Annual report 2003.

Economic growth in Hungary slowed down further in 2003. The forint exchange rate fluctuated widely during the year, with a detrimental effect on the profitability of the Company’s exports, and the stagnation of industrial output in the first half of the year hampered substantial growth in our sales volume. Owing to stagnating European demand, paper prices fell in the first half of the year and remained under the projected level by more than 10%. Our manufacturing operation was characterized by slightly decreasing prices, but – especially in the second half – sales volumes were higher than planned. At the end of the year, substantial provisions had to be made partly to buy-back the Rambox Co. of Romania sold temporarily and partly for the environmental remediation of the Csepel site.

2003 was the year of capital projects and investments for the Group, and in line with corporate strategy, preparations for the future were made in nearly every area of operation. The close to one billion-forint investment into paper manufacturing has greatly improved consistency of paper quality and enabled us to satisfy customers’ demand for a constant paper quality.

Major developments were implemented in corrugated product manufacture during the year. This involved the simultaneous upgrade of five board making machines at different sites within the Group. Increased capacity means faster and more flexible service to customers.

The e-commerce service launched this year provides Dunapack’s customers with a direct channel of communication and a source of permanently updated sales information.

In the Nyíregyháza plant, a new converting machine was purchased and bag production was modernised at a capital cost of over a billion forints.
With the integration and development of the management information system, we have started to introduce an integrated financial and accounts system (EOS project) which will involve all of our subsidiaries with a total cost of more than one billion forints at group level. We also pursued an active acquisition policy during the year. The new plant built as a greenfield investment went into production in Zabok, Croatia.