Business News

American Israeli Paper Mills Ltd. Reports Financial Results for First Quarter Announces Date of Annual General Meeting

Tuesday 13. May 2008 - American Israeli Paper Mills Ltd. (AMEX:AIP) (the "Company" or "AIPM") today reported its financial results for the first quarter ended March 31, 2008. 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”)), the consolidated data, which includes the results of all the companies in the AIPM Group (including the associated companies), is being presented without considering the rate of holding therein and net of mutual sales.

As a result of the Company’s transition to reporting according to International Financial Reporting Standards (“IFRS”), the figures for the first quarter, as well as the comparison figures for the corresponding quarter last year and for the year ended December 31, 2007, are in accordance with IFRS.

Aggregate sales amounted to NIS 847.6 million during the first quarter, as compared with NIS 752.7 million in the corresponding period last year and NIS 826.1 million in the fourth quarter of 2007.

The aggregate operating profit amounted to NIS 59.8 million during the first quarter, as compared with NIS 28.3 million in the corresponding period last year and NIS 58.3 million in the fourth quarter of 2007. The significant improvement in the aggregate operating profit was primarily due to the improved performance in Israel, on the one hand, coupled with the continued trend of lowering the operating loss in Turkey, on the other hand.

The consolidated data set forth below excludes the results of operation of the associated companies: Mondi Hadera, H-K and Carmel Containers Systems Ltd. (“Carmel”).

Consolidated sales during the first quarter amounted to NIS 142.5 million, as compared with NIS 136.6 million in the corresponding period last year and as compared with NIS 154.8 million in the fourth quarter of 2007.

Operating profit totaled NIS 17.5 million during the first quarter, as compared with NIS 16.5 million in the corresponding period last year, representing growth of 5.7%.

Net profit amounted to NIS 21.3 million during the first quarter, as compared with a loss of NIS (-3.9) million in the corresponding period last year.

The net profit in the first quarter was affected by the improvement in the Group’s profitability in Israel, coupled with the NIS 18.4 million reduction of the Company’s share in the losses of Kimberly Clark Turkey (KCTR), a wholly-owned H-K subsidiary (from a share in the loss of NIS 22.8 million last year to NIS 4.4 million this year), as compared with the corresponding period last year.

Basic earnings per share amounted to NIS 4.20 per share ($1.18 per share) in the first quarter, as compared with NIS -0.96 per share ($-0.23 per share) in the corresponding period last year.

Mr. Avi Brener, Chief Executive Officer of the Company, said that “the global trends in the paper sector — primarily in Europe — are affecting the group companies that are active in Israel. The reduced gaps between the supply and the demand for various types of paper, especially in Europe, in light of the relatively high growth rates in developing markets, especially Asia, are increasing the demand for paper and are leading to a continued increase in pulp prices in Europe as well as other input prices, such as chemicals, while also leading to higher prices for the different types of paper. These trends enable the Group companies to continue raising prices in most paper and paper products areas, thereby compensating for the high input prices, while improving profitability.”

In the first quarter, KCTR continued to implement its strategic plan formulated together with its international partner, Kimberly Clark. The plan is intended to introduce Kimberly Clark’s global brands to Turkey, on the basis of local manufacturing. If fully implemented, KCTR will grow to become a dominant and profitable company by 2015, with annual sales in the area of $300 million.

The financial expenses during the first quarter amounted to NIS 6.8 million, as compared with NIS 6.6 million in the corresponding period last year.

The Company’s share in the earnings (losses) of associated companies totaled NIS 14.6 million during the first quarter, as compared with a loss of NIS (10.5) 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%) increased
by approximately NIS 4.3 million. Most of the change in profit
originated primarily from Mondi’s improved profitability, primarily as
a result of the higher selling prices that led to an improved gross
margin. This improvement was the result of the said recovery in the
European paper industry. The net profit also increased as a result of
the decrease in financial expenses, primarily on account of the impact
of the revaluation of the NIS against the dollar.
— The company’s share in the net profit of H-K (49.9%) increased by
approximately NIS 2.1 million. The improved operating profit originated
from a quantitative increase in sales, improved selling prices net of
the impact of higher raw material prices and the continuing trend of
raising the proportion of some of the premium products out of the
products basket.
— The Company’s share in the losses of KCTR (formerly: “Ovisan”) (49.9%)
decreased by NIS 18.4 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 27 million last
year to approximately NIS 11 million this year. In the corresponding
period last year, a non-recurring loss of NIS 6 million was included on
account of the termination of trade agreements with distributors due to
the transition to distribution by Unilever, of which our share was
approximately NIS 3 million. Moreover, the tax asset that was recorded
in previous years in Turkey, in the sum of approximately NIS 12 million
was reduced, of which our share is NIS 6.0 million. Moreover, due to
the increase in the shareholders’ equity of KCTR through a financial
influx from Hogla, the bank loans in Turkey were repaid, while
significantly reducing the financial expenses, thereby leading to an
additional reduction in the net loss.
— The Company’s share in the net profit of Carmel (36.21%) increased by
approximately NIS 0.6 million. The factors that influenced the growth
in the Company’s share in the net profit of Carmel originated inter
alia from the improved operating profitability as a result of the
improved gross margin as a result of the raising of prices beyond the
rise in raw material prices.




As part of the Options Plan that was approved by the Company’s Board of Directors on January 14, 2008, for the allocation of 285,750 option warrants, a sum of 250,500 option warrants was allocated in the first quarter of 2008 to senior employees at the Company and at the subsidiaries, to the Company’s CEO and to senior employees at associated companies, and the rest 35,250 of the said option warrants were allocated to a trustee as a pool for future granting to senior officers and employees at associated companies, subordinate to the Board of Directors approval.

In other Company news, the Board of Directors decided that the Annual General Meeting of Shareholders will be held at the registered office of the Company on June 24, 2008. If the meeting is postponed, it will be held on July 01, 2008.