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Domotex Asia claims success

The sixth edition of the largest international trade fair for floor coverings in Asia has again proven that growth of the floor covering industry in Asia, and in China in particular, is booming.
The fair, which was held March 24-26 (Shanghai, China), broke all previous records for: attendance (19,000 trade visitors), exhibition area (34,500 square meters), number of exhibitors (542), countries represented amongst exhibitors (30) and diversity of floor covering exhibits including: textile floor coverings, machine made rugs, hand-made rugs, fibers & yarns, resilient (PVC), wood & parquet, bamboo, laminate, stone & tile, applications technology and production machinery. “Visitors themselves were a diverse group at the fair with over 30 countries represented. Taken together with the many Asian-based exporters and agents for international companies abroad, this select group of visitors (24% of all visitors) is further evidence that there is great international interest in Asia’s floor covering market,” according to organizers VNU Exhibitions Asia & Deutsche Messe AG. Next year’s fair will be held March 22-24, 2005.

Euparal/Domotex Asia, April 2004

Formica agrees to settlement with Berry

The Berry Group (through Alloc Inc.) and Välinge have settled the patent dispute with Formica Corporation.
Berry/Alloc and Välinge had instituted before the District Court of Delaware (USA) a civil action against Formica Corporation alleging infringement by Formica Corporation of Välinges US patent 6.023.907, protecting a method for laying and mechanically joining floor panels. The settlement agreement was entered into in February 2004 but needed approval of the Bankruptcy Court and related interested parties, because Formica is presently in Chapter 11 proceedings in the United States District Court for the Southern District of New York. All necessary approvals have now been obtained, according to a press release by Berry. “The agreement permits Formica a limited amount of time to sell off their inventory of mechanically locking flooring panels and to satisfy obligations to customers in the NAFTA region. The settlement includes a substantial payment by Formica to the Berry Group in compensation for past sales by Formica.”

Euparal/Berry Group, April 2004

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Bona, Amorim: strategic partnership

At the beginning of the year, a strategic partnership was formed between Bona (wood and cork care products) and Amorim (cork flooring). The main purpose of this common cooperation platform is to ensure the best possible flooring solutions and customer service on offer, according to Bona in a press release.
Claes Björck, Vice President of the Bona Group: “It is impossible for a single company to be an expert in all fields and produce all kinds of different products. If you want to extend your range, it is much better to co-operate with true experts in the relevant field and gain market share through partnerships.” “Our basic intention in this partnership is to establish working cooperation at all levels to bring out the best in the Amorim and Bona complementary product ranges. Our aim is to provide the best possible solution for our customers,” explains Jorge Santos, General Manager of Amorim Revestimentos. Bona will provide Amorim’s customers with adhesives, cleaners and finishes.

Euparal/Bona, April 2004

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First quarter results Pergo

Pergo in the first quarter of 2004 reported sales of SEK 746 M (2003: 679), an increase of 22% compared with the year-earlier period after currency adjustments. Sales in Europe increased with 6% adjusted for currency effects. Sales in the North American market increased 32%, due mainly to increased sales to Lowe’s, but sales also increased to Home Depot and the specialty segment. The gross margin for the period was a negative 9.6%. The margin was affected adversely by costs connected with the pending concentration of the European production from Perstorp to Trelleborg. Total restructuring costs are approximately SEK 250 M, of which SEK 150 M pertains to the write-down of fixed assets.
The laminate flooring market in Europe is expected to show growth in an otherwise stagnating flooring market. The prevailing overcapacity is resulting in continued price pressure.

Euparal/Pergo, April 2004

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Junckers in Køge

Junckers: Axcel implements rescue plan

F. Junckers Industrier A/S held its Annual General Meeting on March 30th. Several decisions have been made as part of the adoption of the plan for reconstruction of the company proposed by Danish investment company Axcel. Axcel will acquire the company in exchange for financing it with DKK 100 m.
The share capital of the Company was reduced to DKK 0 for reimbursement of losses and all the Company’s shares were revoked. The share capital of the Company was at the same time increased to DKK 15 m. at a quotation of 500 per share in a capital increase directed at Junckers Holding A/S. Junckers Holding A/S is a Danish Limited Company, indirectly controlled by Axcel II. The hitherto Board Members elected by the Annual General Meeting stepped down and were replaced by (1) Director Christian Frigast, (2) Director Jacob Thygesen, (3) Director Christian Schmidt-Jacobsen, (4) Director Lars Hermansen and (5) Solicitor Søren Johansen. The shares of the Company will, as a consequence of the approved changes in capital, be registered for de-listing from Copenhagen Stock Exchange. The Company will recall the application for suspension of payments. Junckers recorded a pre-tax loss of DKK 518 m. in 2003.

Euparal/Axcel, April 2004

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Karelia Cherry

Karelia Corporation: good results 2003

The Karelia Corporation’s net sales of 2003 rose to EUR 107.5 million from the EUR 105.8 million in the previous year. The EBIT was EUR 7.0 million (EUR 8.3 million). The net profit after taxes amounted to EUR 4.6 million (EUR 5.5 million).
Despite difficult circumstances the net sales of the wood flooring business with Upofloor and Karelia brands grew to EUR 78.6 million compared to EUR 77.6 million in 2002. Also the net sales of resilient floorings (Upofloor) grew to EUR 28.9 million compared to EUR 28.2 million in the previous year. The exports with EUR 62.1 million represents 58 per cent of the net sales. The group invested EUR 13.6 million (EUR 11.4 million), which compares to 12.7 per cent of the net sales. During the last three years Karelia Corporation has invested EUR 36 million in their wood and resilient flooring business. The most important investments in the wood flooring business were fulfilled at the factories in Kuopio and Heinola. The investment in Kuopio aims at doubling of the factory’s capacity and also includes the implementation of new technology enabling the production of new products. The investment in Heinola focused on the new finishing and machining technology for producing the loc-tongue-and-groove wood flooring installable without glue.

