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Electronics Production | March 02, 2010

Neways sees recovery after loss-making year

The Netherlands based EMS provider Neways recorded a net loss of € 4.6 million excluding exceptional charges in 2009.
The loss was recorded primarily in the first half of the year, in which Neways was faced with an unprecedented drop in demand due to the economic crisis. A recovery in demand from September onwards and the cost saving measures and reorganisations the company effected led to a moderately positive operating result in the final quarter of 2009. The order portfolio at year-end 2009 stood at € 56.0 million, a rise of 7% from end-June 2009. The first two months of 2010 showed a further increase in order intake.

Gross turnover dropped to € 206.3 million in 2009, down 22.8% from the previous year. Net turnover fell by 22.4% to € 188.4 million, which means internal turnover was in line with the previous year.

The decreases in turnover were due to a drop in demand across all activities. Demand lagged particularly in the first half of the year, with the semiconductor and automotive sectors hit the hardest. Turnover in other sectors was also under pressure, although the medical, telecommunications and defence sectors proved less sensitive to economic fluctuations. As from September, there was a notable recovery in demand from the semiconductor and automotive sectors. The situation in the other sectors remained volatile, but was positive on balance.

The total order portfolio as of year-end 2009 stood at € 56.0 million, a slight drop of 2% compared with year-end 2008, but an increase of 7% when compared with the end of June 2009. This increase is largely due to the recovery of demand from the semiconductor and automotive sectors.

The gross margin dropped by 22.2% in 2009 to € 77.4 million (2008: € 99.5 million). It remained virtually unchanged as a percentage of turnover at 41.1%. The shift in the product mix towards activities with a higher added value, such as development, prototyping and engineering of new components and systems, continued in 2009. During the course of the year, Neways started new development projects in close cooperation with its customers. These may form the first steps towards new production and complete product life cycle management orders. Due in part to the fact that the expansion of these activities should be seen partly as an investment in the development of reputation and track record, this did not have an immediate visible impact on margins in the past year.

Due to the economic crisis and the associated sharp drop in demand, in 2009 Neways continued to implement and further intensified the cost-saving measures introduced at the end of 2008. As a result of these measures, the number of FTEs was reduced by around 174 (9%) in the past year. A large part of the reduction was due to the downsizing of the flexible part of the workforce. Employee expenses were down 15.1% at € 58.5 million. The other costs, including housing, production, sales and consultancy costs were down 10.2%, excluding exceptional charges.

The operating expenses include a € 1.5 million (gross) exceptional charge for restructuring costs, which related to the merger of the subsidiaries Neways Electronic Assemblies and Neways Industrial Systems in Son. The annual cost savings are estimated at € 1.5 million.

The cost savings programmes and reorganisations implemented in 2009 have resulted in a total cost saving of € 12 million, with around € 4 million of this realised in the second half of the year. This led to a reduction in the breakeven net turnover level to € 195 million at year-end 2009, from € 220 million.

The operating result excluding extraordinary charges came in at a loss of € 4.0 million, compared with a profit of € 5.9 million in 2008. The operating result in the second half of 2009 was a loss of € 0.9 million, compared with a loss of € 3.1 million in the first half of the year. After four loss-making quarters, the operating result for the final quarter of 2009 was slightly positive again.

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