Business News
Hadera Paper Ltd. Reports Financial Results For Third Quarter and Nine Months
Tuesday 11. November 2008 - Hadera Paper Ltd. (AMEX:AIP) (the "Company" or "Hadera Paper") today reported financial results for the third quarter and first nine months ended September 30, 2008. The Company, its subsidiaries and associated companies - is referred to hereinafter as the "Group".
Since the Company’s share in the earnings of associated companies constitutes a material component in the company’s statement of income (primarily on account of its share in the earnings of Mondi Hadera Paper Ltd. (“Mondi Hadera”) and Hogla-Kimberly Ltd.(“H-K”), before the presentation of the consolidated data below, the aggregate data which include the results of all the companies in the Hadera Paper Group (including the associated companies whose results appear in the financial statements under “earnings from associated companies”) is being presented, without considering the rate of holding therein and net of mutual sales.
As a result of the transition to reporting according to International Financial Reporting Standards (IFRS), the Company presented its financial statements for the reported period, as well as the comparison figures for the corresponding period last year and for the year ended December 31, 2007 according to IFRS
Aggregate sales amounted to NIS 2,442.5 million during the reported period (nine month period- January-September 2008), as compared with NIS 2,298.2 million in the corresponding period last year.
Aggregate sales in the third quarter this year amounted to NIS 823.9 million, as compared with NIS 805.5 million in the corresponding period last year, and as compared with NIS 771.0 million in the second quarter of the year.
Aggregate operating profit totaled NIS 160.5 million during the reported period, as compared with NIS 129.7 million in the corresponding period last year. The significant improvement in the aggregate operating profit is attributed to the performance improvement at some of the Israeli companies on the one hand, coupled with the continuing trend of a lower operating loss in Turkey on the other hand.
Aggregate operating profit totaled NIS 49.2 million in the third quarter of the year, as compared with NIS 59.6 million in the corresponding quarter last year, and as compared with NIS 51.5 million in the second quarter of the year.
The Consolidated Data set forth below excluding the results of operation of the associated companies: Mondi Hadera, H-K. Consolidated Data include the sales turnover of Carmel Containers Systems Ltd. (“Carmel”) and Frenkel- C.D. Ltd. (“Frenkel- C.D.”) that were consolidated as of September 2008 due to the completion of transaction for the acquisition of Carmel shares.
Consolidated sales during the reported period amounted to NIS 447.2 million, as compared with approximately NIS 428.8 million in the corresponding period last year.
Operating profit totaled NIS 38.0 million during the reported period, as compared with NIS 53.0 million in the corresponding period last year. Most of the erosion in profit is attributed to the change in the dollar exchange rate that negatively influenced the selling prices in the packaging paper and recycling activity.
The net profit attributed to the Company’s shareholders totaled NIS 59.5 million during the reported period, as compared with net profit attributed to the Company’s shareholders of NIS 14.0 million in the corresponding period last year. The net profit was affected by the improvement in the Group’s profitability in Israel, from recording profit from the allocation of excess negative cost as a result of the acquisition of Carmel and Frenkel CD – whose net impact on the net income allocated to the Company’s shareholders amounted to NIS 11.7 million coupled with the significant reduction of the Company’s share in the losses of the operations in Turkey (KCTR).
The net profit attributed to the Company’s shareholders for the third quarter this year amounted to NIS 20.2 million, as compared with a net profit attributed to the Company’s shareholders of NIS 7.7 million in the corresponding quarter last year. The net profit attributed to the Company’s shareholders in the third quarter last year appears net of our share (49.9%) in the amortization of the tax asset in Turkey (KCTR) in the sum of NIS 7.4 million.
Basic earnings per share amounted to NIS 11.75 per share ($3.44 per share) in the reported period, as compared with NIS 3.47 per share ($0.87 per share) in the corresponding period last year.
Basic earnings per share attributed to the Company’s shareholders amounted to NIS 3.99 per share ($1.17 per share) in the third quarter of the year, as compared with earnings of NIS 1.90 per share ($0.47 per share) in the corresponding quarter last year.
The inflation rate during the reported period amounted to 4.4%, as compared with an inflation rate of 2.3% in the corresponding period last year.
Mr. Avi Brener, Chief Executive Officer of the Company said that “Due to the surplus manufacturing capacity, the import volumes of fine paper and packaging paper from Europe in dumping prices, have recently grown and the company is working to preserve its market share and quantitative sales, that as a result causing to certain erosion of gross margins. The sharp change in the currency exchange rates that took place in the reported period – as the shekel grew stronger vis-a-vis the US dollar and the euro – is working in the benefit of the Company in terms of the imported inputs, while also eroding the selling prices in those areas whose prices are denominated in US dollars. The whole business of the Hadera Paper Group – including the associated companies – is relatively balanced and the company’s exposure to sharp fluctuations in exchange rates is therefore low”.
In the reported period, KCTR continued to implement its strategic plan formulated together with the international partner, Kimberly Clark.
Financial expenses during the reported period amounted to NIS 11.9 million, as compared with NIS 19.8 million in the corresponding period last year.
The company’s share in the earnings (losses) of associated companies totaled NIS 36.6 million during the reported period, as compared with a loss of NIS (7.0) million in the corresponding period last year.
