Electronics Production |
Note's sales down 30% in 2009
In 2009, sales reduced by nearly 30% to SEK 1,200.1 (1,709.5) million. Extra sales from newly acquired units were SEK 54.8 m, or just over 4% of sales for the year. Thus in like-for-like terms, the company saw a reduction of 33%.
Demand in the year was characterised by the marked deterioration of the manufacturing cycle apparent in late-2008. Reduced activity in manufacturing and destocking has had a negative effect on Note’s production and deliveries. New business sales progressed positively as planned. Considering the fairly long lead-times in the sector, only a limited portion of new business sales in the year started delivery.
Demand in Industrial, Note’s largest customer segment, is usually relatively stable in volume terms. One contributor is the relatively long product lifecycles in this customer segment. But mainly due to the weak economy, Note saw sales reduce by 25% in the year. Sharp downturns were apparent in segments including investment-intensive sectors like the mining and raw materials industries.
Compared to Industrial, demand from customers in the Telecom segment is inherently more volatile. In the year, sales to customers in Telecom fell by 47%. One strong contributor was Note’s largest customer amending its product range and discontinuing one product, which was significant to Note. In this context, a decision was made to cease production. These events led to the divestment of the operation at Skellefteå at year-end 2009. Stabilisation of demand from manufacturing became apparent in the autumn, while new business sales started to exert a progressive impact.
Note’s strategic initiative of centralising most of the group’s sourcing function achieved the desired results in the year. Coordination of sourcing operations improved, simultaneous with the cost of electronic components and other production materials reducing as planned.
Apart from costs of material, personnel costs are completely dominant in Note’s operations. The relocation of labour-intensive production to the group’s units in low-cost countries began back in early-2008. This initiative generated substantial staffing changes and downsizing of organisational resources, primarily in our Swedish business. Compared to the previous year-end, staffing in Sweden reduced by 41%.
These measures have made a significant positive change to the group’s cost structure. In like-for-like terms, and adjusted for non-recurring costs, costs in the period were down some 25% year on year. However, staff downsizing progressed more slowly than originally planned, which affected profits negatively in the year. Some SEK 10 m of the SEK 31 m restructuring provision created in the fourth quarter of last year for staff downsizing, remained at the end of the period.
Shorter working-hours have been introduced at several units as another savings measure against reducing production and sales volumes. Capacity utilisation in several production plants was lower than last year. Despite extensive cost-cutting and reduced cost of materials, volume contraction meant that gross margins weakened to 2.2% (7.2%). Adjusted for non-recurring costs, gross margins were some 6.8% (10.0%).
Apart from costs of material, personnel costs are completely dominant in Note’s operations. The relocation of labour-intensive production to the group’s units in low-cost countries began back in early-2008. This initiative generated substantial staffing changes and downsizing of organisational resources, primarily in our Swedish business. Compared to the previous year-end, staffing in Sweden reduced by 41%.
These measures have made a significant positive change to the group’s cost structure. In like-for-like terms, and adjusted for non-recurring costs, costs in the period were down some 25% year on year. However, staff downsizing progressed more slowly than originally planned, which affected profits negatively in the year. Some SEK 10 m of the SEK 31 m restructuring provision created in the fourth quarter of last year for staff downsizing, remained at the end of the period.
Shorter working-hours have been introduced at several units as another savings measure against reducing production and sales volumes. Capacity utilisation in several production plants was lower than last year. Despite extensive cost-cutting and reduced cost of materials, volume contraction meant that gross margins weakened to 2.2% (7.2%). Adjusted for non-recurring costs, gross margins were some 6.8% (10.0%).
