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PCB | March 30, 2009

Cicor with loss of CHF 21.6 million despite increased sales

Cicor Technologies Group, based in Boudry (Canton Neuchâtel, Switzerland) increased its net sales in 2008 by 2.6% to CHF 208.4 Mio. (PY: CHF 203.1 Mio.). Despite the onset of the economic downturn in the second half of the year, the group achieved a positive operating profit before depreciation and amortization (EBITDA) of CHF 20.8 Mio. (PY: CHF 24.4 Mio.).
Owing to an exceptional goodwill impairment of CHF 28.0 million, the operating result (EBIT) fell to CHF -17.6 million (previous year: CHF 14.8 million), leading to a loss of CHF -21.6 million (previous year: profit of CHF 11.4 million). However, strong operating cash flow and proceeds from the sale of properties allowed a substantial reduction in net debt from CHF 49.0 million to CHF 26.5 million. Despite the goodwill impairment, the Group was able to improve its relatively high equity ratio still further to 57.9% (57.2%).

After a good first half year, the economic downturn that began in the third quarter had a negative effect on Cicor Technologies' performance. The collapse in markets relevant to Cicor Technologies – automotive, semi-conductors and telecommunications – had a particularly dramatic effect on demand from these sectors. The slight increase in net sales to CHF 204.8 million is due mainly to the full-year consolidation of the ME Division, which was integrated in 2007, and to the acquisition of the ESG Group in May 2008. Acquisition-driven growth of sales came to CHF 19.3 million, or 9.5% of the total. Most of the CHF 13 million raised from the sale of real estate was used to pay back existing financial liabilities. Overall net debt fell substantially from CHF 49.0 million to CHF 26.5 million thanks to the operating cash flow generated and the sale of properties. The equity ratio was increased further to 57.9% (previous year 57.2%), which is remarkable by industry standards.

Goodwill impairment
Around CHF 9 million of the CHF 28 million goodwill impairment was accounted for by the PCB Division, and the remaining CHF 19 million by the EMS Division. IFRS accounting regulations meant that in 2005 the portion of the purchase price paid in shares for Electronicparc Group had to be booked at a share price of CHF 80, despite the fact that shares were trading at only CHF 60 when the binding declaration of intent was signed and the purchase price was fixed. The relevant accounting rules meant that the CHF 20 per share difference caused an increase in goodwill and equity of around CHF 10 million.

Performance of the individual divisions
The PCB Division generated net sales of CHF 49.6 million (CHF 55.2 million), a decline of -10.1% in 2008. Operating profit (EBIT) before exceptional impairment of goodwill fell from CHF 7.8 million a year ago to CHF 3.2 million. The EBIT figure also includes a profit of CHF 1.0 million made on the sale of properties. While the first half of 2008 went well, demand for prototypes and small series, especially in the semiconductor industry, and orders from the highly cyclical car industry both went into significant decline. The performance of the watchmaking industry provided a very welcome exception to this general trend. It achieved record sales throughout the whole year. Despite the introduction of cost cutting measures as early as in the third quarter, the PCB Division's overall results failed to meet expectations.

The ME Division posted a 54.8% increase in like-for-like sales to CHF 35.3 million (CHF 22.8 million). All three companies in the Division achieved new record annual sales, and operating profit (EBIT) went up to CHF 4.0 million (CHF 3.5 million). The main drivers of this solid performance were the defence, medical technology, and telecommunications industry and, for the first time, the printing industry. In November and December incoming orders declined slightly as a result of the general economic slowdown. On 1 April 2009 the former Deputy Head of Division Udo Dehne (44) will take over as Head. Udo Dehne has held several management functions within the ME Division since 2000.

In 2008, the EMS Division posted sales of CHF 123.6 million – thus achieving almost the same level as the previous year (CHF 125.1 million) despite the difficult market environment. ESG Group, consolidated since 1 May 2008, contributed CHF 11.3 million of the total. The Division's operating profit (EBIT) before exceptional impairment of goodwill increased by 12.0% to CHF 5.4 million (previous year CHF 4.8 million). The repositioning of Systel SA had a particularly beneficial effect, as did targeted investment in new equipment. The Division's competitive advantages include a global market presence, the ability to deal with a large number of complex products from different industries across their whole life cycle, and a high degree of vertical service integration.

By taking a stake in ESG Group, which has production sites in Singapore, Indonesia and Vietnam, Cicor Technologies has established a firm foothold in Asia to go with its strong presence in Germany and Romania. The Asian operation serves as a cost-effective purchasing unit for the whole group, and also allows Cicor to develop further in this high-growth, high-potential market.

Outlook
Cicor Technologies expects the challenging market situation to continue in 2009, though the continuing weakness will affect the businesses within Cicor Technologies to different degrees. The Group will adjust to the difficult business environment as required, and if necessary will expand the short-time working that it introduced in the PCB and EMS Divisions in the first quarter of 2009. If the economic situation continues to deteriorate and the orders coming into each division remain lower than expected, it is not impossible that jobs will have to be cut. The corresponding reductions in capacity are part of existing plans designed to adjust cost structures to business volumes.

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