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Hadera Paper Ltd. Reports Financial Results for First Quarter Ended March 31, 2009

Posted on: Monday, 11 May 2009, 01:52 CDT

HADERA, Israel, May 11 /PRNewswire-FirstCall/ -- Hadera Paper Ltd. (AMEX:AIP) (the "Company" or "Hadera Paper") today reported financial results for the first quarter ended March 31, 2009. The Company, its subsidiaries and associated companies are 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.

Aggregate sales amounted to NIS 830.0 million during the reported period, as compared with NIS 847.6 million in the corresponding period last year.

Aggregate operating profit totaled NIS 63.9 million during the reported period, as compared with NIS 59.8 million in the corresponding period last year. The growth in aggregate operating profit that was achieved despite the erosion of prices at some of the companies originates from the improved growth and the profits of the Group's operations in the marketing of office supplies, the continuing growth and improved profitability at H-K in Israel and the continuing trend of scaling down the operating loss in Turkey, coupled with non-recurring revenues on account of a unilateral dividend from an associated company.

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.

As of January 1, 2009, the Company has been implementing IFRS8, and has consequently identified the packaging products and cardboard sectors, covering the operations of both Carmel and Frenkel CD as a separate sector.

Consolidated sales in the reported period amounted to NIS 229.9 million, as compared with NIS 142.5 million in the corresponding period last year, representing a 61.3% increase which is primarily due to the consolidation of the data of Carmel and Frenkel CD during the reported period, amounting to approximately NIS 132.5 million, that had not been consolidated last year.

Operating profit totaled NIS 18.5 million during the reported period, as compared with NIS 17.5 million in the corresponding period last year. The improvement in the operating profit despite the erosion of selling prices of packaging paper and recycling, originated from an improvement in the profitability of Graffiti, coupled with the recording of non-recurring revenues of NIS 16.4 million on account of a unilateral dividend that was offset by a certain slowdown in the operations of some of the companies as a result of the global crisis and its local influence.

The net profit attributed to the Company's shareholders in the reported period amounted to NIS 19.1 million, as compared with net profit of NIS 21.3 million in the corresponding period last year, and was affected by improved profitability at some Group companies in Israel due to income recorded from distribution of unilateral dividend in respect of the distribution of preferred shares by an associated company, that resulted in net revenues to the Company amounting to approximately NIS 8.4 million. Furthermore, the reduction in the Company's share of losses from operations in Turkey (KCTR), as compared with the corresponding period last year has also contributed to improved profitability, while net profit decreased due to the recording of an expenditure amounting to NIS 3.0 million from the valuation of the Mondi PUT option.

Basic earnings per share amounted to NIS 3.77 per share ($0.90 per share) in the reported period, as compared with NIS 4.20 per share ($1.18 per share) in the corresponding period last year.

The negative inflation rate during the reported period amounted to -0.1%, as compared with a positive inflation rate of 0.1% in the corresponding period last year.

The USD exchange rate was devalued in the first quarter of this year by 10.1%, as compared with a 7.6% revaluation in the corresponding period last year.

Mr. Avi Brener, Chief Executive Officer of the Company said that "The Group manages an extensive, relatively diversified portfolio of companies and businesses - and this fact helps the Group to face the global and domestic crisis. The Company's operating segments are focused on basic consumer goods and inputs, which are relatively less impacted by implications of the global financial and economic crisis. In the first quarter of 2009, the downward trend in input prices continued for fiber, chemicals and commodities as a result of the global crisis, which partially compensates for the slow-down in operations in both domestic and export markets. These savings were partially offset by higher electric utility prices in the first quarter of 2009 and by higher water prices. The NIS devaluation vs. the USD, and the NIS devaluation vs. the Euro have both negatively impacted imported inputs for the Company, while improving the sale prices that have been eroded, as set forth above, in the Company's major operating segments, wherein prices are denominated in USD. The overall business range and currency operations of the Hadera Paper Group, is relatively balanced and the Company's exposure to sharp fluctuations in exchange rates is therefore low. In view of the Company's estimates regarding continued paper imports at dumping prices, in both packaging paper and fine paper, the Company and Mondi Hadera, have appealed to the Supervisor of Anti-dumping Charges and Homogenization Charges at the Ministry of Industry, Trade and Employment ("the Supervisor") and has filed a complaint concerning import at dumping of packaging paper from several European countries to Israel. The Supervisor decided to launch an investigation of this issue. There is no certainty that the above complaints would be accepted, and the Company is currently unable to estimate the impact of such acceptance on its business results."

In the reported period, the Company continued to expand the new recycled packaging paper manufacturing network, and construction of the facility at the Hadera site is making progress, in preparation for installation of equipment, which has started arriving on site, toward the planned complete operation of the new machine in early 2010.

Financial expenses during the reported period amounted to NIS 4.6 million, as compared with NIS 6.8 million in the corresponding period last year.

The company's share in the earnings of associated companies totaled NIS 15.0 million during the reported period, as compared with NIS 14.6 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%) decreased by NIS 2.5 million. The decrease in income was primarily due to a decrease in Mondi's operating income, from NIS 9.6 million last year to NIS 5.4 million this year - primarily due to price erosion due to the devaluation of the US dollar. The net profit also decreased as a result of a slight increase in financial expenses in the reported period in relation to last year, primarily on account of the impact of the devaluation of the NIS against the dollar. - The company's share in the net profit of H-K Israel (49.9%) increased by NIS 1.7 million. Hogla's operating income increased from NIS 41.1 million to NIS 47.9 million this year. The improved operating profit originated from a quantitative increase in sales, improved selling prices in certain areas of operation, the continuing trend of raising the proportion of some of the premium products out of the products basket, while innovating products and empowering the Company's brands, the lower prices of some of the inputs at the Company in light of the erosion of global commodity prices, the continuing efficiency measures across the company and the savings realized in purchasing - have all contributed to the significant improvement in earnings. - The company's share in the losses of KCTR Turkey (formerly Ovisan) (49.9%) has decreased by approximately NIS 2.0 million. The significant decrease in the loss is attributed to the growth in the volumes of operation that led to a significant reduction in the operating loss, from NIS 11.0 million last year to NIS 7.9 million this year. Moreover, due to the increase in the shareholders' equity of KCTR through a financial influx from Hogla - last year and during the reported period - the bank loans were repaid, while significantly reducing the financial expenses, thereby leading to an additional reduction in the net loss.

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.

Hadera PAPER LTD. SUMMARY OF RESULTS (UNAUDITED) except per share amounts Three months ended March 31, NIS IN THOUSANDS (1) 2009 2008 Net sales 229,881 142,519 Net earnings attributed to the Company's shareholders 19,079 21,270 Basic net earnings per share attributed to the Company's shareholders 3.77 4.20 Fully diluted earnings per share attributed to the Company's shareholders 3.77 4.20

(1) The representative exchange rate at March 31, 2009 was NIS 4.188=$1.00.

SOURCE Hadera Paper Ltd

Source: PR Newswire

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