Euparal/Karelia, March 2004

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Kährs plans staff cutback

Kährs is planning to cut its staff in Nybro and Kalmar by 285. The planned staff cutback is one of the measures begun in 2002 to restructure operations at Kährs.
“Our volume targets for the year won’t change but we have to streamline operations in Nybro in order to make us more competitive,” explains Folke Becker, CEO and Group President at AB Gustaf Kähr. The goal is to achieve a 20 percent rise in productivity during the year. It is calculated that the reduction in staff will lower costs by 80 million Swedish Krona per year.
Kährs is owned by Nybron Flooring International (Switzerland) and operates in over 40 markets worldwide and has subsidiaries in ten countries. Sales for 2002 totalled some 220 million Euro. The number of employees is approx. 1,700.

Euparal/Kährs, March 2004

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EPLF meets NALFA

The European Laminate Flooring Association (EPLF) from Bielefeld (Germany), and its American counterpart, the North American Laminate Flooring Association (NALFA), from Washington, intend to further develop their relationship in future. Discussions regarding this cooperation were held at ‘Surfaces 2004’ in Las Vegas between representatives of the EPLF and the NALFA. One example of the new cooperation is the exchange of marketing statistics between both associations, so that sales of laminate flooring on the world market can be analysed and as a result, marketing activities can be tailored and improved. EPLF and NALFA will also communicate on the subject of ISO standards.

Euparal/EPLF, March 2004

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Domotex/Euparal, February 2004

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EFLF presents sales statistics 2003

The members of the Association of European Producers of Laminate Flooring (EPLF ) are satisfied with the way the market has developed over the last year. The yearly forecast of the sales figures of the association, based on the first three-quarters of 2003, shows a significant increase in laminate flooring sales in Europe compared with the previous year there.

The 21 members of the EPLF had a worldwide turnover of 391 million square metres of laminate flooring. This compares with the previous year’s total of 334 million sq.m. – an increase in the amount of goods sold by the members in world markets by some 57 million square metres. Western Europe is the strongest market and achieved an increase of 25 millions to 227 million square metres, compared with 202 million in 2002, and representing 58% of total sales. The largest individual market was Germany, with 63 square metres (2002: 59), followed by Great Britain with 49 million square metres (2002: 45), France with 37 million square metres (2002: 29) and the Netherlands with 16 square million square metres (2002: 16).

In China there were noticeable decreases for European products, which is attributed to the increasing number of local production plants, or joint ventures with EPLF members (which are not represented In the EPLF sales statistics). Sales totalling 71 million square metres were recorded in North America, compared with 58 million square metres previously. Eastern Europe has also shown positive growth in 2003. Sales of the EPLF member companies in this region rose from 46 million square metres in 2002 to 63 million square metres in 2003.

EPLF/Euparal, February 2004

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European flooring market expected to grow

The European flooring market is expected to grow 0.8% in money and 0.2% in volume this year, at least according to the market researchers of the Interconnection Consulting Group.

Sales of wooden flooring could even rise 4.3% in money and 4.8% in volume, since per capita consumption is still increasing in several European countries.

Euparal/IC Group, February 2004

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FEP moderately optimistic for 2004

The European federation of the parquet industry (FEP) observes that, following two rather weak years, certain indicators presently point towards a renewed pick-up of parquet sales in 2004. The federation says that developments in the 2nd half of 2003, and especially the 4th quarter, have fuelled a moderate optimism within the parquet industry as regards its performance this year.

At its meeting held in the context of Domotex in Hannover, the FEP Board made an evaluation of the developments in the European parquet markets in 2003. It is estimated that the overall parquet market in the FEP member countries (Western-Europe) has remained relatively stable, with a slight decline of less than 1% compared to the previous year. This represents a consumption volume of more than 80 million m2. In general terms, the Central European markets (Austria and Germany) as well as France and the Netherlands have performed less well, whereas the Nordic countries reported more stable sales. Spain remained a growing market for parquet, which can be explained by a steady expansion of the construction sector.

“With the enlargement of EU effective in May 2004, some important parquet producing countries will join the European Union. Our sector will therefore face both challenges and new opportunities, as the current consumption volumes of parquet in the new Member States certainly have room for improvement,” according to FEP. FEP is at present also working on the implementation of the future CE-marking for parquet under the provisions of the European Construction Products Directive, focusing especially on the reaction to fire classification.

FEP/Euparal, February 2004

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Patina Tuscan Slate by Formica Flooring

Last month Formica Corporation announced that it had reached an agreement to sell the equipment assets of its Formica Flooring business to the Shaw Industries Group, Inc.

The equipment, which is located in Algona (WA, USA), is being sold to Shaw for cash and the assumption of certain liabilities. After closing of the transaction Formica will withdraw from laminated flooring manufacturing in North America. “Formica's decision to exit the laminate flooring business in North America reflects the competitive nature of the laminate flooring business and the changing dynamics of the North American flooring industry,” said Frank Riddick, President and Chief Executive Officer. “Not being a vertically integrated producer in this highly competitive business, we reluctantly concluded that it would not be economically viable for Formica to remain as a niche, stand-alone manufacturer.” Last year, Formica invested about 1 million US dollar in equipment to produce embossed-in-registered laminate flooring.

Formica/Euparal, February 2004

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Oy Karelia Parketti (Tuupovaara Factory)

The Karelia Corporation recently announced that the Finnish wood flooring producers Suomen Parketti Oy (Upofloor) and Oy Karelia Parketti Ltd will become one company from 1st February 2004. The new company will be called FinnWoodFloors Oy (FWF) and the entire wood flooring division of Karelia Corporation will operate under it.

FWF will be headed by Tommi Lindbom who will also hold the position of Deputy Managing Director of parent company Karelia Corporation. Upofloor and Karelia thus continue as two brands for FinnWoodFloors. Both brands will keep their own separate organisational functions and distribution arrangements. “During the year we have invested heavily in new technology and production capacity. Unifying the wood flooring business enables us to look for more internal and external synergies,” says Tommi Lindbom. During last three years Karelia Corporation claims it has invested 36 million euros on expansion in their wood flooring and vinyl flooring business. As a result FWF now has a wood flooring capacity of over 6 million sq.m. annually.

