AT&S strong & positive position – despite the ongoing crisis

How do you see the European PCB industry and its development in the coming years? Dr. Strasser: It must be said that the whole PCB industry – and in particular also the European PCB industry – in 4Q/2008 had to endure one of the largest decreases since 2000. Particularly hard hit are – of course – the market segments Automotive and Industrial, two segments that the European PCB industry is traditionally very strong in. We assume that the sales declines for the global PCB industry in 2009 will be around 16%. For the European PCB industry, we expect a decline of even 18% to 19%. Reasons for this decline are: Firstly, as said already, the two main segments – Automotive and Industrial – are particulary hard hit. Secondly, a further shift of standard technologies from Europe to Asia will occur under this market conditions. This impacts the European PCB industry currently strongly. What will remain in Europe, are the technologically more sophisticated products, as well as small series, prototypes and fast production. When will this difficult market situation subside and the European PCB industry can return to some growth? Dr. Strasser: This is of course the crucial question. We assume that we can expect a positive growth for the global PCB industry again in 2010; here we are talking about a low, single digit number growth – around 4%. The real recovery in the market, we can probably expect in 2011 – with higher growth rates. What industry segments are covered by AT&S and to what extend? Dr. Strasser: The industry mix at AT&S is as follows: Mobile Devices with 64%, Industrial Applications with 22%, Automotive with 10% and Others with 4%. Many big names in the PCB industry had to file for bankruptcy in recent weeks. How much is AT&S affected by the crisis? Dr. Strasser: We see the current situation rather as a chance than a threat, because the market adjustment opens additional opportunities for us. The market consolidation, which has been visible in this highly fragmented market in the past as well, is accelerated by the current economic crisis. Some of our competitors, which already struggled in a relatively good market environment, have to face considerable pressure in the current market situation. Healthy and well-established companies – like AT&S – will master these difficult times. For those companies, the consolidation will have lasting and positive effects, such as market share gains. Reports of failures within the PCB industry result in considerable uncertainty from many customers. The solvency of suppliers is gaining considerable importance. Individual customers now rethink their strategies and projects and approach other PCB manufacturers – such as AT&S. The cutthroat competition, which has always been strong in Europe, has intensified even more. AT&S presents itself as a solid partner to its customers. The company has a strong financial base; is stable and well-established. Something that is visible also through our quarterly reports. Did you also experience cancelled / postponed orders at AT&S? Dr. Strasser: There are obviously adjustments in order behaviour, since many customers now seek to hold their stocks small. This development has intensified since December last year. We at AT&S, however, have no withdrawals of entire orders. AT&S has introduced short-work at its Austrian facilities, even some redundancies were announced. What is the current situation? Dr. Strasser: You have to differentiate between strategic and temporary measures. The restructuring of our facility in Leoben-Hinterberg was a strategic measure – coinciding with the beginning of the economic collapse and the financial crisis. We produced PCBs for mobile phones at our facility in Leoben-Hinterberg for many years. This business has migrated successively to Asia. Because of this, we had to adjust our capacities from 215,000 m² to 130,000 m² (measured in produced PCB). The location Leoben-Hinterberg is still the largest HDI-facility in Europe; home to our R&D unit and now also a production hub for small series, prototypes, custom-made products and quick business. Given the current economic situation, we have also introduced short-work at our facility in Klagenfurt. This is one of several models available to companies in Austria to react to a temporary under-utilisation and to save costs. We are convinced that the need for those PCBs that we produce in Klagenfurt will pounce again. Mr. Lang: These measures were only implemented in Austria. In Shanghai – where we have our largest facility with around 3600 employees – we traditionally face a very strong employee fluctuation. As vacant jobs are not refilled – staff numbers can be adjusted. Are there new segments for AT&S to explore - such as medical or alternative energy sources? Dr. Strasser: Medical belongs to the Industrial Segment and is a very essential part in it. As for alternative energy sources; we are pursuing a project with our cooperation partner Solland Solar in the field of photovoltaic. We are currently still in the testing and evaluation phase, but all looks very promising. Here we offer foils – in principle, similar to large PCBs – for the production of solar modules. Again, we are nearing market launch. What about investment in 2009? Dr. Strasser: We will reduce investment sums this year quite a lot. Of course, our machinery and equipment will always be kept up-to-date, but we will only invest into capacity expansion if customer demand requires this. As we already have infrastructure, buildings and facilities, we can quickly respond to market demand and add additional capacity. Mr. Lang: Regarding investments in general, I want to mention the third stage of our factory in Shanghai. We will ramp up a third manufacturing line for the HDI-production during the current quarter. In addition, we have the ability to accommodate additional production lines, if need should arise. Moreover, we are currently constructing a second plant in India. The building and individual machines will be available until the middle of the calendar year. The new machines will add quality and synergies in cost savings to our already existing plant. The full ramp-up of the second plant in India will finally be executed once the market requires appropriate capacity again. Would you like to add something? Dr. Strasser: AT&S is well positioned in this current difficult market situation. Despite the restructuring in Leoben-Hinterberg and value adjustment for our factory in Korea, we were able to report a positive EBIT in our 9-month fiscal figures. If you exclude the one-off effects, we were able to record an EBIT of €28 million – which represents an 8% EBIT margin. This underlines the strong operating performance of AT&S. Together with equity of €240 million – we can represent a very solid financial base; and this again is greatly appreciated by our customers. Mr. Lang: AT&S is an international company and not just active on the European market. We are well positioned with locations in Austria and Asia. The breadth of our customer base is also very good. It includes 5 of the 6 biggest mobile phone manufacturers, all major suppliers to the automotive industry and well over 500 companies in the Industrial sector count on AT&S for their supplies. All this shows the strength of the company, our sustainable industry position and the trust that many companies – including large, global corporations – have in AT&S. Thank you for this interview.