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PCB | May 05, 2006

Aspocomp's Q1 performance<br>was not satisfactory

Aspocomp's first quarter this year was affected by the gradual decline in the profitability of the Modules division and particularly the conversion project at the Salo printed circuit board (PCB) plant.
- Consolidated net sales in the January-March period amounted to EUR 40.7 million (EUR 39.9 million in 1-3/2005), remaining on a par with the reference quarter. - Net sales of the Printed Circuit Board division grew by 9.1 percent to EUR 37.2 million (34.1). Net sales of the Asian plants grew by 33 percent.

- Consolidated operating result weakened to EUR -3.6 million (-1.8), representing -8.7 per cent of net sales. As expected, the decline was mostly due to the ongoing conversion project at the Salo PCB plant and the sharpvdecrease in the profitability of the Modules division.

- Cash flow from operations was EUR 1.7 million (2.1) and investments amounted to EUR 5.7 million (1.9). Per-share cash flow after investments was EUR -0.20 (0.01). The figures in the report do not include the Mechanics division divested in September 2005.


OUTLOOK FOR THE FUTURE
The full-year net sales and profitability of the Aspocomp Group's Printed Circuit Boards division are forecast to improve compared with the previous year. The net sales and profitability of the non-core Modules division are expected to improve on the first quarter and the full-year result to be positive due to increasing deliveries under the current maintenance agreement. The Group's net sales in 2006 are expected to grow compared to the previous year and the result to rise into the black during the second half of the year.


MAIJA-LIISA FRIMAN, PRESIDENT AND CEO:
"Aspocomp's first-quarter performance was not satisfactory. It was affected by the gradual decline in the profitability of the Modules division and particularly the conversion project at the Salo printed circuit board (PCB) plant. The Salo plant's product margins were reduced by the delayed introduction of HDI PCBs manufactured with new technologies as well as a weaker yield in the new products' ramp-up phase. As a result, the plant's sales did not reach the level of the reference quarter.

Growth in the global handheld device market was strong during the quarter and the segment reported increases in the average price and product complexity. This surge has even led to a global supply shortage of HDI PCBs, used particularly in more complex mobile phones. The trend presents substantial growth potential.

The changes we are carrying through are taking the Group to the next technological level. The present growth in the global demand for high technology HDI PCBs is more than twice as fast as the growth for other PCBs. Market researchers forecast that the overall PCB market will grow to around USD 42 billion (almost EUR 34 billion) in 2006, with technologically complex HDI PCBs accounting for about 12 percent. The Asian market is forecast to grow over 8 percent, whereas the market in the rest of the world is expected to decline somewhat.

Given this development, our recent decision to invest in India was well timed. It deepens our cooperation with our global, fast-growing key customers. The plant will be the first HDI PCB production facility in India and is expected to be operational during the second half of 2007. The project has begun on schedule with the hiring of key personnel and the finalization of the plant engineering.

Although the investment in India will strengthen our position as a global PCB supplier, we are actively looking to expand further in Asia to supply our present and future growing customers. One priority is to secure sufficient production capacity in China. Our medium-term objective is to outpace technological high-end global PCB market growth, and to achieve that, we need to move on as swiftly as possible."


PRINTED CIRCUIT BOARD MARKET
In the global telecom network and automotive segments, demand for HDI PCBs remained at a healthy level during the review period. Strong growth continued in the handheld devices segment. The Aspocomp Group's customers in the handheld segment reported outstanding results and higher average prices, which indicated a boost in sales of high-end devices that utilize demanding HDI PCBs. Consequently, global HDI PCB demand during the quarter exceeded supply.

Together with gradually growing material prices, it created pressure to raise HDI PCB prices.

According to market estimates, overall global PCB production during the report period grew slightly over 2 percent on the previous quarter. In Asia, PCB demand grew markedly over 3 percent. Furthermore, HDI PCB production increased even faster and in China, in particular, it was estimated to have grown by about 10 percent since the end of last year.

Click here to view the full report.

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