Karelia Corporation/Euparal, February 2004

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Pergo’s year-end report over 2003 shows that sales during this period amounted to SEK 2,799 M (3,194), which is unchanged compared with 2002, excluding currency effects. In the North American market, sales increased by 5%, excluding currency effects. In Europe, sales declined by 7%, excluding currency effects, primarily due to the phasing-out of low-price products during 2002.

Fourth quarter sales amounted to SEK 732 M (730), an increase of 14%, excluding currency effects. This increase was largely attributable to continued strong sales growth in North America. The gross margin for the full year was 22%, which was in level with the preceding year. According to Pergo the completed action program, which included measures to reduce costs and improve margins, has affected the margin in a positive way while a write-down of SEK 22 M of a production line at the Garner plant in the fourth quarter had a negative impact.

Pergo’s factory in Trelleborg

This also explains the fourth quarter’s gross marginal decrease of 1 percentage points to 21% compared to the corresponding period of the preceding year.
Operating profit, including items affecting comparability, amounted to a loss of SEK 146 M (profit: 61). Items affecting comparability amounting to an expense of SEK 150 M included costs related to Witex and the recovery of a customer receivable of SEK 4 M that had previously been written down. In connection with Witex being placed in preliminary bankruptcy proceedings at its own request during the second quarter of the year, the entire value of Pergo’s shareholdings in Witex was written down. Including the participation in earnings and costs incurred during the acquisition process Witex-related items reduced Pergo’s earnings during the year by SEK 168 M (negative: 7).

North America
Sales in North America during 2003 amounted to SEK 1,728 M (1,989). Excluding currency effects, this represents an increase of 5% compared with the preceding year. Sales to Lowe’s more than compensate for the decline in sales to The Home Depot and the specialty segment. The fourth quarter was the strongest quarter of 2003 in terms of sales. Fourth quarter sales amounted to SEK 462 M (449), an increase of 22%, excluding currency effects, compared with a year earlier. Here too, sales to Lowe’s more than offset the decline in sales to The Home Depot.
The laminate flooring market is estimated to have had continued growth in an otherwise weak flooring market. Growth is occurring mainly in the lower-price segments of the market. Price increases were announced by some competitors earlier during the autumn. Due to the movements in the US-dollar, companies with domestic production are expected to strengthen their competitiveness in relation to European competitors.

Europe
Sales in Europe during 2003 amounted to SEK 949 M (1,050), a year-on-year decline of 7% after the elimination of currency effects. The lower level of sales was due primarily to the phasing-out of low-price products to retailers such as IKEA. Fourth quarter sales, excluding currency effects, were slightly higher than in the corresponding period in the preceding year. The improved profitability in Europe is primarily due to an increased focus on high-margin products, the introduction of new products, improved distribution and cost-savings.
The laminate flooring market in Europe is expected to grow in an otherwise stagnating market. Prevailing overcapacity is creating continued price pressure. In addition, movements in the US-dollar may lead to a decline in exports to the US, which could increase price pressure even more.

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VDP: Lower sales of parquet in Germany

According to the Association of German Parquet Producers (VDP) consumption of parquet in Germany decreased 8.3% last year, from 20.8 to 19.2 million square meters.

VDP expects a moderately higher consumption level of 20 million square meters this year. Bigger growth rates are expected for the year 2005. Production volume has not changed much in 2003, states VDP. Multilayer systems have reached a production share of nearly 80% in Germany.
VDP/Euparal, February 2004

Witex: reorganisation with new structure

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Pergo's Plant in Trelleborg

Interim report Pergo

The net sales of Pergo during the first nine months of the year amounted to SEK 2,067 M (2,464), a decline of 4%, excluding currency effects, compared with the preceding year.

According to Pergo the decline is primarily attributable to lower sales in Europe. Sales in the North American market were marginally lower than during last year. Sales to the, as of this year, new customer Lowe’s virtually compensates for the lower sales mainly to The Home Depot.
Excluding currency effects, third-quarter sales rose 10% compared with the corresponding quarter in the preceding year. The increase was attributable to favorable sales growth in the North American market.
Sales in North America during the first nine months amounted to SEK 1,266 M (1,540). Excluding currency effects, this represents a decline of 1% compared with the corresponding period in the preceding year. Sales to Lowe’s offset virtually the entire decline in sales to the specialty segment and The Home Depot. Sales during the third quarter amounted to SEK 455 M (447), an increase of 16%, excluding currency effects, compared with the year-earlier period. Sales to Lowe’s and the specialty segment more than compensated for the decline in sales to The Home Depot. The laminate flooring market is estimated to have shown continued growth in an otherwise soft market for flooring products. The growth occurred mainly in the low-price segments in the market. Price increases have been announced by some competitors in the marketplace. Due to the development of the USD, companies with domestic production are expected to strengthen their competitiveness in relation to European competitors.
Sales in Europe during the first nine months amounted to SEK 716 M (811), a decline of 10% after the elimination of currency effects, compared with sales in the corresponding period in 2002. The lower level of sales was due primarily to the earlier phasing-out of low-price products to retailers such as IKEA and in and out-phasing activities in conjunction with the launch of the new products with Compact Soundbloc™. Sales during the third quarter declined slightly compared with third-quarter sales last year, excluding currency effects, but were unchanged compared with second-quarter sales this year.
The launch of products with Compact Soundbloc™, a preglued noise-absorption underlayment, was started throughout all of Europe during the second quarter. The launch has now been completed, which means that most of Pergo’s premium products in Europe are now sold with this underlayment. In the British market, PERGO VINTAGE™, a new range of products with rustic decorative designs, was prelaunched to favorable market reception. The launch of these products will be conducted throughout the rest of Europe in the beginning of next year.
The laminate flooring market is expected to reflect growth in an otherwise stagnating market. Prevailing overcapacity in the European market will create continued price pressure. The development of the USD may lead to a decline in exports to the US, which could increase price pressure even more.

Pergo/Euparal 2003

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Update Domotex 2004

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Armstrong Headquarters

Armstrong Holdings reported second quarter 2003 net sales of $826.9 million that were 0.1% higher than second quarter net sales of $825.7 million in 2002. However, excluding the favorable effects of foreign exchange rates of $42.1 million, consolidated net sales decreased by 4.7%, primarily due to lower sales volume.