The following principal changes were recorded in the Company’s share in the earnings of associated companies, in relation to the corresponding period last year:
– The Company’s share in the net profit of Mondi Hadera (49.9%) increased by approximately NIS 1.8 million. Most of the change in profit originated primarily from Mondi’s highly improved operation profit, which recorded an increase from operating profit of NIS 25.9 million last year to an operating profit of NIS 27.4 million this year
– primarily as a result of the raising of quantitative sales, the operating efficiency and the decrease in energy prices as a result of the transition to the use of netural gas at the Hadera site. The net profit also increased as a result of the decrease in financial expenses this year in relation to last year, primarily on account of the impact of the revaluation of the NIS against the dollar.
– The company’s share in the net earnings of Hogla-Kimberly Israel (49.9%) increased by approximately NIS 10.9 million. Hogla’s Operating profit grew from NIS 100.9 million to NIS 126.6 million this year. The improved operating profit originated from a quantitative increase in sales, improved selling prices net of the impact of higher raw material prices, the continuing implementation of efficiency measures and the continuing trend of raising the proportion of some of the premium products out of the products basket and from currency exchange rates causing to decrease Company’s expenses that are mostly dollar dominated.
The Company’s share in the losses of KCTR Turkey (49.9%) was reduced by NIS 39.9 million. The significant reduction in loss originated primarily from to the growth in the volume of operations that resulted in a significant reduction in the operating loss, from NIS 61.2 million last year to approximately NIS 29.4 million this year. In the corresponding period last year, a non-recurring loss of approximately NIS 6 million ($1.5 million) was included on account of the termination of trade agreements with distributors due to the transition to distribution by Unilever, of which our share was approximately NIS 3 million. Moreover, the tax asset that was recorded in previous years in Turkey, in the sum of approximately NIS 26.8 million (approximately $6.4 million) was reduced, of which our share is NIS 13.4 million. Moreover, due to the increase in the shareholders’ equity of KCTR through a financial influx from Hogla Kimberly, the bank loans were repaid, while significantly reducing the financial expenses, thereby leading to an additional reduction in the net loss.
– The Company’s share in the loss of Carmel (36.21% as at August 31, 2008 – the date of consolidation), increased by NIS 4.8 million. This increase is attributed to the sharp erosion in the operating margin as a result of lower demand for packaging due to the slowdown in industrial exports on account of the erosion of currency exchange rates vis-a-vis the NIS, coupled with the damages of the cold spell in the agricultural sector. On the other hand, the prices of imported raw materials did not decrease in NIS terms, due to hedging transactions on the exchange rate.
On July 1, 2008, pursuant to approval by the Registrar of Companies, the Company changed its name from American Israeli Paper Mills Ltd. to Hadera Paper Ltd.
Pursuant to the shelf prospectus published by the Company on May 26, , the Company completed the offering – on July 16, 2008 – of two debenture series in the total sum of NIS 308,060 thousands. Net of offering expenses, the Company received net proceeds of approximately NIS 306, 609 thousands. On August 17, 2008 the Company raised in an additional offering a total of NIS 120,000 thousand in return for that allocation of NIS 114,997 thousand par value in bonds (Series 4). Net of issuance expenses, the Company received net proceeds amounting to NIS 119,826 thousand. The Company raised from the two offerings a net proceeds amounting to approximately NIS 426,435 thousand.
Following Company’s request to raise an additional amount by a shelf offering of debentures in the total amount of NIS 400 million, on July 6, 2008, the Maalot Rating Company (Standard and Poor’s) announced a rating of AA- with Negative Outlook for the Company’s debenture series (Series 3 and Series 4), that applies also to the rest of the Company’s debenture series. On August 14, 2008, Maalot clarified that the rating also applies to an overall issuance of up to NIS 426 million.
On November 3, 2008, the Company’s General Meeting approved the lease agreement signed on September 18, 2008 between the Company and Gav-Yam Land Ltd. (“the lessor”), a public company controlled by the Company’s indirect controlling shareholders, whereby the Company would lease a plot in Modi’in with an area of 74,500 square meters, as well as buildings to be constructed by the lessor for the Company, with a total constructed area of 21,300 square meters, to serve as a logistics center, industrial and office space for the Company’s subsidiaries and associated companies, which would – in part – replace existing lease agreements. The Leasing Period shall be 15 years from the date of receiving possession of the Leased Property. The Company will also hold an option to extend the lease by an additional 9 years and 11 months.
On August 24, 2008, a transaction was completed for the acquisition of shares of Carmel Container Systems Ltd. (“Carmel”), pursuant to an agreement signed on July 10, 2008, whereby the Company acquired the shares of Carmel held by Robert Kraft, the principal shareholder in Carmel, as well as those of several other shareholders, in consideration of a total of $20.77 million, paid in a single installment upon closing of the transaction. The shares were acquired “As Is”. The transaction was concluded after receiving approval from the Antitrust Supervisor, which was a pre-condition for conclusion of the transaction.
Upon conclusion of the transaction, the company holds approximately 89.3% of Carmel shares and as of the transaction closing date, the financial statements of Carmel and those of Frenkel-CD have been consolidated with the Company’s financial statements.
This report contains various forward-looking statements based upon the Board of Directors’ present expectations and estimates regarding the operations and plans of the Group and its business environment. The Company does not guarantee that the future results of operations will coincide with the forward-looking statements and these may in fact differ considerably from the present forecasts as a result of factors that may change in the future, such as changes in costs and market conditions, failure to achieve projected goals, failure to achieve anticipated efficiencies and other factors which lie outside the control of the Company as well as certain other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation for publicly updating the said forward-looking statements, regardless of whether these updates originate from new information, future events or any other reason.