American Israeli Paper Mills Ltd.
Hadera, Israel, 14 May 2007 -- /PRNewswire/ -- American Israeli Paper Mills Ltd. (AIPM) (AMEX:AIP) today reported its financial results for the first quarter ended 31 March 2007.
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 Business 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 AIPM 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 inter-company sales.
Aggregate sales totaled NIS 752.7 million during the reported period, compared with NIS 719.9 million (net of TMM Integrated Recycling Industries Ltd. ("TMM") that was sold in early 2007) in the corresponding period last year and NIS 699.9 million (net of TMM) in the fourth quarter of 2006. Aggregate operating profit, totaled NIS 30.4 million during the reported period, compared with NIS 37.4 million (net of TMM) in the corresponding period last year and NIS 15.5 million (net of TMM) in the fourth quarter of 2006.
Aggregate sales from activity in Israel totaled NIS 708.2 million during the reported period, compared with NIS 659.1 million (net of TMM) in the corresponding period last year and NIS 657.3 million (net of TMM) in the fourth quarter of 2006.
The aggregate operating profit in Israel totaled NIS 57.3 million during the reported period, compared with NIS 46.5 million in the corresponding period last year (net of TMM) and NIS 40.8 million (net of TMM) in the fourth quarter of 2006.
The consolidated data set forth below does not include the results of operation of the associated companies: Mondi Hadera, H-K and Carmel Containers Systems Ltd., which are included in the company's share in results of associated companies.
Consolidated sales totaled NIS 136.6 million during the reported period, compared with NIS 131.5 million in the corresponding period last year and NIS 134.5 million in the fourth quarter of 2006.
Operating profit totaled NIS 16.9 million during the reported period, compared with NIS 13.3 million in the corresponding period last year and NIS 8.8 million in the fourth quarter of 2006.
Net loss amounted to NIS -3.5 million during the reported period, compared with net profit of NIS 7.7 million in the corresponding period last year and net profit of NIS 14.8 million in the fourth quarter of 2006.
Net loss in the first quarter of 2007 was affected by the growth in the company's share in the losses of the operations in Turkey (KCTR), amounting to NIS 19.1 million, as compared with the corresponding quarter last year.
Net profit in the fourth quarter of 2006 included capital gains of NIS 28.3 million from the sale of real estate.
Basic loss per share totaled NIS (0.87) in the reported period, compared with basic earnings of NIS 1.92 per share in the corresponding period last year.
The inflation rate during the reported period amounted to a negative rate of -0.2%, as compared with an inflation rate of 0.6% in the corresponding period last year.
The exchange rate between the NIS and the US dollar was revaluated by 1.7% during the reported period (January-March 2007), as compared with a devaluation of 1.3% in the corresponding period last year.
Avi Brener, chief executive officer of the company, said that the accelerated growth rate (5%) of the Israeli market continued in the first quarter of the year as well, following the trend of high growth that was recorded last year. The growth is expressed by greater demand, primarily in private consumption, along with lower unemployment rates, the continuing bullish behavior of the capital markets and a stronger local currency (NIS), especially vis-a-vis the U.S. dollar.
Following two consecutive years of rising energy prices, fuel prices began to drop at the end of 2006. This decrease resulted in savings of NIS 5 million in the Group's energy costs. This trend was reversed in April this year as fuel prices began increasing again.
Raw material prices continued to rise in the first quarter of the year, although due to the rise of the NIS against the dollar during those periods, the impact of this NIS rise in raw material prices on the financial results was moderated, and affected the aggregate operating profit in the first quarter of the year, as compared with the corresponding period last year by NIS 6 million.
The recent economic recovery in the paper industry in Europe is expressed by a better balance between the supply and the demand for paper and resulted in higher paper prices and in a reduction of the imports into Israel. Consequently, the Group raised the selling prices of paper--especially packaging paper--and partially also those of fine and printing paper.
The anticipated continuation of this trend over the next several quarters will render it possible to continue to raise prices and compensate for the erosion in profitability over the past several years, due to the rising energy and raw material prices.
The company is continuing to examine and promote the project for the establishment of a co-generation plant in Hadera, using natural gas. The conversion of the company's energy generation facilities from the use of fuel oil to natural gas will be completed with the completion of the installation of the natural gas pipeline to Hadera, postpones due to delays that lie outside the control of the company, planned for the third quarter of 2007, and will enable significant savings in fuel costs, estimated at USD 8.5 million per annum, due to the significant differences between the current prices of fuel oil and gas, and will enhance the Group's competitiveness and profitability.
In the first quarter of 2007, Kimberly Clark Turkey (KCTR)--a H-K subsidiary--continued to implement its global business plan (GBP), which was formulated together with the international partner, Kimberly Clark. The plan is designed to introduce Kimberly Clark's international brands into the Turkish market, on the basis of local manufacturing. If the plan will be fully implemented, KCTR would grow into a dominant and profitable company by 2015, with annual sales of approximately USD 300 million. The company is continuing to implement the strategic business plan and is expected to continue to grow and gradually reduce the losses incurred by the investment in penetrating into this market, which holds great potential for the company.
