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Electronics Production | November 06, 2008

Smartrac with 18% increase in sales for Jan-Sep period

Smartrac reported sales of €79.8 million in the first nine months of 2008, which represents an improvement of some 18% compared to sales of €67.7 million in the first nine months of 2007.
Smartrac made full use of its production capacity and, although Smartrac was faced with a very challenging environment in its US ePassport business, the company has achieved its best quarter since inception. From July to September 2008 group sales exceeded €30 million (€30.2 million) for the first time representing 35% growth over the previous quarter.

Smartrac´s ability to compensate the significant decline in the US ePassport business with other projects and product lines is evidence of the strength of its diversified product portfolio. Due to the change in the product mix, ramp-up costs and extraordinary legal expenses, EBITDA from January to September decreased by 7% from €17.6 million to €16.4 million, still generating an EBITDA margin of above 20%. In the period under review, Smartrac is generating cash flow from operating activities of €13.9 million compared to €9.4 million a year ago.

The change in the product mix and the challenges in the ePassport business have led to Smartrac reassessing its sales for the fourth quarter. Smartrac now assumes its fourth quarter sales to be at least slightly up on the third quarter with a certain growth potential to finish the year close to the original sales target for the full year 2008. Management assumes total sales for the fiscal year 2008 to be in the range of €110 million to €120 million, representing a year-on-year growth in the range of 14% to 24%. In terms of profitability Smartrac assumes an EBITDA margin of around 20% in light of the changing product mix.

“Smartrac has returned a record quarter. In light of the economic environment in general and the development in our ePassport business in particular, the result is a strong performance. It shows the strength of our diversified portfolio and provides an indication of what Smartrac would have achieved if development in the US passport sector had been normal,” said Dr. Christian Fischer, CEO of Smartrac. “With the acquisition of Sokymat Automotive, entry into the Chinese market, the settlement of a licensee dispute, and a co-operation with Sony, we have realized important steps of our business strategy. Smartrac has delivered on its strategic objectives and again returned profitable growth from its operating business.”

Sales in the first nine months of 2008 in the High Security segment reached €45.9 million, representing a decrease of some 3% compared to sales of €47.5 million from the same period of the previous year. Due to a higher proportion of chip-sourcing, EBITDA in the nine month period ended September 30, 2008 fell disproportionately by some 6% to €14.8 million compared to €15.8 million from January to September 2007.

Sales in the Standard segment for the first nine months of 2008 of €34.3 million are 67% higher compared to sales of €20.5 million from the comparable period in 2007. With EBITDA of €3.5 million in the first nine months of 2008, the Standard segment returned a slight increase on the EBITDA of €3.2 million recorded in the same period in 2007. EBITDA growth in the first nine months of 2008 was not proportional to sales growth mainly due to a higher proportion of chip sourcing, the ramp-up costs for the new product lines such as eTickets with etched antennas, and RFID components for animal identification and logistics.

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