STOCKHOLM, Sweden, May 16, 2003 (PRIMEZONE) -- The Annual General Meeting of Nefab AB shareholders was held on May 16, 2003.
Dividend
The Annual General Meeting approved the Board of Directors' proposal that a dividend of SEK 2.80 per share be paid to shareholders. This amount is unchanged compared with the preceding year. May 21, 2003 was set as the record date and the dividend is expected to be distributed via VPC on May 26, 2003.
Board of Directors
Ing-Marie Nordgren, Jochum Pihl, Bjorn Svedberg, Hans Nilsson, Reinhold Geijer, Hans Narfstrom and Lars-Ake Rydh were all re-elected as members of the Board for the next fiscal year.
Auditors
As auditors for the next four years, Bo Magnusson was elected as auditor and Linus Brandt as deputy auditor.
Financial reports Interim report for January-June 2003 August 12, 2003 Interim report for January-September 2003 October 29, 2003 Year-end report for 2003 February 11, 2004
For further information, contact President and CEO Lars-Ake Rydh, tel. +46-70-592 45 70, e-mail lars-ake.rydh@nefab.se, or CFO Anna Stalenbring, tel +46-70-814 23 44, e-mail anna.stalenbring@nefab.se
Alfta, May 16, 2003 Lars-Ake Rydh President and CEO
Appendix: President's address at the Annual General Meeting
Information about Nefab
Nefab delivers complete packaging solutions to international industrial groups, primarily within the telecom equipment and automotive industries. Nefab has its own companies in Europe, North and South America and Asia. Invoiced sales in 2002 amounted to slightly above SEK 1 B. The Nefab share is listed on Stockholmsborsen.
Nefab AB (publ)
Ostra Storgatan 20 . P O Box 2184 . SE-550 02 Jonkoping . Sweden Telephone +46(0)36-345050 . Telefax +46(0)36-150444 . Organization No. 556226-8143 Homepage: www.nefab.com . E-mail: info@nefab.se The registered office of the board of directors is in Ovanaker, Sweden
CEO's address at Nefab's 2003 Annual General Meeting
Mr. Chairman, shareholders, meeting participants!
Today marks the seventh time Nefab has held an Annual General Meeting since we were listed on the stock exchange in 1996. The number of participants this year is fewer than we have grown accustomed to, and I believe the gloomy stock market climate is being reflected in this way, or perhaps it is the choice of a weekday for the meeting. Nefab as a company is more exciting today than ever before and, as such, should attract many more participants.
As in prior years, the meeting is being held here in Halsingland. Nefab is becoming an increasingly global company. We are represented today in 35 countries, and our globality is becoming an increasingly important competitive factor. The plant here in Alfta has been forced to make substantial cutbacks in operations in recent years. Despite the cutbacks, however, the Alfta unit is the heart of this global Nefab structure. A very substantial part of our expertise remains here and, above all, an important part of the company's soul.
RIGHT CHOICE
Let me review the past year. When the guidelines for 2002 were formulated, we believed there would some recovery in demand. Many market factors indicated this would be the case. We decided, however, to plan our business activities so that Nefab would be able to generate a reasonable level of earnings and strong cash flow even if demand was lower. This somewhat cautious plan proved to be a wise choice.
The telecom equipment industry, which accounted for about 40 percent of our sales during 2002, had another difficult year. Demand declined in Europe and North America. Even the Asian market, which had been exceptionally strong, was pulled into the decline. As a result, Nefab's deliveries to the telecom equipment industry declined by about SEK 90 M, compared with the preceding year. An even sharper decline was averted by successful efforts to capture market shares during the year. The reason we were able to take market shares was our strong position in China. As our customers transfer production from Europe or North America to China, the likelihood increases that we will be entrusted to deliver the packaging materials they need.
To compensate for the decline in the telecom industry, we intensified market cultivation activities focused on the automotive industry, among others. The effect was that sales within the automotive industry increased 6 percent to SEK 111 M, accounting for 11 percent of Group sales. We now plan to sharpen our focus on this segment. Sales to the automotive industry are project-oriented. A not insignificant percentage consists of return packagings of an investment nature. In today's market, it is difficult to conclude agreements. All customers are safeguarding their cash assets and postponing investments. Our recent success has been more strongly attributable to the aftermarket and so-called CKD, an acronym for Completely Knocked Down, which means that car parts and components are shipped for final assembly in another country. Fortunately, some of these shipments are sent to Brazil, a market where we otherwise have faced difficult conditions during recent years.
STRONG CASH FLOW
Sales declined during the past year, accordingly. We succeeded in efforts to adjust the total cost mass, however, so that our gross margin remained relatively stable. How were we able to do this? With a gradually higher element of commercial products, the costs of goods sold will increase? There are a number of different factors in the equation. We were quick to adjust capacity in parallel with the transfer of production to so-called low- cost countries. Over the long term, however, our gross margin will decline in parallel with a higher percentage of commercial products. This does not mean that profitability will suffer, however. We have less capital tied up in operations, and return on capital, therefore, should show favorable development.
