Business News

Hadera Paper Ltd. Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2010

Monday 09. August 2010 - Hadera Paper Ltd. (AMEX:AIP) (the "Company" or "Hadera Paper") today reported financial results for the second quarter and first six months ended June 30, 2010. The Company, its subsidiaries and associated companies - is referred to hereinafter as the "Group".

The Consolidated Data set forth below excluding the results of operation
of the associated companies: Mondi Hadera Paper Ltd. (“Mondi Hadera”) and
Hogla-Kimberly Ltd. (“H-K”).



Consolidated sales during the reported period amounted to NIS
489.2 million, as compared with approximately NIS 434.0 million last year,
representing an increase of 12.7% originating primarily from growth in the
packaging paper and recycling sector, coupled with growth in the sales of the
office supplies marketing sector, as compared with the corresponding period.



Consolidated sales in the second quarter of the year totaled
NIS 249.2 million, as compared with NIS 204.1 million in the corresponding
quarter last year, growth of approximately 22.1%, originating primarily as a
result of an increase in the sales of the packaging paper and recycling
sector in relation to the corresponding quarter last year and as compared
with first quarter sales of NIS 240.0 million, an increase of approximately
3.8%.



The operating profit totaled NIS 12.6 million during the
reported period, 2.6% of sales, as compared with NIS 13.9 million, 3.2% of
sales, last year. Net of non-recurring revenues in the amount of NIS 16.4
million last year, on account of unilateral dividend, the operating loss in
the corresponding period last year amounted to approximately NIS 2.5 million.
The increase in operating profit during the reported period is primarily
attributed to the increase in gross profit as a result of the increase in
sales.



Operating profit amounted to NIS 5.1 million in the second
quarter of the year, as compared with an operating loss of NIS 4.6 million in
the corresponding quarter last year.



The net profit attributed to the Company’s shareholders amounted to NIS
42.3 million in the reported period, as compared with net profit of NIS 34.7
million in the corresponding period last year, an increase of 21.9%.



The net profit attributed to the Company’s shareholders during the
reported period was affected by the improvement in the operating margin of
most Group companies in Israel and in Turkey as a result of the increase in
operations that brought about an improvement in the operating profit.



The net profit for the second quarter this year amounted to NIS 18.0
million, as compared with a net profit of NIS 15.6 million in the
corresponding quarter last year, an increase of approximately 15.4%.



Basic earnings per share amounted to NIS 8.35 per share ($2.15 per share)
in the reported period, as compared with basic earnings per share of NIS 6.86
per share ($1.75 per share) in the corresponding period last year.



The basic earnings per share amounted to NIS 3.55 per share in the second
quarter ($0.92 per share), as compared with earnings of NIS 3.09 per share
($0.79 per share) in the corresponding quarter last year.



The US dollar exchange rate was devaluated by approximately 2.6% during
the reported period, as compared with a devaluation of approximately 3.1%
during the corresponding period last year.



The inflation rate during the reported period amounted to 0.7%, as
compared with an inflation rate of 2.1% in the corresponding period last
year.



The global paper industry saw a continuation of the trend that began in
2009, of rising prices in the reported period, across various product types.
The packaging paper sector in Europe experienced an additional rising prices
starting in January 2010, amounting to approximately 22% during the reported
period (according to publications by PPI Germany).



The company estimates that the high global pulp prices continued to rise
during the reported period, thereby leading to increase in prices of virgin
packaging paper and consequently – as a replacement for these paper types –
an increase in the demand for recycled packaging paper produced by the
packaging paper division was recorded. The continuation of this trend, in
addition to the prevailing high level of prices, may support the continued
growth and increase in the volumes of operation of the packaging paper
sector.



The Group manages a wide and diverse portfolio of companies and
businesses focused on consumer goods and basic commodities. As part of the
global trend of increasing private consumption in light of the emergence from
the crisis, this trend led to an increase in demand at most Group companies
for a wide range of products, while continuing to place an emphasis on the
implementation of efficiency and cost-cutting measures across all sectors of
operation.



In terms of raw materials, the NIS reevaluation vis-a-vis the
dollar and the euro by an average ranging between 7.4% and 7.9%,
respectively, in relation to the corresponding period last year, led to
savings in terms of the inputs and imported products denominated in either
dollars or euros in the company’s principal sectors of operation, whose
prices tend to follow import prices denominated in these currencies. As a
result of the said revaluation, the price of natural gas decreased by
approximately 8% in relation to the corresponding period last year, thereby
also making a contribution to savings. Moreover, the price of electricity
also decreased by approximately 15% during the reported period, in relation
to the corresponding period last year. These savings were partially offset by
the rising prices of water during the reported period, by an average rate of
approximately 34%, along with the rising price of fibers by approximately
35%, in relation to the corresponding period last year.



Financial expenses during the reported period amounted to NIS
10.8 million, as compared with NIS 10.0 million in the corresponding period
last year.



The company’s share in the earnings of associated companies
totaled NIS 40.1 million during the reported period, as compared with NIS
34.9 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 Paper
(49.9%) rose by approximately NIS 3.4 million. The increase in the
profit originated primarily from the increase in the operating profit
of Mondi, that grew from NIS 15.9 million last year, to NIS 23.2
million this year. Despite the sharp rise in the prices of raw
materials in relation to the corresponding period last year, thanks
to efficiency measures in paper manufacturing during the reported
period, coupled with the improved gross margin of some of the product
range, the operating profit for the period has increase. The increase
in net profit was moderated somewhat as a result of the increase in
tax expenses in the amount of approximately NIS 2.0 million during the
reported period, in relation to last year, primarily as a result of
the increase in pre-tax earnings.
– The Company’s share in the net earnings of H-K Israel
(49.9%) decreased by approximately NIS 1.3 million. H-K’s operating
profit decreased from NIS 102.3 million to NIS 100.2 million this
year. The slight decrease in the operating profit originated
primarily from the erosion in the selling prices in certain sectors
of operation, that was offset as a result of the decrease in the
prices of some of the company’s inputs, coupled with significant
efficiency measures that were implemented across the company,
considerable savings in purchasing and the continuing reinforcement
of the company’s brands, that rendered it possible to preserve
profitability levels during the reported period.
– The Company’s share in the losses of KCTR Turkey (49.9%) was
reduced by NIS 4.0 million. This reduction in loss is primarily
attributed the slight increase in the volume of operations, coupled
with the sale of the PEDO brand to a local chain, that generated
non-recurring revenues of NIS 3.1 million during the reported period,
that brought about the continuing reduction in the operating loss
from NIS 14.1 million during the corresponding period last year, to
NIS 6.9 million during the reported period.




During the reported period, 102,462 option warrants that were
granted as part of the management option plan, were exercised. 23,733 company
shares were issued following this exercise.



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.