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© PKC Group Electronics Production | February 21, 2011

PKC Group with net sales growth of 56.6% Y-o-Y

“During the final quarter, the sales of PKC Group continued to grow along with the recovery of the markets. Sales increased in both business segments and in all of our market areas. [...] Profitability improvement was limited by unfavourable price development of raw and other materials. However, profitability remained at a good level thanks to the growth in sales and the cost reductions made earlier", states Harri Suutari, President and CEO.
Operating Environment - Wiring Harness business

Registrations of heavy trucks increased in Europe (EU, Norway and Switzerland) in 2010 by about 8% compared to 2009. About 179'000 heavy trucks were registered during the financial year. The number of registrations in Europe is still exceptionally low. The industry and analysts expect the number to increase to about 220'000 – 230'000 registrations in 2011.

In Brazil, deliveries of heavy trucks increased by about 64% from the previous year, totalling about 110'000 vehicles. Our customers’ order volumes from the final quarter support the automotive industry’s general assumption of the markets remaining at least at the current level in 2011.

Registrations of heavy trucks in North America increased in 2010 by about 20% from the previous year, totalling about 140'000 trucks. The industry and analysts expect the number to increase to about 220'000 registrations this year. The order intake from the last four months (October 2010 to January 2011), about 100'000 vehicles, shows signs of strong growth in North America.

In North America, the recreational vehicle deliveries of our customers increased in 2010 by about 50% from the previous year’s level.

Although PKC Group has no wiring harness production of its own in Asia, the increasing export to Asia by our customers supports the growth of PKC’s production volumes.

The sales of construction equipment increased in Europe by about 4% from the previous year. The market is expected to growth a further 5 – 15% during 2011.

Sales of agricultural tractors declined in Europe in 2010 by 10% from the previous year’s sales. By contrast, forestry equipment sales increased from the exceptionally weak comparison year.

Operational Environment - Electronics business

The recovery of the global economy and revival of the electronics industry increased the demand for the design and manufacturing services of PKC’s Electronics business in 2010. In particular, customers in the industrial electronics and energy segments increased their sales during the latter half of the year.

Due to the global growth in the electronics industry, there have still been problems in the availability of electronics components.

Net Sales & Financial Performance - October-December 2010

Consolidated net sales from October-December amounted to EUR 91.9 million (EUR 55.4 million), up 66.0% on the same period a year earlier. Consolidated operating profit totalled EUR 9.8 million (EUR 2.6 million), accounting for 10.6% of net sales (4.8%). During the report period were reported EUR 0.2 million in non-recurring expenses (the operating profit on the same period year earlier included a non-recurring item of EUR 0.7 million as a result of the costs of rationalisation being lower than what had been estimated).

Depreciation amounted to EUR 2.5 million (EUR 2.6 million). Financial items were EUR 3.1 million negative (EUR 0.8 million negative). In addition to EUR 0.7 million interest expenses, a translation loss of EUR 0.8 million related to the translation of subsidiaries’ financial statements, as well as exchange rate loss caused mainly by Group’s internal liabilities totalling EUR 1.6 million have been entered into the financial items. Profit before taxes was EUR 6.6 million (EUR 1.8 million). Profit for the report period totalled EUR 5.3 million (EUR 3.2 million). Earnings per share were EUR 0.29 (EUR 0.18).

Net Sales & Financial Performance - January-December 2010

Consolidated net sales from financial year amounted to EUR 316.1 million (EUR 201.8 million), up 56.6% on the previous financial year. Consolidated operating profit totalled EUR 29.7 million (EUR 0.7 million), accounting for 9.4% of net sales (0.3%). The result was burdened by EUR 1.8 million (EUR 4.3 million) mainly in non-recurring rationalisation expenses.

Depreciation amounted to EUR 10.7 million (EUR 11.0 million). Financial items were EUR 4.7 million negative (EUR 0.4 million). In addition to EUR 2.0 million interest expenses, a translation loss of EUR 1.0 million related to the translation of subsidiaries’ financial statements as well as exchange rate losses caused mainly of Group’s internal liabilities totalling EUR 1.8 million have been entered into the financial items. Profit before taxes was EUR 25.0 million (EUR 1.1 million). Profit for the financial year totalled EUR 19.7 million (EUR 2.3 million). Earnings per share were EUR 1.09 (EUR 0.13).

Net sales generated by the Wiring Harness business in the financial year amounted to EUR 242.4 million (EUR 149.4 million), or 62.3% more than in the previous financial year. The segment’s share of the consolidated net sales was 76.7% (74.0%). Wiring Harness business generated an operating profit of EUR 24.5 million (EUR 3.9 million negative), equivalent to 10.1% of the segment’s net sales (2.6% negative). The result of the Wiring Harness business was burdened in total by EUR 1.8 million (EUR 4.4 million) in non-recurring expenses.

Net sales generated by the Electronics business increased by 40.4% to EUR 73.7 million (EUR 52.5 million). The segment’s share of the consolidated net sales was 23.3% (26.0%). Electronics business generated an operating profit of EUR 7.7 million (EUR 4.6 million), equivalent to 10.4% of the segment’s net sales (8.7%).

Personnel

During the financial year, the Group had an average payroll of 5'039 employees (4'478). At the end of the financial yaer, the Group’s personnel numbered 5,765 employees (4'077), of whom 5'326 (3'617) worked abroad and 439 (460) in Finland. In addition the Group had at the end of the financial year 708 rented employees.

As a result of the co-determination negotiations concluded in March 2010, it was decided to lay off a total of 45 persons from PKC Wiring Systems Oy. Non-recurring costs arising from layoffs were recorded during the first half of the year to the total amount of EUR 0.6 million.

As a result of the co-determination negotiations concluded in August 2010, it was decided to lay off a total of 31 persons from PKC Wiring Systems Oy. Non-recurring costs arising from layoffs were recorded during the third quarter of the year to the total amount of EUR 0.5 million.

Outlook for the future

The number of orders received by automotive industry customers during the final quarter exceeded the number of vehicles they delivered within the same period. The industry is anticipating significant growth this year on the recovering European and North American markets. Markets in the developing countries are also expected to keep growing. Based on this, PKC Group are expecting an increase in the net sales of the Wiring Harnesses segment compared to last year.

Customers in the industrial electronics and energy segment steadily increased their sales last year, and the company expects this growth to continue. It is also estimated that the net sales generated by the electronics design and manufacturing services will increase this year. PKC Group estimates that its net sales and comparable operating profit will increase in 2011 from the previous year’s level. In 2010, net sales amounted to EUR 316.1 million, and operating profit before non-recurring items was EUR 31.5 million.

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