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Hadera Paper Ltd. Reports Financial Results for Fiscal Year Ended December 31, 2008

Posted on: Thursday, 12 March 2009, 03:02 CDT

HADERA, Israel, March 12 /PRNewswire-FirstCall/ -- Hadera Paper Ltd. (AMEX:AIP) (the "Company" or "Hadera Paper") today reported financial results for the year ended December 31, 2008. The Company, its subsidiaries and associated companies are referred to hereinafter as the "Group".

As a result of the transition to reporting according to IFRS, the Company presented its financial statements for 2008, as well as the comparison figures for the year ended December 31, 2007, according to IFRS.

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 3,229.1 million in 2008, as compared with NIS 3,124.3 million in the corresponding period last year.

Aggregate operating profit in 2008 amounted to NIS 203.0 million, as compared with NIS 183.8 million in 2007. 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.

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 2008 amounted to NIS 673.5 million, as compared with NIS 583.6 million in 2007.

Operating profit amounted to NIS 35.4 million in 2008, as compared with NIS 71.1 million in 2007. Most of the erosion in the profit was due to changes in the dollar exchange rate, which negatively impacted the selling prices, to dumping prices of competing imports and to the apparent slowdown in the operations during the final quarter of 2008, as a result of the financial crisis.

The net profit attributed to the Company's shareholders in 2008 amounted to NIS 69.7 million, as compared with net profit of NIS 31.5 million in 2007, and was affected by the improvement in the profitability of some of the Group's companies 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 profit attributed to the Company's shareholders amounted to NIS 10.6 million and from the significant reduction of the Company's share in the losses of the operations in Turkey (KCTR). On the other hand, the net profit decreased as a result of recording an expenditure of NIS 10.0 million from the valuation of a PUT option at Mondi.

The net profit attributed to the shareholders of the company in the fourth quarter this year amounted to NIS 10.2 million, as compared with net profit attributed to the company's shareholders of NIS 17.5 million in the corresponding quarter last year.

Basic earnings per share amounted to NIS 13.77 per share ($3.62 per share) in 2008, as compared with basic earnings per share of NIS 7.63 per share ($1.98 per share) in 2007.

The inflation rate in 2008 amounted to 3.8%, as compared with an inflation rate of 3.4% in 2007.

Mr.Avi Brener, Chief Executive Officer of the Company said that "In view of the global recession, the Company formulated in recent months an action plan which includes aggressive measures to improve efficiency, cut current investments, cut general expenses. True to this date, there is no material impact as a result of the escalation of the global financial crisis, on the Company's business results, its financial robustness or the value of its assets. In the first half of 2008, input prices rose for energy, fibers, chemicals and commodities, a trend that was reversed in the second half of the year due to the global crisis. The Company's transition, at the end of 2007, to using natural gas, has led to NIS 46 million in Group-wide (including associated companies) energy-cost savings in 2008. These savings were partially offset as a result of the increase in electricity prices in 2008. In the second half of 2008, the global paper market, particularly Europe, saw the start of a trend of slowing demand that led to surplus production in the market, which increased the importing of fine paper and packaging paper from Europe at dumping prices. In order to avoid erosion of its gross margin, the Group filed two complaints, with the Supervisor of Anti-Dumping Charges at the Israeli Ministry of Industry, Trade and Employment, regarding dumping imports of packaging paper and fine paper from several European nations to Israel. In both cases, the Supervisor decided to launch an investigation. 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. The average revaluation of the NIS against the US$ coupled with the revaluation of the NIS against the euro had a positive impact on the Company with regard to imported inputs while, on the other hand, serving to erode the selling prices in the main operating segments of the Company whose prices are denominated in US$. In the fourth quarter, the trend in input prices was reversed and prices started to decline due to the aforementioned crisis - which served to somewhat offset the looming slowdown in operations in both local and export markets. The overall business range and currency operations of the Hadera Paper Group, including its 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 by the Company together with the international partner, Kimberly Clark.

Financial expenses in 2008 amounted to NIS 15.0 million, as compared with NIS 22.2 million in the corresponding period last year.

The company's share in the earnings of associated companies totaled NIS 51.3 million in 2008, as compared with NIS 0.9 million in 2007. The Company's share in the earnings of associated companies amounted to NIS 14.7 million in the fourth quarter of the year, as compared with NIS 7.9 million in the corresponding quarter last year.

The following principal changes were recorded in the Company's share in the earnings of associated companies, in relation to 2007:

- The Company's share in the net profit of Mondi Hadera (49.9%) rose by NIS 0.6 million. The increased income was primarily attributed to the improvement in Mondi's operating profit, which grew from NIS 33.6 million last year to NIS 34.1 million this year - primarily due to a quantitative increase in sales, operating efficiency and lower energy costs due to the transition to using natural 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 H-K Israel (49.9%) increased by approximately NIS 12.3 million. 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, while innovating products and empowering the Company's brands. - The Company's share in the losses of KCTR Turkey (49.9%) decreased by NIS 48.0 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 73.7 million last year to approximately NIS 33.4 million this year. In 2007, the Company recorded a non-recurring loss in respect of termination of trade agreements with distributors following the transition to distribution by Unilever, amounting to approximately NIS 6 million, of which the Company's share amounts to 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 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, 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% before August 31, 2008 - the date of consolidation), increased by NIS 6.4 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 exchange rates.

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 (AUDITED) except per share amounts NIS IN THOUSANDS (1) 2008 2007 Net sales 673,484 583,650 Net earnings attributed to 69,710 31,535 the Company's shareholders Basic net earnings per share attributed to the Company's shareholders 13.77 7.63 Fully diluted earnings per share attributed to the Company's shareholders 13.77 7.62 (1) The representative exchange rate at December 31, 2008 was NIS 3.802=$1.00. (2) The net profit attributed to the Company's shareholders in 2008 was affected by the improvement in the profitability of some of the Group's companies 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 profit attributed to the Company's shareholders amounted to NIS 10.6 million and the significant reduction of the Company's share in the losses of the operations in Turkey (KCTR), as compared with 2007. On the other hand, the net profit decreased as a result of recording an expenditure of NIS 10.0 million from the valuation of a PUT option at Mondi (3) The net profit in 2007 was affected by the growth in the Company's share in the losses of the operations in Turkey (KCTR), amounting to approximately NIS 11.8 million (from NIS 52.0 million last year to NIS 63.8 million this year), as compared with the preceding year. In 2007, the net profit included earnings from the realization of surplus cost at an associated company in the amount of NIS 2.5 million, a loss from the amortization of a tax asset at an associated company in the sum of NIS 13.4 million and a capital loss from the sale of cardboard machines (machine 6) and hub machines in the sum of NIS 2.4 million. Contact: Lea Katz, Adv. Corporate Secretary and Chief of Legal Department Hadera Paper Ltd. Group Tel:+972-4-6349408 Leak@hadera-paper.co.il

SOURCE Hadera Paper Ltd

Source: PR Newswire

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