The financial expenses totaled NIS 6.2 million during the reported period, compared with NIS 4.2 million in the corresponding period last year and NIS 9.6 million in the fourth quarter of 2006, mainly due to the increase in the interest-bearing liabilities of the company and the revaluation that was recorded in the NIS-U.S. dollar exchange rate.
The company's share in the earnings (losses) of associated companies totaled NIS (10.8) million during the reported period, as compared with NIS 1.3 million in the corresponding period last year and as compared with NIS (10.9) million in the fourth quarter of 2006.
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 NIS 1.5 million, mostly resulting from the company's improved profitability, from an operating loss of NIS 0.8 million in the corresponding period last year to an operating profit of NIS 1.7 million in the first quarter this year, as a result of the improved gross margin. The improvement was rendered possible as a result of the recovery in the European paper industry, the decrease in energy prices and the quantitative growth in sales on the domestic market. Moreover, a decrease was recorded in financial expenses on account of the erosion of dollar-denominated liabilities due to the revaluation of the NIS by 1.7% in the first quarter of the year, as compared with a devaluation of 1.3% in the corresponding quarter last year.
* The company's share in the net earnings of H-K in Israel (49.9%) increased by NIS 4.9 million. The operating profit of H-K from its activities in Israel grew from NIS 29.0 million to NIS 36.1 million this year as a result of the growth in sales. Record sales were recorded this quarter, resulting, among others, from the timing of the Passover holiday in early April, improvement in selling prices, increased share of premium products out of the total basket of products, and streamlining. On the other hand, the higher raw material prices served to slightly offset the improved profitability. Net profit of H-K in Israel, was affected in the corresponding period last year from the nonrecurring tax expenses amounting to NIS 4.5 million (our share was approximately NIS 2.2 million).
* The company's share in the losses of KCTR Turkey (formerly Ovisan) (49.9%) grew by NIS 19.1 million, primarily on account of the sharp increase in the operating loss (NIS 18 million in relation to the corresponding quarter last year), originating primarily from expenses associated with the continuance of the launch of premium KC products in the Turkish market (Kotex® and Huggies®) in the second quarter last year. Advertising costs, sales promotion and registration fees to the retail chains, are allocated to profit and loss, on a current bases. During the first quarter this year, a part of the tax asset that was recorded in Turkey in the last few years was reduced, in the amount of NIS 12.3 million (USD 2.9 million) due to the limitation on transfer losses, expired at the end of five years. Our share in the reduction is approximately NIS 6.1 million.
* The company's share in the net profit of Carmel Group (26.25%) decreased by NIS 1.3 million, primarily attributed to the decrease in the operating profit, despite the quantitative growth in sales. The erosion is primarily associated with the sharp rise in raw material prices, which was not fully compensated for by the raising of selling prices. Moreover, the net profit last year included capital gains of NIS 3.9 million from the sale of a real estate asset in Netanya. Net of the company's share in the capital gains, the company's share decreased by NIS 0.3 million.
* In the corresponding quarter last year, the company's share in the earnings of associated companies included the company's share in the losses of TMM, in the sum of NIS -1.9 million (including NIS 0.5 million as cumulative effect at the beginning of the period). As mentioned above, the company sold its holdings in TMM in February 2007 and this item is therefore not included in the company's share in the earnings of associated companies this year.
A total of 4434 shares were issued during the reported period (0.1% dilution), on account of the exercise of 11,950 options warrants as part of the company's senior employee option plan.
On 15 April 2007, the General Meeting of the shareholders approved the appointment of Brightman Almagor & Co. as external auditors of the company for the year 2007. Brightman Almagor & Co. will replace Keselman & Keselman & Co. that served as external auditors of the company since 1954.
The board of directors decided that the Annual General Meeting of Shareholders will be held at the registered office of the company on 17 June 2007. If the meeting is postponed, it will be held on 24 June 2007.
On 13 May 2007, the board of directors approved the employment agreement and remuneration of Avi Brener, the CEO of the company. The main principals of the agreement are: monthly salary of NIS 95,000 (approximately USD 22,864) linked to the Israeli Consumer Price Index and a yearly bonus in the amount of between 6-9 salaries, subject to the discretion of the board. In addition, upon the termination of employment of the CEO he will receive, in addition to the provisions for severance payments, a retirement grant payment in an aggregate amount equal to one month's salary for each year in which he was employed by the Group (from August 1988).
AMERICAN ISRAELI PAPER MILLS LTD.
Summary of results
NIS in thousands
Three months ended March 31,
except per share amounts
Net sales 136,638 131,488
Net earnings (3527) 7700*
Basic Earnings (losses) per share (0.87) 1.92*
Fully diluted earnings (losses) per share (0.87) 1.91*
* Including accumulated effect resulting from initial application of new accounting standards of NIS 461 thousand at net earnings and NIS 0.11 at earnings per share.
The representative exchange rate at 31 March 2007 was NIS 4.155 = USD 1.00
Source: American Israeli Paper Mills Ltd.