Elcoteq sales up 53%

The increase compared to the first quarter of 2005 was approximately 21% owing in particular to good demand for terminal products. The Group's operating income between April and June was MEUR 15.9 (MEUR 9.1), representing 1.6% of net sales. Operating income improved on the first quarter, notably in Communications Network Equipment, and the segment's operating margin exceeded 4% due to good production volumes and the favorable product mix. The Terminal Products business area's operating margin weakened slightly, however, due mainly to an emphasis in the product mix on higher-cost products as well as losses associated with certain ODM projects and the costs arising from expansion programs. Income before taxes was MEUR 12.1 (MEUR 6.5) and net income was MEUR 8.3 (MEUR 5.2). Earnings per share were EUR 0.27 (EUR 0.17). Gross capital expenditures on fixed assets in the April-June period totaled MEUR 17.8 (MEUR 16.5) or 1.8% of net sales. Capacity was also increased using operating leases amounting to MEUR 7.4. The bulk of investments took place in Europe, notably the new manufacturing plant in St. Petersburg, Russia. Depreciation amounted to MEUR 18.0 (MEUR 14.4). January-June net sales rose 46% on the same period last year to MEUR 1,792.4 (MEUR 1,228.5). Operating income was MEUR 25.4 (MEUR 17.2) and income before taxes was MEUR 18.6 (MEUR 13.4). Earnings per share were EUR 0.41 (EUR 0.27). The Group's gross capital expenditures on fixed assets between January and June amounted to MEUR 39.4 (MEUR 36.4) or 2.2% of net sales. Depreciation totaled MEUR 35.0 (MEUR 28.1). At the end of June Elcoteq Group employed altogether 17,910 (14,647) people, 998 (925) of whom worked in Finland and 16,912 (13,722) elsewhere. The geographical distribution of the personnel was as follows: Europe 9,726 (8,477), Asia-Pacific 5,125 (4,873) and Americas 3,059 (1,297). On average Elcoteq employed 18,620 (14,023) people between January and June, and the average number of people on Elcoteq's direct payroll was 14,775 (12,885). Elcoteq has two business areas: Terminal Products and Communications Network Equipment. In the second quarter of 2005 Terminal Products contributed 81% (76%) and Communications Network Equipment 19% (24%) of Elcoteq's net sales. The companies within the Ericsson and Nokia groups accounted for altogether 68% (73%) of Elcoteq's second-quarter net sales. The figures do not include business activities with Sony Ericsson. April-June net sales of the Terminal Products business area totaled MEUR 795.0 (MEUR 489.8), increasing 62% on the same period last year and 23% from the first quarter of 2005. The segment's operating income was MEUR 19.4 (MEUR 10.3). April-June net sales of the Communications Network Equipment business area amounted to MEUR 187.1 (MEUR 152.2), up 23% on the same period last year and 13% higher than in the first quarter of 2005. The segment's operating income was MEUR 8.0 (MEUR 7.4). Elcoteq has three geographical areas: Europe, Asia-Pacific and Americas. Net sales in the second quarter were distributed as follows: Europe 56% (61%), Asia-Pacific 23% (21%) and Americas 21% (17%). Net sales in the second quarter showed clear growth in all geographical areas compared to the same period last year. Net sales in Europe rose 40% to MEUR 550.9 (MEUR 393.2). Net sales in Asia-Pacific increased 65% on the comparison period to MEUR 226.6 (MEUR 137.2). Net sales in the Americas grew 83% totaling MEUR 204.5 (MEUR 111.5), part of which was attributable to the Thomson acquisition at the end of 2004. Elcoteq estimates that for the full year 2005 its net sales will increase and its operating income from continuing operations will improve clearly compared to last year, and therefore the company's previous forecast for the full year remains unchanged. Net sales and operating income in the third quarter are expected to increase compared to the second quarter.