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Electronics Production | July 18, 2008

NOTE estimates lower profit in 2008

NOTE today delivered a report indicating softlanding in sales but heavily decreased profit. The sales will turn up in H2 but profit will still be lower than last year when this year has ended, estimates, the company’s CEO Arne Forslund.
Swedish EMS provider NOTE in January initiated a cost reduction programme which so far has made 200 people redundant in Sweden. NOTE’s restructuring towards transferred work intense products to low cost regions and centralized purchasing services at the company’s logistics centre in Poland aims to strengthen the company’s profitability and that work will continue. However in first half the company didn’t manage to raise the profit and hold back the impact from price pressure and restructuring costs so NOTE’s slightly increased turnover, from 95.0 MEUR to 95.2 MEUR returned a decreased operating profit from 5.9 MEUR to 3.2 MEUR. Restructuring costs accounted for 2.1 MEUR in first half. Company’s net result in first half was 1.6 MEUR (4.1).

In second quarter the company’s turnover decreased from 49.9 MEUR last year to 49.8 MEUR. Operating profit went down from 3.2 MEUR to 1.7 MEUR. NOTE’s net result was 0.9 MEUR down from 2.4 MEUR last year.

“Our restructuring actions have exerted short-term downward pressure on our margins, particularly in the first half-year. Year to date, profits have been subject to costs of SEK 20 m to implement this change process. Mainly for this reason, our operating margin is down on the first half-year of last year. We have also felt increasing price pressure, particularly from international USD-dependent customers, and somewhat weaker demand, primarily from customers in the engineering sector. However, our recent acquisitions have resulted in sales remaining above previous-year levels”, NOTE’s CEO Arne Forslund commented.

Even though the company sees that the total sales in 2008 will exceed the sales of 2007 Arne Forslund expects weaker margins in 2008.

“We are now just over half way through a year featuring extensive change and challenges to our organisation. We’re building a new NOTE, which even by this year-end, will be far stronger than it was at the beginning. Despite market conditions deteriorating somewhat in the second quarter, we are seeing continued corroboration of our previous judgment that overall this year, there are prospects of exceeding the previous year’s sales. In the second quarter, we took a decision to accelerate and extend our headcount downsizing in Sweden. Even if we have already expensed the absolute majority of the costs of this change process, our margins will remain under pressure during the third quarter. The effect of the rationalisation package will appear progressively through the autumn. But as a result of somewhat weaker market conditions and extending our rationalisation package we expect full-year profits to be below the previous year’s level. We also expect to make more acquisitions of Nearsourcing Centres through the autumn, to increase our sales”, Arne Forslund added.
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