Ergis

Press Release

27 October 2006, 11:36

Eurofilms SA - Planed Profits Achieved After III Quarters

Eurofilms, the leading Polish manufacturer of stretch film, PVC thermoshrink film and BOPP film, after three quarters of this year (cumulative), has reached results better than in the same period of 2005: the revenue was higher by more than 25.9%, operating profit – by 17.9%, gross profit increased by almost 31%, and net profit – by nearly 8.5%.

After the results for the three quarters of 2006, the Company upholds its annual financial forecast of net profit as presented in the Issue Prospectus (PLN 5.54 mn). At the same time, Eurofilms makes an adjustment of revenue by almost 5%: down to PLN 127.5 mn from PLN 133.4 mn. The revenue adjustment follows from the prices of raw materials which were lower than expected which resulted in lower unit price of finished goods.

After the three quarters, cumulative, the Company generated sales revenue of PLN 93.2 mn compared to PLN 74 mn in the same period of last year. Operating profit is PLN 5.47 mn while it was PLN 4.64 mn a year before. At the same time gross profit amounted to PLN 4.52 mn – PLN 3.45 mn last year, and net profit amounted to PLN 3.96 mn while in 2005 – PLN 3.65 mn.

Financial data of the Company are presented below: In PLN mn

Q3 2006

Q3 2005

change in %

3 quarters of 2006 cumulative

3 quarters of 2005 cumulative

change in %

Net sales revenue

37.10

26.27

+41.23

93.22

74.06

+25.87

Operating profit

2.24

3.03

-26.07

5.47

4.64

+17.89

Gross profit

2.23

2.76

-19.20

4.52

3.45

+31.01

Net profit

1.96

2.93

-33.11

3.97

3.66

+8.47

The results achieved by Eurofilms during the three quarters of 2006 are better than assumed in the budget prepared for that period. Although the revenue is lower than budgeted by almost 4%, which is a result of lower unit price of finished goods, profit on sales grew by almost 12% as compared to the budgeted figure. Gross profit is more than 20% and net profit is more than 11% higher.

It must be also pointed that only in the third quarter of this year margins dropped as compared in the third quarter of 2005. This is a result of reduction of the seasonality effect which gave higher unit margins in the second half-year. As a result, in previous years, with the fixed costs maintaining at the same level, the second half-year, and in particular the third quarter, brought better financial results. This year showed a trend of balancing the results generated in individual quarters, which has been proven by better results of the first half-year in 2006 as compared with the first half-year of 2005.

“Reduction of seasonality in our business does not translate into worse results for the whole year. I believe that this trend will contribute to the improvement of transparency of our business for the investors. We are satisfied with the results achieved during the three quarters of 2006. We sustain our forecasts for this year as shown in the issue prospectus,” says Grzegorz Kędzierski, the President of Eurofilms Board.

The following investments were completed in the third quarter: purchase of a winder increasing the production capacity with respect to the PE stretch manual film, as well as the replacement investments, as provided for in the budget. After the three quarters of 2006, from the pool of budgeted investments expenditure of PLN 17,930,000, PLN 2.3 mn still remains to be invested: the planned investments primarily include the purchase and launching of the PVC thermoshrink film production line and the purchase of a film winder, as well as replacement investments. Majority of investment commitments have been completed; the amount of lease liabilities as at the end of third quarter amounted to PLN 1.8 mn. The Company does not expect to exceed the budgeted investment expenditure. The proceeds from the issue of Series D Shares of 15.2 mn (after issue costs) will be the source of financing of further investments.

Updated financial forecasts of Eurofilms for 2006 assume sales revenue of PLN 127.5 mn and net profit at the level of PLN 5.54 mn. At the same time, according to the assumptions made, in 2007 the sales are expected to increase up to PLN 154.3 mn, and the net profit is expected to exceed PLN 8.1 mn.