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Electronics Production | February 12, 2009

PKC with net sales growth of 8%

Consolidated net sales grew 8% over the previous year, totalling EUR 311.7 million (288.6 million). Operating profit was EUR 21.0 million (28.2 million) and profit before taxes EUR 15.2 million (25.6 million).


Operating Demand & Deliveries
The demand for commercial vehicles decreased significantly during 2008, continuing its decline towards the end of the year. Our main customers' order backlogs also shrank due to the financial crisis and the downturn in the global economy. The most significant event of the year was the acquisition of MAN Nutzfahrzeuge AG's wiring harness business.

Growth in demand for electronics design and manufacturing services levelled off, but remained high throughout the year. In the electronics business the most significant event of the year was the successful start-up of the factory in China.

Acquisition of the Cable Harness Business in Poland
The PKC Group acquired the cable harness business of MAN Nutzfahrzeuge AG from MAN Star Trucks & Buses Sp. z o.o. located in Starachowice in Poland. The acquisition price was about EUR 21,6 million, of which EUR 5.5 million was recorded as goodwill.

PKC's Polish subsidiary, PKC Group Poland Sp. z o.o., will be responsible for the cable harness business operations. The business currently employs about 800 people and its net sales in 2008 amounted to about EUR 66 million. This business has been included in the PKC Group's consolidated financial statements as of 31 December 2008.

The acquisition brought a significant addition to PKC's customer base as the German MAN Group became a customer of PKC on the basis of a long-term supplier agreement signed at the same time.

Net Sales & Financial Performance (October-December 2008):
Consolidated net sales in October-December amounted to EUR 64.7 million (78.1 million), down 17.2% from the same period a year earlier. Consolidated operating profit totalled EUR 3.9 million negative (6.8 million positive), accounting for -6.1% of net sales (+8.7%). Depreciations amounted to EUR 3.3 million (2.0 million). Financial income and expenses were EUR 3.5 million negative (1.2 million negative). Profit before taxes was EUR 7.4 million negative (5.6 million positive). Profit for the report period totalled EUR 9.5 million negative (3.3 million positive).

Net Sales & Financial Performance (January-December 2008):
Consolidated net sales in the financial year totalled EUR 311.7 million (288.6 million), increasing by 8% on the previous year. Consolidated operating profit totalled EUR 21.0 million (28.2 million), accounting for 6.7% of net sales (9.8%). Depreciations amounted to EUR 9.4 million (7.6 million). Financial income and expenses were EUR 5.8 million negative (2.5 million negative). Profit before taxes was EUR 15.2 million (25.6 million). Profit for the financial year totalled EUR 5.6 million (17.6 million).

A programme for rationalising and improving the efficiency of operations was started during the second quarter and is still underway. The reorganisation of the North American operations was completed during the third quarter. In December, the PKC Group decided to close one of its two wiring harness factories in Russia and to move all of its production operations in China to one factory due to decreased production volumes and loss-making operations. The number of personnel was adapted to match the production volumes.

Personnel
During the period under review, the Group had an average payroll of 5,588 employees (4,971). At the end of the financial year, the Group's personnel numbered 5,652 employees (5,311), of whom 4,951 (4,576) worked abroad and 701 (735) in Finland.

Personnel cuts were made at various units within the Group. Around 800 new employees were transferred to the Group at the end of the year in conjunction with the acquisition of the business in Poland.

Events after the close of the financial year
As a result of the co-determination negotiations completed in January 2009, almost the entire personnel of PKC Group Oyj in Kempele, or 300 employees, were temporarily laid off for periods of a week or longer, and 60 people were laid off at PKC Electronics Oy's Raahe factory for a maximum period of three months.

Outlook for the Future
At present, it is difficult to estimate how long the current economic downturn will continue. However, we foresee the weak predictability of commercial vehicle demand and uncertainty concerning financing in general, coupled with the emptying of the stocks of vehicle manufacturers, keeping demand for wiring harnesses exceptionally low.

We also estimate that demand for electronics design and manufacturing services in the market will weaken compared with last year. In Asia, investments made in the infrastructure of mobile phone networks may have a positive effect on demand for PKC's products.

We predict that the operating profit continues to be negative for the first half of the year, our full-year net sales will decrease substantially and operating profit to remain weak. Full year estimation contains significantly more uncertainty than usual. Thanks to low need for capital expenditures and decrease of working capital, cash flows after investments are expected to be positive.

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