Financial Development in July - September 2008
Operating profit decreased by 62% to €2.4 million (€6.3 million). Profitability was weakened by realized and unrealized exchange rate losses of €2.8 million. The exchange rate losses were related to sharp changes between the €, US$ and currencies in the countries where Salcomp has production. Especially the Indian rupee and the Brazilian real weakened considerably during the third quarter. The exchange differences were mainly due to intragroup receivables and payables. In addition, the operating profit was burdened by lower gross margin compared with the comparison period, mainly due to the decline in sales prices. The sales prices were lowered due to changes in the product mix, as well as tightening competition in the mobile phone charger market.

The Group’s net financial expenses were €1.3 million (€0.9 million). The financial expenses for the third quarter include €0.5 million (€0.1 million loss) of losses due to the unrealized exchange rate differences in intragroup loans. Taxes for the period totalled €1.1 million (€1.1 million). They include a deferred tax of €0.7 million (€0.7 million) resulting from the parent company’s tax-deductible goodwill amortization. The third-quarter net result amounted to €0.0 million (€4.3 million).

Cash flow from operating activities was €3.7 million negative (€1.5 million positive) due to an increase in working capital. Cash flow from operating activities, excluding the change in selling of receivables, was €0.9 million negative (€7.9 million positive).

Personnel
The Group employed 10,355 (9,241) people at the end of September: some 6,700 in China, 1,700 in Brazil and 1,900 in India. Hannu Hyrsylä, Vice President, Global Sourcing, was appointed as a member of the Global Management Team as of 12 August 2008. Other members of the Global Management Team are: Markku Hangasjärvi, President and CEO, Osmo Oja, Vice President, Global Operations, Niilo Oksa, Vice President, Human Resources, Antero Palo, Vice President, Sales and Marketing, Juha Raussi, Vice President, Research and Development and Markku Saarikannas, Vice President, Strategic Planning.

Antti Salminen, CFO, has accepted a position with another employer and will resign from Salcomp on 12 November 2008. Jari Saarinen has been appointed as the new CFO and a member of the Global Management Team as of 25 January 2009. Markku Saarikannas, VP, Strategic Planning, will act as the CFO from 13 November 2008 until 24 January 2009.

Pekka Kyyriäinen has been appointed Vice President, Global Operations, and a member of the Global Management Team at Salcomp as of 1 January 2009. Osmo Oja who is the present VP, Global Operations, will be in charge of the development projects in Salcomp’s global operations until autumn 2009 when he will retire. In addition to the responsibilities of VP, Global Operations, Pekka Kyyriäinen will continue as General Manager at Salcomp China and his place of business is Shenzhen.

Salcomp’s codetermination negotiations, which began in August, were concluded on 30 September 2008. The negotiations concerned all activities in Finland, and the target was to investigate the possibility to transfer some functions from Finland to China and centralize the Finnish activities to Salo, Finland. As a result of the negotiations, a total of 18 employments will be terminated. The Finnish activities will be centralized to Salo and the office in Kemijärvi will be closed by the end of April 2009.

Outlook for rest of the year
According to the estimates published by some of Salcomp's key customers and by various market research companies, the mobile phone market is expected to grow in volume by approximately 10% during 2008, compared with 2007. Net sales in 2008 are expected to grow compared with 2007, but the operating profit in value is expected to be below the 2007 level.