Annual report 2005

Annual Report of Dunapack Group for 2005

2005 was not a year of upheaval for the European paper industry. Supply increased faster than demand, driving prices down in all product segments. By autumn 2005, paper prices fell by EUR 40/tons, which meant operating at a loss for the entire European paper industry. The Group´s processing operations were also characterized by falling sales prices, but decreased raw material prices drove profits up to the planned level. The only exception was the Croatian subsidiary, where sales targets were not met and another significant loss was reported for the year.

For the above reasons, the Group failed to realize its targeted profits. Financial reserves, however, grew on account of decreased capital investments and acquisitions. Therefore, we still have sufficient funds at our disposal to meet our strategic objectives.

In 2005, Dunapack Ltd. implemented a number of capital investment projects in environmental protection and production line optimisation in an amount of HUF 1.155 million. Such projects included investments in paper machine no. 3 at Dunaújváros, such as the development of light weight production (at HUF 44 million) and replacement of the driving units of the drying section (at HUF 133 million), and reduced water consumption at the Csepel plant (at HUF 166 million). The most significant improvement in the paper processing business was the acquisition of a new folding-gluing machine, which cost HUF 158 million. With a considerable cut-back in capital investments for the maintenance of standards, only HUF 500 million was spent instead of the budgeted HUF 1 billion.

Only minimal investment activities were undertaken throughout the year, our only investment being a capital increase of HUF 124 million in our subsidiary in Poland, required for financing outstanding capital investment activities there. At the end of the year, a capital decrease in the subsidiary in Bulgaria (Rodinvest) involving no cash transaction was carried out, making Dunapack a direct owner of our production unit Rodina.

In 2000, Dunapack Ltd. introduced the ISO 14001 environment management system in all of its units, forming an integral part of a system of ISO 9001 quality assurance and OHSAS 18001 Occupational health and safety standards. Targets and tasks are set and evaluated.