KML Carmel Container Sys

Carmel Container Systems Ltd. Reports Results for the Quarter Ended June 30, 2004 TEL-AVIV, Israel, Aug. 5 /PRNewswire-FirstCall/ -- Carmel Container Systems Ltd. ("Carmel" or the "Company"), a leading Israeli designer, manufacturer and marketer of containers, packaging materials and related products, reported today its consolidated financial results for the first half of 2004. Carmel's Ordinary Shares are traded on the American Stock Exchange (AMEX:KML). The financial results for the first six months of 2004 were primarily influenced by the following factors: -- The recession tendency that characterized the Israeli economy, since September 2000, caused a significant decrease in many economic areas, but changed slightly by the end of 2003 and the six first months of 2004, which in turn had a positive effect on the company's business, financial condition and results of operations. Such economic activities include: * Moderate improvement in the volumes of the local demands for customer's goods and private consumption in the first 6 months. * Slight increase in the volumes of the industrial export to the U.S.A. and Europe. * A growth in the gross national product that exceeds predictions, mainly because of the growth in the business product. -- The average level of price in packaging industry slightly increased during the first six months of 2004 compared to the end of 2003. -- In the first quarter of 2004 there was a slight growth in the volume of the Hi-Tech export, which encouraged industrial productivity. Carmel's results for the first six months of 2004 were improved compared to the results of the first six months of 2003. That improvement was achieved mainly by increased sales, which impacted positively all other parameters, including gross profit and net profit. There also has been a mild improvement in the average product sales prices of the company, which caused an additional improvement. The economic improvement only mildly affected the level of selling prices, which remains relatively low as a result of the continued recession in the local Israeli market in previous years. During the second six months of 2002 the price of raw materials increased slightly and remained at the same level during the first half of 2003. During the second half of 2003 and the first three months of 2004, the price of raw materials decreased slightly and as a result operating income increased slightly. In the second quarter of 2004 there has been a growth in the raw materials' prices, which partially affected the financial reports. The New Israeli Shekel ("NIS") devaluated by 2.7% against the Dollar during the first six months of 2004, as compared to a revaluation of 9.0% during the same period of 2003. Rate of inflation in Israel during the first six months of 2004 was 1.4%, as compared to a rate of inflation of -0.5% during the same period of 2003. The translation of NIS amounts into U.S. dollars is at rate of exchange of NIS 4.497 to $1 (which was the rate of exchange on June 30, 2004). As a result, the amounts presented in U.S. dollars in 2003 are different from the U.S. dollar amounts previously published by the Company with respect to such period. Revenues in the first six months of 2004 were NIS 194.6 million ($43.3 million), as compared to NIS 175.1 million, ($39.0 million) for the first six months of 2003. Revenues in the second quarter of 2004 were NIS 93.0 million ($20.7 million), as compared to NIS 83.7 million ($18.6 million) in the second quarter of 2003. The increase in sales in the first six months of 2004, as compared to the first six months of 2003, resulted primarily from an increase in the volume of sales and an increase of the selling prices. Gross profit for the first six months of 2004 was NIS 28.1 million ($6.3 million), representing 14.4% of sales, as compared to NIS 14.6 million ($3.2 million), representing 8.3% of sales, for the first six months of 2003. Gross profit in the second quarter of 2004 was NIS 12.4 million ($2.8 million), representing 13.3% of sales, as compared to NIS 5.8 million ($1.3 million), representing 6.9% of sales in the second quarter of 2003. Operating income before financial expenses was NIS 9.9 million ($2.2 million) representing 5.1% of sales for the first six months of 2004, as compared to operating loss of NIS 3.0 million ($0.7 million), representing (1.7%) of sales for the first six months of 2003. Operating income before financial expenses in the second quarter of 2004 was NIS 3.5 million ($0.8 million), representing 3.8% of sales, as compared to operating loss before financial expenses of NIS 3.0 million ($0.7 million) representing 3.6% of sales in the second quarter of 2003. Financial expenses net for the first six months of 2004 were NIS 3.4 million ($0.8 million), representing 1.7% of sales, as compared to NIS 0.9 million ($0.2 million), representing 0.5% of sales, for the first six months of 2003. Financial expenses, net for the second quarter of 2004 were NIS 1.0 million ($0.2 million), representing 1.1% of sales, as compared to income of NIS 0.5 million ($0.1 million), representing 0.6% of sales for the second quarter of 2003. The decrease in actual financial expenses in the second quarter of 2004, as compared to the first six months of 2004, reflects a