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Electronics Production | October 27, 2004

Elcoteq, sales up 67%

Elcoteq's third-quarter net sales and operating income grew strongly compared both to the same period last year and to the second quarter of 2004.
Changes have taken place in recent years in the communications technology end-market and also in the electronics manufacturing services sector. Elcoteq has responded to these changes by further broadening its service offering and by increasing manufacturing capacity in all its geographical areas.

Third-quarter net sales rose 67% on the same period last year totaling MEUR 828.7 (MEUR 496.1). The increase compared to the second quarter in 2004 was almost 30%, the bulk of which came from Europe and Asia-Pacific.

Operating income between July and September more than tripled on the same period last year to MEUR 20.0 (MEUR 6.6). The reported operating income includes a one-time item of MEUR +2.3, and therefore operating income from actual business operations was MEUR 17.7. The claim concerning the value added tax charged by the Chinese authorities to Elcoteq's 70%-owned Shenzhen GKI company was settled during the third quarter. This added MEUR 2.3 to Elcoteq's operating income and raised minority interest by MEUR 2.2. The impact on the the Group's net income, therefore, was approximately MEUR +0.1.

Operating income was boosted by clearly higher than forecast production volumes in the Terminal Products business area, especially in Europe. Profitability, on the other hand, was weakened by the Communication Network Equipment's weak result, the main reason for which were temporary problems with production for a certain customer. The problems relate to production transfers within Elcoteq and their timetables and to clearly lower than planned production volumes. The situation is expected to be largely rectified during the final quarter of the current year.

Income before taxes totaled MEUR 17.2 (MEUR 4.8) and net income was MEUR 10.0 (MEUR 8.5).
Group's gross capital expenditures on fixed assets between July and September amounted to MEUR 46.7 (MEUR 21.8), or 5.6% of net sales. In addition to this, operating leases were signed for a total value of approximately MEUR 10. Depreciation was MEUR 15.9 (MEUR 14.4). Most of the investments were made in the manufacturing plants in Estonia and Hungary.

Elcoteq's largest customers are companies within the Nokia and Ericsson groups. During the third quarter these accounted for 72.5% (79.0%) of Elcoteq's net sales. This figure does not include the company's business activities with Sony Ericsson. Net sales between January and September increased 38% to MEUR 2,089.1 (MEUR 1,513.8). Operating income was MEUR 50.6 (MEUR 13.6).

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