An operating loss of $33.4 million was recorded for the second quarter of 2003 compared to operating income of $55.6 million in the second quarter of 2002. The decline in operating income was primarily due to a non-cash charge in the second quarter of 2003 of $73 million related to management's current assessment of probable asbestos-related insurance asset recoveries. Also contributing to the decline in operating results were lower net sales, excluding the effect of foreign exchange rates, and higher raw material costs, particularly lumber, petroleum-based materials, natural gas and higher costs of foreign sourced products.

Wood Flooring net sales of $181.6 million in the second quarter of 2003 decreased 4.4% from $190.0 million in the prior year. This decrease was primarily driven by lower sales volume. Operating income of $5.7 million in the second quarter of 2003 compared to $18.5 million in the second quarter of 2002. The decline in operating income was primarily attributable to increases in lumber and manufacturing costs and lower sales volumes, partially offset by lower selling expenses.

For the six-month period ending June 30, 2003, net sales were $1,601.8 million, an increase of 1.8% from the $1,573.7 million reported for the first six months of 2002. Increases in Building Products, and Resilient and Textiles and Sports Floorings were partially offset by decreases in Cabinets and Wood Flooring. Excluding the favorable effects of foreign exchange rates of $77.4 million, consolidated net sales decreased 3.0%.

Armstrong/Euparal, August 2003

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‘Hardwood is trendy’

Hardwood has resurfaced as the trendiest thing to tread on in American homes, according to the Baltimore Sun and Floor Daily. “Although carpet continues to dominate flooring, hardwood has seen a surge of interest during the past decade. From the pages of consumer home magazines to the aisles of home improvement centers, hardwood is being promoted as the material of the moment.”

Gopal Ahluwalia, vice president for research with the National Association of Home Builders in Washington: "It used to be that everyone wanted carpet in their homes. Now all they want is wood."
Hardwood flooring has become a prime selling point in a real estate market that has posted record sales during the past two years. Hardwood floors add value to almost any home. The Baltimore Sun presents as a good example Mrs and Mr Mitchell. Before putting their Baltimore house on the market earlier this year, Mrs. Mitchell and her husband replaced the linoleum and worn-out carpeting on their first floor with hardwood, investing about $4,000. The new oak floors made such an impression that the couple increased their initial listing price by almost $50,000.

In 2002, U.S. manufacturers sold 627.5 million square feet of hardwood flooring, a 90 percent increase from 1995, when they sold 330.2 million square feet, according to annual data from the Wood Flooring Manufacturers Association.
Today, homeowners are not only pulling up carpets; they're also putting hardwood down in rooms that were once relegated to tile or carpeting, like the kitchen and the bedrooms. A recent study by the national homebuilders' group showed that wood flooring in kitchens has grown from 9 percent in 1999 to 21 percent in 2002.
Hardwood has earned high consumer confidence. Last month, the National Wood Flooring Association polled a group of 1,000 non-wood and wood floor owners. Among them, 39 percent said hardwood is the easiest material to clean, 57 percent said it is the most beautiful and 81 percent said that it increases the value of their home.

Floor Daily/Euparal, August 2003

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India wants bamboo flooring

Bamboo, traditionally considered the ‘poor man's timber’ in India, is under consideration as a major export item by the Indian government for a global market valued at US$11.9 billion.

According to the American trademagazine Floor Focus the Indian government, almost 20 years behind China in commercial production, produces only 3 million tons a year. The Indian government now considers bamboo as an easily manageable export product that can provide good profits, has lots of uses and a potential to provide employment for millions, and thus stop the rural flight to India's teeming cities. Bamboo is growing in popularity in the United States and Europe as high-end flooring and decorative planking. The Indian government would like to see its bamboo industry take 27 percent of the world market by 2015. Therefore India wants to host the 8th International Bamboo Congress, in competition with Brazil and Colombia. The Indian government hopes to create 8.6 million jobs in the bamboo industry.

Euparal, August 2003

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Karelia continues to invest

The net sales of Karelia Corporation between January and June 2003 rose to 55 million euro. Compared to the corresponding period of previous year the net sales grew by 1.8 %. The operating income (EBIT) of the Finnish group amounted to 4.7 million euro, which is 8.6 % of the net sales. The result after financial items was 3.5 million euro, which is 6.3 % of the net sales.

The net sales from January to June of previous year amounted to 54 million euro, the operating income (EBIT) was 6 million euro and the result after financial items was 4.8 million euro.
Karelia continues to invest heavily. The gross value of the investments within the period of January to June amounted to 7 million euro. A year ago the investments were already 4.7 million euro. The most important investment was the enlargement of the wood flooring factory in Kuopio and its new production lines, which will double the factory’s capacity. Other important investment projects during the first half of the year were the finishing of the new production line in the vinyl factory of Ikaalinen and the installation of the new production line at the Heinola factory in order to produce the locking tongue-and-groove wood flooring.

Karelia/Euparal, August 2003

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Slower growth rates laminate flooring

During 2002, the European production of laminate flooring rose by 28% up to 390 million m2. Consumption also witnessed strong growth (20% increase, up to 295 million m2) and exports to North America were strongly enhanced.

These figures were presented to the Annual General Meeting of the European Panel Federation (EPF), last june, by the President of the federation Frans De Cock. For the next years consumption of laminate flooring in Europe is expected to witness slower growth than during last year, with only some 5% on average. In North America and the Asian countries, laminate flooring demand is estimated to increase by 10%. In China growth of 20% on average is forecast for the next years. Frans De Cock expects, however, that local laminate flooring production in these regions will increase, so that the export prospects for the European producers “might not be so very positive”.

EPF/Euparal, August 2003

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Parquet maintains its position despite tougher market conditions, according to FEP, the European federation of the parquet industry. The FEP survey on the production and consumption of parquet in 2002 has shown that, in spite of the tough market conditions in Europe and the generally worsened economic climate, parquet has been able not only to maintain its market position but even to build it out further, which, in a generally declining market, points towards increases in market shares.