revaluation of the NIS against the Dollar of 1%, as compared to devaluation of 3% in the first half of 2003 and the transition to nominal accounting compared to 2003. Other income, net for the first six months of 2004 was net income of NIS 86.0 thousand ($19.1 thousand), as compared to net income of NIS 31.0 thousand ($6.8 thousand) during the first six months of 2003. Income before taxes for the first six months of 2004 was NIS 6.6 million ($1.5 million), representing 3.3% of sales, as compared to loss before taxes of NIS 3.8 million ($0.8 million) for the first six months of 2003, representing 2.1% of sales during that period. The income before taxes on income in the second quarter of 2004 was NIS 2.6 million ($0.6 million), representing 2.8% of sales, as compared to loss before taxes of NIS 2.6 million ($0.6 million) representing 3.1% of sales in the second quarter of 2003. Tax on income for the first six months of 2004 was NIS 1.4 million ($0.3 million), as compared with a tax benefit on income of NIS 1.4 million ($0.3 million) for the first six months of 2003. The tax on income for the second quarter of 2004 was NIS 0.2 million ($0.05 million), as compared to a tax benefit of NIS 0.9 million ($0.2 million) in the second quarter of 2003. Net income for the first six months of 2004 was NIS 5.1 million ($1.1 million), representing 2.6% of sales, as compared to a net loss of NIS 2.2 million ($0.5 million), representing 1.2% of sales of the first six months of 2003. The net income in the second quarter of 2004 was NIS 2.3 million ($0.5 million), representing 2.4% of sales, as compared to a net loss of NIS 1.6 million ($0.4 million), representing 2.0% of sales in the second quarter of 2003. Income per share for the first six months of 2004 was NIS 2.11 ($0.47), as compared to net loss per share of NIS 0.91 ($0.20) for the first six months of 2003. The income per share in the second quarter of 2004 totaled NIS 0.95 ($0.21), as compared to loss per share of NIS 0.68 ($0.15) for the second quarter of 2003. In the first six months of 2004, the Company's positive cash flow from operating activities was NIS 14.0 million ($3.1 million), as compared to a negative cash flow from operating activities of NIS 5.3 million ($1.2 million) for the first six months of 2003. Depreciation and amortization in the first six months of 2004 was NIS 9.4 million ($2.1 million), as compared to NIS 12.2 million ($2.7 million) in the first six months of 2003. In the first six months of 2004, the positive net cash flow financed repayment of NIS 11.6 million ($2.6 million), in long and short term debt, and the Company's acquisition of NIS 2.2 million ($0.5 million) of fixed assets. In the second quarter of 2004, the company's positive cash flow from operating activities was NIS 6.2 million ($1.4 million), as compared to a positive cash flow of NIS 3.8 million ($0.8 million) for the second quarter of 2003. The positive net cash flow for the second quarter of 2004 was used primarily for repayment of NIS 4.8 million ($1.1 million) in net long- term company debt and short-term debts to banks and to finance the company's acquisition of NIS 1.2 million ($0.3 million) in fixed assets. The positive net cash flow for the second quarter of 2003 was used primarily for repayment of NIS 2.7 million ($0.6 million) in debts to banks, and to finance the company's acquisition of NIS 1.1 million ($0.2 million) in fixed assets. In view of the crucial impact of the political and economic situation in Israel on the Company's financial results, the Company's management continues to take significant measures to reduce costs in all areas in order to improve the financial results. Forward-looking statements with respect to the Company's business, financial condition and results of operations contained in this release are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements, including, but not limited to, fluctuations in product demand, the impact of competitive pricing as well as certain other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Carmel Containers Systems Ltd. Consolidated Unaudited Statement of Income Six months Ended June 30, 2004 NIS U.S. Dollars In millions, except In millions per share data June 30, June 30, June 30, 2003 2004 2004 Net sales NIS 175.1 NIS 194.6 $43.3 Gross profit 14.6 28.1 6.3 Operating income (loss) (3.0) 9.9 2.2 Net income (loss) (2.2) 5.1 1.1 Weighted average shares 2,400,000 2,400,000 2,400,000 Net income (loss) per 1,000 shares NIS (0.91) NIS 2.11 $0.47 Second quarter of 2004 NIS U.S. Dollars In millions, except In millions per share data Second Second Second quarter 2003 quarter 2004 quarter 2004 Net sales NIS 83.7 NIS 93.0 $20.7 Gross profit 5.8 12.4 2.8 Operating income (loss) (3.0) 3.5 0.8 Net income (loss) (1.6) 2.3 0.5 Weighted average shares 2,400,000 2,400,000 2,400,000 Net income (loss) per 1,000 shares NIS (0.68) NIS 0.95 $0.21 Translation of NIS to US Dollars is at the exchange rate of NIS 4.497 to U.S. $1.00, reflecting such exchange rate at June 30, 2004. DATASOURCE: Carmel Container Systems Ltd. CONTACT: Nestor Szwarcberg of Carmel Container Systems Ltd., +011-972-4-623-9350; or David P. Stone of Weil, Gotshal & Manges, +1-212-310-8403, for Carmel Container Systems Ltd.

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