Micronic reports a weaker equipment market

Operating profit for the first nine months was SEK 114 (10) million, including SEK -112 (57) million for the third quarter. Operating profit for the period adjusted for capitalization and amortization of development costs totaled SEK 189 (99) million, of which SEK -85 (81) million referred to the third quarter. Profit after tax for the first nine months of 2006 was SEK 84 (3) million, equal to SEK 2.13 (0.07) per share. Profit after tax for the third quarter was SEK -79 (39) million, equal to SEK -2.01 (1.01) per share. The order backlog at the end of the period was SEK 425 (1,297) million and consisted of systems scheduled to ship during 2006 and 2007. “As previously indicated, the third quarter was weak in terms of sales. We work in an industry where demand for our products can change rapidly. This is also clearly visible in our order intake, which reached only SEK 113 million. The low order intake for display products is in line with our predictions for flat demand in the second half of 2006. In the semiconductor segment, both orders and sales fell short of expectations. We are now making an intensive effort to complete existing sales commitments in the fourth quarter," says Sven Löfquist, President and CEO of Micronic Laser Systems AB. “Our very low gross margin of only 3 percent for the third quarter is primarily attributable to soft sales and the product mix. Gross margin for the entire nine-month period was 55 percent. Due to the weak order level, we need to reduce our costs. This will be achieved mainly by decreasing the number of contract employees and consultants, but we will also be forced to downsize our own staff. The total effect of these measures will be an annual cost reduction of more than SEK 100 million". “Despite a disappointing third quarter, operating margin reached 12 percent for the nine-month period and more than 20 percent adjusted for capitalization and amortization of development costs," points out Sven Löfquist. “The aftermarket is an increasingly vital part of our business. Recent years have seen a steep increase in the number of installed advanced systems. As these systems reach the end of their warrantee periods, service revenue is expected to rise sharply over the next few years". “We anticipate a strong fourth quarter and expect to restore our key financial ratios. In our full-year assessment we are now predicting sales in the range of SEK 1,300 to SEK 1,500 million. Placement in the upper end of this range will require another major sale with recognition of income during the year, which we have the potential to achieve, " concludes Sven Löfquist. 1 SEK is equal to 0,1 EUR.