FEP states that production in the traditional FEP countries in 2002 has risen by 0.7% to reach a total volume of 62.5 million m2. With this increase, the drop in production experienced in 2001 is almost fully restored. Consumption has increased by a further 0.9% and attained a volume of 80.4 million m2. If one adds the parquet volumes produced in the Czech republic, Hungary, Poland and Romania, the total production of the countries represented within FEP amounted in 2002 to 72.7 million m2. The production of mosaic parquet attained a volume of only 2.5 million m2 (a decline by 12% compared to 2001). If this tendency continues, it is to be feared that there will no longer be a relevant mosaic parquet production in Europe in a couple of years from now, explains FEP. Multilayer could increase by a further 1% to close to 46 million m2. Solid lamparquet production remained quite stable and solid parquet with thicknesses from 14 to 22 mm increased by 2%. Average pro capita production in the FEP countries amounted to 0.19 m2. In 2002, the total European flooring market would have declined by 1.2%, as reported by Intercontuft. With a volume of 95 to 96 million m2, this means that the parquet sector has been able to even improve its position on the market, holding a 5% market share overall.

FEP/Euparal, July 2003

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“After initiating insolvency proceedings at the Witex AG, Augustdorf (Germany), the course is already being set now for the company to be present on the market again as soon as possible,” claims Witex in a recent press release.

“The provisional receiver, Wolfgang van Betteray, aims to save the company and to secure the jobs that depend on it. Van Betteray is regarded as a noted restructuring specialist, whose partnership has already been working in more than 600 partly supraregional proceedings that have become well known. Thus, it has already been possible to obtain the necessary asset credit from the banks to resume business activity. On Wednesday the 4th of June, the Witex Logistics department resumed work in preparation for the normalisation of all business transactions. Production started on Tuesday the 10th of June.” Pergo, owning 25,1% of the shares in Witex AG, and HW Industries, the main shareholder of Witex, had agreed on a merger in November of 2002. The deal called for HW Industries to transfer all its shares to Pergo. In return, Pergo would issue new shares to HW Industries, making it the main shareholder in Pergo.
After a long period of negotiations, Pergo announced, in a press release dated the 20th of May, that it would not go through with the intended merger, due to Witex’s “weakened financial development in the spring of this year.” As a result of this press release and the ensuing meetings with its banks, Witex AG filed for preliminary bankruptcy. The director of Witex AG, Joachim Plate, said he was “surprised” by Pergo’s press release. Plate stated that at the time Witex AG filed for preliminary bankrupcy half of its production capacity was idle. Witex AG invested 100 million DM in new production facilities three years ago. According to Plate, Pergo was unable to capitalize on this investment, leaving Witex AG behind in a state of insolvency. Later in June the Pergo Board of Directors decided to make a complete write down of the value of its shareholding of 25.1% in Witex, due to the preliminary bankruptcy of Witex AG. The book value of the Witex shares amounted to SEK 135 million as of March 31.The write-down amounts to approximately SEK 130 million after the second quarter’s result from participation in associated company Witex has been considered. Besides the write-down of shares, the result for the second quarter is estimated to be negatively influenced by costs of more than SEK 20 million, connected to the acquisition process of Witex. This will, says Pergo, in aggregate, affect the result with slightly more than SEK -155 million for the second quarter, of which about SEK -150 million is non-recurring.

Pergo/Witex/Euparal, June 2003

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First quarter Tarkett Sommer

Net sales (invoiced sales) for Tarkett Sommer’s first quarter were 333,9 million € (345,4 million €), - 0,2% (0,3%), lower compared to the first quarter 2002. At constant exchange rate, net sales increased by 6,9%: as sales on the North American continent represent about 30% of Group sales, the decrease in the value of the dollar versus euro has significantly reduced dollar sales translated in euros.

At constant exchange rate and comparable structure, i.e without the impact of the joint venture with Sintelon for Eastern Europe, net sales have increased by 1,9%. By region and at constant exchange rates, sales of the first quarter grew by 4,4% in Western Europe and by 1,2% in North America where the effects of a general slow down started to be felt. With exception of Germany, in Western Europe, sales increased in most countries, as a consequence of the introduction of new products and new branding policy in the residential sector. In Eastern Europe, including Russia, sales grew by 63,9% mainly due to the contribution of the joint venture with Sintelon, as well as very good market conditions. This part of the world now accounts for 9,9% of Group sales. By product category and at constant exchange rate, sales of resilient products increased by 7,9%, 16;4% for residential applications including the contribution of the JV with Sintelon and 1,6% for commercial applications. Also at constant exchange rate, sales of hardwood increased by 6,3%, in a growing market environment on both sides of the Atlantic. Sales of laminates continued their high growth trend, at 12,4% versus prior year.

Tarkett Sommer/Euparal, June 2003

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In its June edition the German consumer magazine Öko-Test presented the results of a test regarding zeventeen laminated ‘click’ floors, in the user classes 23/31. Several aspects, such as environment, health and durability were taken into account.

Eleven out of seventeen floors were rewarded with the mark ‘acceptable’. Six floors had shortcomings, not in the least because of the electro static voltage that was measured on the top layer. Very common sorts of friction, such as friction caused by shoes or bare hands, resulted in values of at least 2000 up to even 10000 volt in a laboratory setting. The ‘bullet’ test, on object that is dropped on the floor from a certain height, reveals that only a small load will lead to cracks in the base. A ‘bullet’ falling from 50 centimeters will result in the disintegration of almost all tested products, that only appear to be a whole because of the top layer that remains intact.

Öko-Test/Euparal, June 2003

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Tarkett Sommer in Sonneby (Sweden)

With sales amounting to 1,437.3 million Euro, Tarkett Sommer was able to achieve a slight growth of 0.6% compared to 1,429.3 million Euro in the previous year. This increase is mainly attributable to the sales contribution coming from the joint venture with Sintelon.

