Lego's first half surprises
By Staff -- Gifts and Dec, 8/29/2007 7:53:00 AM
BILLUND, Denmark—The Lego Group outperformed expectations in the first half of 2007, with sales and profits before taxes both up.
The construction toy company’s sales during the first six months of this year rose 5 percent to 2.96 billion kroner (DKK) compared with DKK 2.82 billion in the corresponding months of 2006. The increase was due in particular to higher sales of its Lego City, Lego Technic abd Lego Star Wars lines. Its new Aqua Raiders theme also proved popular in its first half year, the company said.
According to Lego, sales in all of its markets recorded higher sales. The company said its American sales rose “especially well” during the period. Its direct sales to consumers through its Brand Retail stores, mail order and internet shop “continue to develop positively,” it added.
Lego’s profit before tax for the first half year was DKK 173 million compared with DKK 168 million for the same period the previous year, an improvement the company attributed to a combination of higher sales and a postponement of certain cost items. Results had been expected to decline on account of investment in Lego’s business platform, including IT, production and innovation.
At the end of the first half year, Lego’s equity was DKK 765 million compared with DKK 274 million at the end of the corresponding period in 2006. Cash flow from operations finished at DKK 208m, unchanged in relation to the same period of 2006.
“The [first half] result demonstrates that our core products and values are the right ones, and at the same time we have enjoyed the benefit of a positive note on most of our markets. This is extremely useful in a situation in which we continue to invest many resources in preparing the Group for the future,” said CEO Jørgen Vig Knudstorp.
Looking forward, Lego said it would scale back on its plans to outsource additional production in light of the need for increased capacity to meet higher demand. “It has now been decided that further relocation of molding activities scheduled to commence in late 2007 will be postponed 12 to 15 months. As a result, there will be no transition related workforce reductions this year,” according to a company statement.
Lego is raising its forecast for the full year to DKK 900 million compared with the DKK 550 million it anticipated at the beginning of the year. The expected improvement is due largely to higher revenue. Total sales for the year are now expected to equal the 2006 level—approximately DKK 7.8 billion.
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