Profit after financial items declined from SEK 67 M in 2001 to SEK 52 M. Cash flow after investments amounted to SEK 150 M, compared with a negative cash flow of minus SEK 35 M in the preceding year. The strong cash flow was attributable in part to our low level of investments. Even more important, we were able to free up working capital in the form of trade accounts receivable in inventories. Today, as a result, after one quarter of 2003, we have a strong financial position with an equity/assets ratio of 48 percent and liquid reserves of about SEK 300 M.
Our strong liquidity might become a valuable asset in the Group's quest to strengthen its market position through acquisitions, primarily in Europe. We are mainly interested in companies that will advance our position in the value chain. I am referring to service and retail companies, while production units have a lower priority in our selection of acquisition objects.
In the beginning of 2003, we acquired a trading company in Portugal. The acquired company is a leading Portuguese supplier of packaging solutions, and the acquisition is a good example of the type of companies in which we are interested. It has a leading position in the domestic market and is strong in one of our prioritized customer segments, in this case the automotive industry; combined with good packaging skills, its product offering also solves customer problems. We will continue to analyze a number of different acquisition objects. One of my goals this year is to be able to bring another company into the Nefab Group.
An increasing number of our customers are transferring their production operations to so-called low-cost countries. To establish an on-site presence and provide our customers with local service and strengthen our competitiveness at the same time - Nefab is following in their path. During 2002, accordingly, operations were started at a production plant in Estonia. Combined with other Group units, the new plant provides Nefab with good growth potential. I believe, therefore, that investments in buildings and machinery will remain at a low level during the next few years, substantially lower than our present depreciation rate. The depreciation rate is about SEK 45 M per year, while investments will probably be in the range of about SEK 25 M per year.
COMPLETE SOLUTIONS
Our goal during recent years has been to develop from a supplier of plywood boxes to a supplier of complete packaging solutions. During 2002, we took another important step in this direction. I am referring to the contract we signed with Flextronics in China, among others, whereby we assumed responsibility for all packaging materials for Microsoft's X- Box. We purchase the packaging material from about 15 different suppliers. The material is then stored in a so-called logistics hub adjacent to Flextronics' industrial park. Our personnel ensure the packaging materials are delivered once every hour, around the clock. When demand reached its peak just before Christmas, we had more than 40 people working with logistics handling and processing. Why was Nefab chosen as the supplier? The reason was that we have the capability to offer both packaging expertise and the ability to manage service requirements. This is one example that illustrates how customers today are demanding more than hardware. The customer wants to work with a supplier that can solve a problem. We shall continue to pursue this course of business, and the percentage of Group sales attributable to non-proprietary products will increase. The percentage today is 24 percent.
FOCUS ON ENVIRONMENTAL ISSUES
Packaging has a central role in the customer's environmental work. In our environmental policy, we clearly state that the most important function of a packaging is to protect goods under shipment and prevent any unnecessary loss of resources through damage. We have developed unique skills and expertise related to these issues over a couple of years. As a result, we are able to offer customers the advisory services and hardware they need to solve problems in this critical area of business operations.
EXPERTISE
As I mentioned earlier, our goal is to deliver a total solution to the customer. It's not enough to be a skilled manufacturer of a good product. The customer wants more. For this reason, the organization's general packaging skills are becoming increasingly important. During recent years, we have made determined efforts to develop our collective skills and expertise, a work in progress that will continue during 2003. Our so-called expertise matrix is one example of our mode of operations. We have divided the company into three regions, Europe, North America and Asia. A number of persons work within every specialist area in each of the three regions. The work is highly decentralized and network-oriented, which does not drive the central costs.
EXPECTIONS FOR THE FUTURE
Nefab's vision is to be the global partner that supplies complete packaging solutions. Our operations during 2003, therefore, will focus on three key concepts: Globality, Partnership and Complete Solution.
With regard to globality, we expect to expand our coverage to other geographical areas. Nefab is a relatively small company in terms of globality. A business presence in Brazil, North America and Asia places particular requirements on management capacity and skills. We are convinced, however, that globality is our most prominent competitive factor today. The packaging market is fragmented and only a few suppliers can offer multinational customers the service they want.
Through efforts to intensify cooperation with key customers in priority segments, we are striving to strengthen the partnership. Since we do not foresee any rapid improvement in demand from the telecom equipment industry, we are now also focusing on the automotive industry. It is common knowledge that the automotive industry is exposed to strong competition, but we believe we can identify segments where we can make money.
Continued efforts to advance our position in the value chain will enable Nefab to offer the market a complete solution. This development will be pursued both through organic growth and acquisitions.
Our dependence on the telecom equipment industry has declined from its peak level of more than 50 percent to slightly less than 40 percent of Group sales. The percentage remains so substantial, however, that we cannot achieve our long-term goal for organic growth of 15 percent annually without recovery in the telecom sector. We are taking the same cautious approach we adopted one year ago, therefore, and our goal is to generate a reasonable level of earnings and a strong cash flow even during a period when demand from the telecom equipment industry is weak.
Shareholders, I herewith conclude my presentation of the Nefab Group's activities during fiscal year 2002.
Thank you for attention.
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