At constant exchange rates and a comparable structure, the Group’s turnover fell slightly by 0.4% to 1,424.1 million Euro, mainly caused by the continued negative economic development in important markets. In its Resilient Floorings core business Tarkett Sommer recorded a decrease of 2.6% at comparable structures and exchange rates. In particular, the continued fierce competition in important core markets impeded the company’s Commercial Floorings business. Sales of Textile Floorings also decreased by 2.5%, whereas worldwide turnover of Wood Floorings rose by 1.8% compared to 2001, mainly as a result of the positive development in North America. Sales of Laminates again showed double-digit growth and rose by 19.3%, again being able to profit from the growing markets. Sales development by region was irregular. Turnover in Western Europe fell by 3.5% - mainly due to the bad economic conditions in important core markets, whereas sales in Eastern Europe recorded double-digit growth. At comparable exchange rates, sales in North America grew by 2.4%. At 93.2 million Euro, EBITA for 2002 was almost 9% above the previous year’s level of 85.6 million Euro.

Tarkett Sommer/Euparal, April 2003

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Worldwide floor covering demand will reach US$63 billion in 2006. Laminate flooring, ceramic tile and other nonresilient flooring will see the strongest market gains based on the durability and ease of maintenance offered by nonresilient flooring, and by growing consumer preference for high-end and natural products, according to a recent report from The Freedonia Group, Cleveland, Ohio.

Economic growth and rising household income levels in Turkey, China, India, South Korea, Mexico and Brazil will trigger a 3.6% annual growth rate in flooring demand through 2006. The market researchers claim that demand in Asia will grow between 6% and 9%. In other regions outside North America and Canada nearly 6%. The USA will remain by far the largest floor-covering market in the world, but with declining growth rates in demand. The study analyzes the 8.2 billion square meter global carpet and flooring industry. It presents historical data for 1992, 1996 and 2001 and forecasts to 2006 and 2011 by type (e.g. tufted and other carpets and rugs; ceramic, laminate, wood, vinyl and other flooring); by market, by world geographic region and for 18 individual countries. The study also examines the market environment, details industry structure and market share, and profiles 42 industry participants including Mohawk Industries, Shaw Industries, Armstrong World Industries, Tarkett Sommer, Beaulieu of America, Lear, and Collins and Aikman. The Freedonia study, ‘World Carpet & Flooring’ is available for $4,700.

Freedonia/Euparal, April 2003

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Pergo's Plant in Trelleborg

The merger is conditional upon e.g. the approval of the directed share issue at the General Meeting of Pergo and upon bank commitments regarding the financing of Witex and Pergo. New information will be announced in the beginning of May 2003, when the board of directors of Pergo tentatively also plans to invite to an extraordinary General Meeting, provided the remaining issues regarding financing have been solved in an acceptable manner by then.
The board of directors of Pergo has, as a result of the above, decided to withdraw the proposals for a directed share issue and the incentive program to senior executives and key managers that were planned to be dealt with at the Annual General Meeting on April 22, 2003. Pergo and HW Industries have earlier received approval for the merger from German and Swedish antitrust authorities.

Pergo/Euparal, March-April 2003

Norwegian parquet manufacturer Boen Bruk has formed a business alliance with its US-American colleague Palo Duro Hardwoods Inc. Boen will take a financial interest in Palo Duro to that effect. Shortly Palo Duro will begin distributing Boen’s products on the US-market.

The existing company of the Norwegians in the USA, Boen Hardwood Flooring Inc., will continue to operate as logistical centre. Recently Boen received a positive ruling of an US judge in a case filed against a unilateral decision of US customs reclassifying multilayer parquet as plywood, leading to an import duty of 8%. The European federation of parquet producers FEP is also engaged in this matter. According to FEP the competitiveness on the US market of European producers has been strongly undermined by this unilateral decision. FEP says it is fighting this measure in co-operation with the national customs services and the European Commission services. Also that the positive ruling in the case filed by FEP member Boen Bruk gives hope to a swift solution to this problem.

Euparal/FEP/Boen, March 2003

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Surfaces 2003

Surfaces 2003

Surfaces 2003 has surpassed 2001's record attendance of 39,183. There were 944 exhibiting companies, a 3 percent increase over 2001. As has been the pattern in recent years, wood flooring's presence continued to grow.

According to the trade magazine Hardwood Floors new wood flooring product introductions from the major manufacturers at the show demonstrated continued trends in distressed floors, dark colors and exotic species. John Mayers, director of sales and marketing for finish manufacturer Dura Seal thinks the number of international attendees is growing, as well. The number of international wood flooring exhibitors also appeared to increase, with bamboo and other Asian imports continuing to have a strong presence.

Surfaces/Euparal, February 2003

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Annual report Pergo

Net sales of Pergo during the year 2002 amounted to MSEK 3,194 (3,729), which excluding currency effects was a decrease of 11%, compared with the preceding year. The operating profit however amounted to MSEK 61 (2001 loss: 889).

The decline of net sales was primarily due to lower price levels in the North American market and to some extent due to reduced volumes in Europe. The volume decline in Europe is mostly due to that deliveries of low-price products to IKEA were discontinued according to plan. Excluding currency effects, sales for the fourth quarter declined 21%, compared with the corresponding period in the preceding year. The decline was primarily attributable to lower prices for Home Depot, lower volumes to the specialty retailers in the US and the discontinuation of sales of low-price products to IKEA. Sales to other customers in Europe were lower than a year earlier. The gross profit margin for the full year amounted to 21.6%, an improvement of 4.1 percentage points compared with the preceding year during which the gross profit margin was lowered by nonrecurring costs of MSEK 146, corresponding to 3.9 percentage points.

The operating profit amounted to MSEK 61 (2001 loss: 889). During the preceding year, restructuring costs and other nonrecurring expenses in an amount of MSEK 644 were charged against the operating loss. According to Pergo this year’s profit is to a large extent an effect of the action program. Operating profit for the fourth quarter amounted to MSEK 33 (loss: 701). The quarter includes MSEK 4 as an item affecting comparability relating to a capital gain on the divestment of a production machine which was earlier written off. During the fourth quarter, license revenues were received in the form of initialpayments for contracts signed during the quarter. These amounts are including in other operating income. A loss of MSEK 18 in the associated company Witex was charged against fourth-quarter earnings. The appreciation of the SEK during the past year, primarily against the USD, had a negative impact on earnings. This negative effect, however, was largely neutralized by forward contracts. The earnings effect of these forward contracts amounted to MSEK 19 during the year, of which MSEK 9 during the fourth quarter. Part of the coming year’s transaction exposure in USD has been hedged.

