Interim Report  January - March 2011

Interim Report  January - March 2011

The merger with Hamelin is progressing as planned and a new, stronger
Bong is taking shape. The work to realise synergies is ongoing,” says
Bong President and CEO Anders Davidsson. “Although first quarter
earnings were pressured by continued price increases on uncoated fine
paper and other raw materials, ProPac delivered healthy growth and cash
flow was good.

January - March 2011

• Net sales of SEK 854m (501)

• ProPac sales of SEK 153m (76)

• Operating profit of SEK 26m (13)

• Profit after tax of SEK 9m (5)

• Cash flow after investments of SEK 30m (13)

• Earnings per share of SEK 0.46 (0.32)

Operating profit by quarter, MSEK

* Including the transaction costs of 15 MSEK
** Including expenses related to the merge with Hamelin envelope
division, and other nonrecurring items totaled -136 MSEK

Cash flow by quarter, MSEK

*
Before the cash consideration and transaction costs associated with the
Hamelin merger

Bong is the leading provider of specialised packaging and envelope
products in Europe, offering solutions for distribution and packaging of
information, advertising materials and lightweight goods. Important
growth areas in the Group are the ProPac packaging concept and the
Russian market. After the merger with Hamelin's envelope division the
Group has annual sales of approximately SEK 3.5 billion and about 2,500
employees in 15 countries. Bong enjoys strong market positions in Europe
and the Group sees attractive opportunities for further expansion and
development. Bong is a public limited company whose stock is quoted on
the NASDAQ OMX Nordic Stock Exchange Stockholm (Small Cap).

Market and industry  

Demand in the European envelope market remained relatively weak in the
first quarter. In the company's assessment, the West European market has
declined by a few percent compared to the same period in 2010. Vigorous
development continued in the Russian and East European markets, which
grew by an estimated 10 percent compared to 2010.

The packaging market, in which Bong sells its ProPac range, is
significantly larger and more multifaceted than the envelope market.
Market statistics for the niches in which Bong is active are unavailable
or difficult to obtain. In Bong's assessment, the recent economic upturn
has improved demand for packages used in the e-commerce, mail order and
retail sectors, where the company expects strong growth potential over
time.

Sales and profit January - March 2011

Consolidated sales for the first quarter were SEK 854 million (501). The
comparison figure represents sales as reported for the first quarter of
2010 and thus does not include Hamelin. The depreciation of the euro had
negative impact on consolidated sales. Restated at last year´s exchange
rates consolidated sales would have amounted to approximately SEK 935m.

The volume trend for envelopes fell somewhat short of expectations
during the quarter, which constrained earnings. ProPac delivered 100%
growth, driven primarily by Hamelin and the acquisition of Bong CSK in
Poland, which sells bubble bags. In constant currencies, ProPac grew by
125%. Order intake for gift bags was strong. The depreciation of the
euro also had negative impact on earnings. Operating profit improved to
SEK 26 million (13). Figured at last year's exchange rate, operating
profit would have amounted to SEK 31 million. The finance net was  SEK
-14 million (-7). Profit before tax was SEK 12 million (6) and reported
profit after tax was SEK 9 million (5).

Higher raw materials prices

prices for uncoated fine paper, Bong's main production material, are
still on an upward trajectory. All paper suppliers have provided advance
notice of further price increases in the second quarter. Cost inflation
is also continuing for several other production materials, especially
petroleum-based products.

It is normally possible for Bong to pass on price increases on raw
materials after a certain lag.

Cash flow and investments

cash flow after investing activities was SEK 30 million (13). Purchasing
synergies in the form of improved payment terms began to manifest in
lower working capital during the period. Cash used in investing
activities during the interim reporting amounted to SEK 50 million. The
figure includes payment of final purchase consideration of SEK 26
million to Holdham S.A. for the Hamelin acquisition, as well as the
acquisition of Egå Offset in Denmark and normal capital expenditures of
SEK 24 million in total. 

Financial position

cash and cash equivalents at 31 March 2011 totalled SEK 157 million
(149m at 31 December 2010). The Group had unutilised credit facilities
of SEK 200 million at 31 March 2011. Total available liquidity was SEK
357 million.

Consolidated equity at the end of March 2011 was SEK 533 million (531
million at 31 December 2010). Translation of net assets in foreign
subsidiaries to Swedish kronor and changes in the fair value of
derivative instruments reduced consolidated equity by SEK 9 million.

Interest-bearing net loan debt declined by SEK 36 million during the
period to SEK 1,026 million (1,062 million at 31 December 2010).
Translation of net loans in foreign currencies to Swedish kronor reduced
the Group's net loan debt by SEK 6 million.

Employees

the average number of employees during the period was 2,507 (1,220). The
Group had 2,479 (1,236) employees at the end of March 2011. The large
change is attributable to the 2010 merger with Hamelin's envelope
division.

Parent company

the parent company's business extends to management of operating
subsidiaries and Group management functions. Net sales were SEK 6
million (0) and the parent company is reporting a loss before tax of SEK
13 million (profit: 3).

Acquisitions

Acquisition of Egå Offset

As previously announced in a press release on 3 January 2011, Bong has
acquired the Danish envelope and printing company Egå Offset's
operations in Århus. Through the acquisition, Bong gained an envelope
printing plant and combined with the Danish subsidiary Bong Bjørnbak A/S
became a major supplier of printed envelopes throughout Denmark. Egå
Offset, a family business specialised in overprinting and envelope
sales, is a significant regional player on Danish Jutland. The company
has annual sales of approximately SEK 30 million and 17 employees. The
acquisition made a positive contribution to Bong's earnings as of the
first quarter of 2011.

Opportunities and risks

business risks for the Bong Group are primarily related to market
development and various types of financial risks. For further
information, please refer to Bong's annual report and the website,
bong.com.

Accounting principles

this interim report was prepared in compliance with IAS 34 and the
Swedish Annual Accounts Act. Application was consistent with the
accounting principles outlined in the 2010 annual report and the interim
report should be read along with those principles. Please refer to
Bong's 2010 annual report for a specification of the new amendments,
interpretations and standards that took effect 1 January 2011. 

Kristianstad, 12 May 2011

BONG AB

Anders Davidsson

President and CEO

This report has not been audited by the company's independent auditors.

Presentation of the report

The report will be presented in a teleconference on 13 May at 9:00 AM.
The telephone number for the conference is +46 (0) 8 5052 0110. Pictures
for the teleconference will be available on our website, bong.com, by
8:00 AM on the day of the conference.

For further information, please contact:

Anders Davidsson, President and CEO, Bong AB

+46 (0) 44 20 70 00 (main exchange),

+46 (0) 44 20 70 80 (direct line),

+46 (0) 70 545 70 80 (mobile).

Scheduled reports: 

• Interim Report January-June, 24 August 2011

• Interim Report January-September, 10 November 2011

• Year-end Report 2011, February 2012