PCB | July 24, 2008

Weak US dollar pressures AT&S profit

In an overall weak first quarter, AT&S’s revenues held up to last year’s level, despite the weak US dollar. Earnings for whole financial year expected to be lower than previous year’s record levels.
AT&S posted revenues of EUR 115.2m for the first quarter of financial 2008/09, up 0.4% on the same period last year. Gross profit was down to EUR 15.9m, a decrease of 15%, and the gross margin was 13.8%, 2.6 percentage points lower than in the comparable period last year.

EBIT of EUR 5.6m was down 28% period on period, and the EBIT margin came out at 4.9%, lower by 1.9 percentage points than in the same period last year. AT&S’s pretax profit for the first three months was EUR 5.3m, a decline of 42%. Net income for the period was EUR 5.0m (down 45%). The effective rate of taxation for the first quarter was some 4.6%, resulting in earnings per share of EUR 0.22 (down by 45%).

Net debt at 30 June 2008 amounted to EUR 145.7m (EUR 123.7m a year earlier), with net gearing at 62.7%. Since 31 March 2008 net debt was down by EUR 10.6m.

Based on the available customer forecasts, the Group expects the coming quarter to produce higher capacity utilisation and a better product mix. However the present macroeconomic dangers, stemming from the financial crisis and the behaviour of the US dollar, make the market environment increasingly difficult to assess. From the present perspective, it is to be expected that the earnings for the whole of financial 2008/09 will not reach the record levels of the previous year. AT&S is therefore not currently prepared to give any precise guidance.

Seasonality of AT&S’s business and difficult market environment meant that margins came under pressure. US dollar and wage costs present a challenge to business in Europe. AT&S’s business is seasonal: the first and fourth quarters of the financial year generally produce lower capacity utilisation and less satisfactory product mixes, while capacity utilisation in the second and third quarters is as a rule extremely good. For a high fixed cost business like AT&S’s, reduced capacity utilisation means
immediate pressure on margins. The state of the general economic environment meant that the seasonal effect in the first quarter of financial 2008/09 was particularly marked, so that the pressure on
margins was exceptionally high.

The weakness of the US dollar and high wage settlements in Austria represent significant competitive drawbacks for volume production, which is why the concentration on European markets is being intensified in the Leoben-Hinterberg plants in particular. Prices for a large part of the Mobile Devices business, but also in the Industrial and Automotive sectors, (in total roughly 75% of total sales) are dependent of the US dollar, because AT&S’s competitors are almost without exception located in countries whose currencies
follow the dollar. Despite the fact that the value of the dollar against the euro has fallen by an average of 16% compared with the first quarter of financial 2007/08, sales revenues have managed to increase slightly, by 0.4%. At 30 June 2008 AT&S employed 6,338 people.

In the first three months of 2008/09, 63% of sales were generated by Mobile Devices, while Industrial/Medical contributed roughly 24%, and Automotive customers roughly 11%. DCC/Trading and Design accounted for 3% of the total. Net capital investment in the first quarter came to EUR 12m, with
the bulk going on further expansion of the Shanghai facilities.
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