Pergo/Euparal, February 2003

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EPLF introduces Draft to regulate Drum Sound Evaluation

In the autumn of 2001, the EPLF Association of European Producers of Laminate Flooring (registered in Bielefeld, Germany) started an international work group that included members from the industry and from renowned testing institutes. Its task was the development of an industry guideline which would standardize a test method and measuring criteria used to determine drum sound. Within a year, the joined effort of industry and institutes has brought to life a draft for suggested regulation, which the EPLF is going to present to the responsible ISO-panel in Vienna.

According to the EPLF the draft determines how drum sound generated by walking on a laminate flooring can be measured and evaluated. The loudness of noise is evaluated in sone-values, which are integers of the curve of the specific loudness (sone/bark) in relationship to the critical band (bark/Zwicker). These sone-values are absolute and linear figures which can be compared to each other and thus represent an objective evaluation method. Through a ring experiment (Round-Robin-Test) the procedure is going to be validated again in the near future. All EPLF-members have agreed to measure the drum sound of laminate floorings by using the technique described in this new draft and also to adjust their advertisements accordingly. This is a measure to avoid conflicting messages given on product packages, brochures and catalogues. The draft is available in English to any interested party. It can be ordered from the EPLF branch at info@eplf.com

EPLF/Euparal, February 2003

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headquarters FEP in Brussels

The European Committee for Standardization, CEN, has recently ratified 6 European product standards for parquet and wood flooring. The European Federation of the Parquet industry, FEP, and its members have been actively contributing to the development of these standards over the past years aiming at setting basic standards for the future trade in parquet products in Europe.

The adopted standards cover:
• Solid parquet elements with grooves and/or tongues, EN 13226;
• Solid lamparquet products, EN 13227;
• Solid wood overlay flooring elements including an interlocking system, EN 13228;
• Mosaic parquet elements, EN 13488;
• Multilayer parquet elements, EN 13489;
• Solid Pre-assembled hardwood boards, EN 13629.

Following the CEN rules, the national standardization bodies now have to withdraw national standards and to replace them by the European provisions. The adopted standards will also serve as a basis for the future "harmonized" parquet standard that will set the requirements for CE-marking following the European Construction Products Directive. FEP is heavily involved in the preparation of this document, and is contributing to a solution for the "reaction to fire" requirement which should make it possible that parquet manufacturers can base the future marking on a well-defined table with fixed values, thus avoiding additional fire testing of products, and consequently costs. Copies of the adopted standards are available through the national standardization institutes.

More information on this issue is available from the FEP Secretariat in Brussels, (Fax: +32 2 5565595 / info@parquet.net

FEP/Euparal, February 2003

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From left to right: L. Schindler, U. Windmöller, EPLF-director P.H. Meyer

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Michel Cognet Deputy Chairman of the Board (Tarkett Sommer)

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Pergo AB and the main shareholder of Witex AG - HW Industries GmbH & Co. KG - have signed a Letter of Intent concerning a merger between Pergo and Witex.

Presently Pergo owns a minority share of 25,1% in Witex, while HW Industries owns all the remaining shares. According to Pergo “the integration of Pergo and Witex will create a very strong, global laminate flooring group with leading market positions. Witex’s know-how in manufacturing combined with Pergo’s strengths in marketing and innovation forms a platform for profitability and future growth.”
The structure of the potential merger is that HW Industries will transfer all of its shares in Witex to Pergo. As payment, Pergo will issue new shares to HW Industries, whereby HW Industries will become a major shareholder in Pergo. The merger is conditional upon i.a. the execution of a binding agreement, customary due diligence, possible antitrust approvals and the approval of the issue in kind at an extraordinary shareholder meeting in Pergo. The parties aim to sign a binding agreement before year-end.

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The Karelia Corporation expands its wood flooring factory in Kuopio. The investment with a value of 12 million euro will double the factory’s capacity. Karelia wants to intensify the production with the implementation of a quite new kind of production technology.

Five million euro of the investment is directed to the factory enlargement, seven million euro to the new production equipments and machineries. The enlargement has to be completed next summer and will bring 70 new jobs until the end of 2004. According to Karelia the investment decision concerns the fourth enlargement stage of the Kuopio factory, which was built in 1998. 7.000 m2 of new production areas and 2.000 m2 of covered external storing areas will be built. Once the project is finished the total area of the factory will amount to 27.000 m2.

Kuopio Factory

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Laminate flooring’s wholesale prices drop in USA

According to trade magazine Floor Covering Weekly laminate flooring’s average wholesale price in the USA dropped from a $1.75 per square foot to $1.50 last year.

Last year, 68 percent of U.S. laminate flooring sales went through specialty retail (including installation) for an estimated $1.9 billion. This is a 3-percentage point drop in volume from 2000, marking the undeniable shift in volume toward home centers a segment that accounted for roughly 27 percent (or $750 million) of laminate flooring sales at retail last year. Laminate flooring shares attributed to lumber yards, furniture stores and various other laminate flooring sources increased to 5 percent during 2001 and increase of two percentage points over 2000. Floor Covering Weekly notices that prices of cheaper laminate floors keep falling in 2002, mainly due to large volumes coming in from Europe, where markets are stagnating. Furthermore higher end products tend to become more expensive, as a result of the growing amount of renovations.

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Armstrong reports third quarter results

Armstrong Corporate Headquarters

Armstrong Holdings reports a 2002 third quarter net sales of $846.0 million, as compared to $804.9 million in the third quarter of 2001, an increase of 5.1%. Increases in Wood Flooring, Building Products, Resilient Flooring and Cabinets were partially offset by a decline in Textiles and Sports Flooring.

