Wednesday 21 February 2007
Ratingvote -Danish toy maker Lego said Wednesday it was "most satisfied" after nearly tripling its after-tax profits in 2006 to 1.4 billion kroner (246 million dollars) following a long period of struggle. The positive result was mainly due to a new business strategy, company chief Jorgen Vig Knudstorp said when presenting the family- owned firm's financial statement.
Turnover rose to 7. 8 billion kroner, up by 11 per cent.
Lego had been struggling with declining turnovers and increasing losses since the 1990s, when children all over the world started playing more with computers and less with plastic bricks.
After its sale of all four Lego family holiday parks, huge job cuts and a return to the traditional core business, Lego also moved its toy production from its headquarters in Billund in the Jutland region into eastern European countries in 2006.
For the current year Knudstorp predicted another "marked fall in profits" with losses in turnover caused by a worldwide stagnation of the toy market.
Especially important Lego market outlets such as the US and Germany were "under pressure. " Lego suffered delivery bottlenecks during the crucial Christmas business due to the move of its production.
Wednesday February 21, 3:23 pm ET
ENFIELD, Conn., Feb. 21 /PRNewswire/ -- The LEGO Group's strategy to focus on its core business as a means to securing its future paid off in 2006, it was announced today during a press conference in the company's Billund, Denmark headquarters. With profits for the year amounting to $271.7 million USD (DKK 1,562 million), LEGO Group is in a very strong position heading into 2007.
Following the financial reconstruction of the company in 2004 and 2005, the years 2006, 2007 and 2008 will focus on bolstering a profitable core platform, with particular focus on continuing its measures to improve profitability and service levels to its retail partners. The results for 2006 are an important step in the implementation of the second phase of the company's corporate strategy and therefore contribute to securing the firm's future.
North American sales of classic product lines such as LEGO® CITY, LEGO Racers and the re-launched LEGO MINDSTORMS® developed more positively than expected. Balanced by strong demand for home-grown, story-driven properties like BIONICLE® and LEGO EXO-FORCE, plus momentum for hot licenses like LEGO Star Wars and LEGO SpongeBob Squarepants, North American consumer demand for LEGO products showed renewed strength.
"We are very pleased with our North American performance last year, with sales growth in both the U.S. and Canada that outpaced the industry and increased our construction category share in both markets," said Soren Torp Laursen, president, LEGO Systems, Inc., the North American division of the LEGO Group. "Consumer demand for LEGO products was higher in 2006 than it has been in four years, which underscores that our commitment to delivering a stronger core offering and more balanced LEGO portfolio is exactly what consumers want. We're confident that continued innovation of the classic LEGO play experience will help us maintain our foothold with consumers and lead us to growth."
Laursen continued, "2006 was not only a strong year for LEGO with consumers, but also for our retail partners, who saw considerable growth in their return on investment in LEGO business over previous years, which is fully aligned with our strategy to become a much more valued partner to our retailers. While the results were strong, we did leave business on the table in the fourth quarter -- something we're squarely focused on improving in 2007."
Commenting on the global performance Jorgen Vig Knudstorp, CEO said:
"I consider the results very satisfactory. It clearly shows that there is plenty of life and relevance in LEGO products and that our strategy of focusing on the core of our brand is the right approach. We are however very much aware that, despite the good results, we do not meet all our objectives in relation to being a sustainable business. Despite the announcement in 2006 of the outsourcing of most of the production, the employees delivered a great and impressive effort, even though the pressure on the employees has without doubt been very heavy. Furthermore, due to the unexpectedly great demand, we have not been able to meet the retailers' needs in a completely satisfactory way. In the coming years, we will increase our focus on meeting our objectives in relation to all our stakeholders".
This year, LEGO Group will increase investment in outsourcing, IT improvements and innovation as part of its continued focus on meeting objectives related to stakeholders and retailers. On the whole, LEGO Group anticipates that the global toy market will remain unchanged and therefore LEGO Group's largest markets, the USA and Germany, are expected to remain under pressure.