Lego's profit falls as taxes go up

By Anastasia Tomazhenkova: Danish toy maker Lego posted that its last year earnings fell 20% due to higher taxes despite higher sales of its plastic building blocks.

The Lego Group reported net profit for the year totaled 1.03 billion kroner (203 million dollars), down from 1.29 billion kroner in 2006.

Sales rose by 3% to 8.03 billion kroner (1.58 billion dollars), from 7.8 billion kroner in 2006.

The biggest increases were seen in the classic product lines LEGO City, LEGO Technic and LEGO Creator as well as LEGO Star Wars.

Earnings were weighed down by a higher tax rate in 2007 than in 2006.

The privately owned group does not release quarterly figures, and reports net profit only in its full-year report.

Lego warned of "great uncertainty" in the toy market this year.

"The trends of stagnation and recession seen in the U.S. during the last six months of 2007 seem to continue in 2008," the company said, adding that a negative development in the U.S. could only partly be compensated for through gains in Europe and Asia.

"We will continue the effort to reduce production costs, and we expect the increasing oil prices as well as the declining dollar rate to put the group's earnings under pressure," said Lego Chief Executive Joergen Vig Knudstorp.

Lego spokeswoman Charlotte Simonsen said it was hard to say whether Lego's sales were boosted by last year's recalls of Chinese-made toys by some of its competitors, including Mattel Inc.

"Of course, in some markets, it has been mentioned that our products are seen as safe," she said.

The Lego Group is a family-owned company which employs about 4,500 people worldwide. Though the company is not publicly listed, it has published earning reports since 1997.

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Author`s name: Editorial Team