“We are showing progress in our operations with the Wood Flooring business performing very well and the Building Products business continuing a solid performance,” says Armstrong Chairman and CEO Michael D. Lockhart. “At the same time, a weak economy in Europe and cost increases related to medical benefits and pensions continue to negatively affect our results.” Resilient Flooring net sales of $314.6 million in the third quarter of 2002 increased 3.8% from $303.2 million in the third quarter of 2001. This primarily resulted from an increase in the Americas net sales of 3.7% due to volume gains in laminate and improved product mix in commercial sheet and linoleum, partially offset by an unfavorable product mix in certain residential products. Excluding the effects of favorable foreign exchange rates, Europe decreased 6.3%, primarily due to lower sales of linoleum products. Operating income of $21.5 million in the third quarter of 2002 compared to $28.3 million in the third quarter of 2001. This decrease was primarily due to higher selling expenses and unfavorable price and mix in the Americas, partially offset by higher sales and lower advertising expenses.

Wood Flooring net sales of $180.3 million in the third quarter of 2002 increased 13.5% from sales of $158.9 million in the third quarter of 2001, driven primarily by increased volume and pricing in the independent channel. Operating income of $10.0 million in the third quarter of 2002 compared to break even performance in the third quarter of 2001. According to Armstrong the increase in operating income was driven by higher net sales, improved production efficiencies, lower lumber costs and lower selling expense, partially offset by increased personnel and medical costs, and costs associated with exiting aproduct line and a provision for an accident. Textiles and Sports Flooring net sales of $68.6 million decreased 4.9% in the third quarter of 2002 compared to $72.1 million in the third quarter of 2001. Excluding the effects of favorable foreign exchange rates, net sales decreased 13.8% due to the weak European market. An operating loss of $1.7 million in the third quarter of 2002 compared to an operating loss of $6.9 million in the third quarter of 2001. The change was primarily due to a fixed asset impairment charge of $8.4 million in 2001 and the unfavorable impact of lower net sales.

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Pergo announces positive result

Raimo Issal

The operating profit for the first three quarters of the Swedish laminate manufacturer Pergo amounted to MSEK 28 (-188) and profit before tax amounted to MSEK 23 (-220).

Net sales amounted to MSEK 2,464 (2,760). Excluding currency effects, sales for the period decreased by 9%. Cash flow from current operations during the nine-month period was positive and amounted to MSEK 299 (-140). During the same time net debt decreased to MSEK 21 (608).
According to Pergo the action program is proceeding better than planned. Savings to date this year exceed MSEK 300. The target for the action program has been raised from at least MSEK 500 to at least MSEK 600. The estimated operating result for full year 2002 has been changed from MSEK 50 to at least MSEK 50 and the cash flow from the operations will be positive in 2002.
“It is positive that Pergo continues to make profit and will reach communicated target,” says Mr Raimo Issal, President of the Pergo Group. “The action program, which is the key to this success, has developed better than expected. We are on the right track of bringing Pergo to profit but we still have much to do before we reach the financial goals.”

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Interim Report Pergo

Pergo's plant in Trelleborg

Last month the Swedish laminate manufacturer Pergo was in the news almost every week. Of course most of the news was about patent infringement but besides that Pergo published their interim report over the first six months and announced the resignation of Lars von Kantzow on Oct. 1 as president and CEO of the firm’s North American operations and the termination of their cooperation with Witex.

According to the interim report net sales during the first six months amounted to SEK 1,740 M (2001: 1,856), which after elimination of foreign exchange effects was a decline of 9%, compared with the preceding year. The reduction in sales was due to lower prices, particularly in the US, as well as a decline in volumes in Europe following the planned phasing out of deliveries of low price products to IKEA, which have now been discontinued. Pergo estimates the laminate flooring market to have a continued low volume growth in an otherwise declining market for flooring products. Competition creates in general a continued price pressure in the mid- and low price segment.

Clickjoints
In July 2002, Pergo was granted a new patent for clickjoints by the US Patent and Trademark Office, USPTO. The patent is in addition to the patent Pergo was awarded by the USPTO in June 2002. As a consequence,
Pergo initiated legal proceedings against four competitors, which included Witex US, in the US market. Pergo terminated the shareholder agreement with Witex AG and its principal owner HW Industries GmbH & Co KG. The reason is that Pergo considers that Witex is in violation of the agreement on several important points. Pergo will also request economic compensation for the loss incurred in conjunction with the contract violations. Pergo’s termination and its claim for compensation are expected to result in a legal dispute. Partly in view of the termination of the shareholder agreement, Pergo does not intend to exercise its option to acquire an additional 23.9% of Witex AG. Alloc in response, initiated litigation against Pergo in Federal Court to invalidate Pergo’s June 4 patent asserted against Armstrong. This because Alloc licenses a version of its patented mechanical locking system to Armstrong.

Outlook for 2002
Pergo thinks the new patents granted to Unilin in Europe and Pergo in the US have significantly increased uncertainty in the market. This since it is not clear which companies will have the right to continue milling click systems directly on the carrier. In addition, it is difficult to foresee over the short term what the compensation levels for these rights will be and whether this will result in the selling off of existing products. The weaker development for Pergo in speciality in the US and the uncertainty regarding how the patent situation will develop and its impact on the market makes the prediction for the development of the second halfyear difficult. At present, Pergo’s earnings forecast of an operating profit of SEK 50 M for 2002 is retained.

Kantzow steps down
In the meantime Lars von Kantzow has announced his resignation from Pergo Group on Oct. 1 as president and CEO of the firm’s North American operations. A successor has not been named. “Nine years as CEO of any company is a long time; I’ve been through a lot and I’ve seen this wonderful project fruition,” Von Kantzow said to Floor Covering Weekly. “This is not a decision that one comes to overnight,” he said. “I’ve been playing with these thoughts for a couple of years and have discussed it very openly with my boss. There’s just never been a good time to do it. In the beginning of the year we had the layoffs and, as painful as it was, I really wanted to do that personally to make sure it was handled like I wanted it to be. But now, with the new fiscal year and operating plant, it’s better to have someone else step in.” Raimo Issal, president and CEO of Pergo considers Von Kantzow one of the reasons behind the succes of Pergo in the USA. “Lars has been instrumental in making Pergo a household name in the U.S. and the undisputed market leader in laminate flooring.”

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