wholesalers was positive with increased demand for renovation products. The project business also developed better than in recent months.

In the North America region, revenue fell by 9.0% compared with the prior-year period to 95.1 million euros. Currency translation boosted revenue by 3.9 million euros. Demand for panels increased slightly with some supply shortages, especially for MDF, and rising prices. Despite this recent revival, prices of particleboard and MDF were approximately 7% lower than a year earlier.

Demand in Canada developed better than in the United States. With laminate flooring, the trend towards low-price products increased while prices continued to fall across all market segments. The Pfleiderer Group was also affected by this development; the less favorable product mix and falling prices led to a significant decrease in revenue.