Electronics Production | August 26, 2008
Neways post record profit in the first half 08
Dutch based EMS provider Neways has posted a record net profit of EUR 1.9 million in the first half of 2008, in line with the EUR 1.5 – 2.0 million forecasted in June.
This is compared to EUR 7.8 million in the exceptionally good first half of 2007. The lower profit is largely the result of a strongly reduced order intake from the semiconductor sector. Turnover and order intake in the other sectors are developing in line with expectations. Partly on the basis of the above and barring unforeseen circumstances, Neways expects net profit of approximately EUR 3 – 4 million for the full year 2008. Gross turnover in the first half of 2008 dropped 6% to EUR 142.8 million. Net turnover also fell by 6% to EUR 130.0 million. Turnover dropped in particular in the last months of the first half of the year due to a strong reduction in the order volume from the semiconductor sector. The 35% turnover drop in the semiconductor sector was only partly offset by higher turnover in other market sectors, such as defence, automotive and telecom. The order portfolio as of the end of June 2008 stood at EUR 68.2 million, down 9% compared with year-end 2007 and down 7% compared with the end of June 2007. The order portfolio in all sectors, with the exception of semiconductors, developed in line with expectations. The drop in turnover was accompanied by a drop in gross margin of 7.7% to EUR 52.9 million. As a percentage of turnover, the gross margin fell to 40.7%, from 41.3%. This was due to the shift in the product mix. The operational costs rose primarily due to an increase in wage costs, higher housing costs, and one-off costs relating to the move to new production facilities in Leeuwarden and Kassel. Partly as a result of the introduction of a minimum wage threshold (collective labour agreement) in the Netherlands, wage costs were up around 6%. Improvements in efficiency could only partly compensate for this increase. In addition, the drop in turnover resulted in capacity under-utilisation. Where necessary, measures have been taken and cost levels have been adapted to the lower activity level. For example, the hiring of third parties has been strongly reduced. The effects of such measures can generally be seen in the results some two months after the drop in turnover. Total operating costs increased by 6% to EUR 49.0 million. This reduced the operating result by 65% to EUR 3.9 million, which translates into an operating margin of 3.0%. The pre-tax profit was EUR 2.9 million, down 72% compared with the same period last year. The interest charges increased by 43% due to the higher capital use and an increase in interest rates. The effective tax burden was 32%, compared with 25% in the first half of 2007. The increase is largely the result of the losses booked in Slovakia. Due to this, net profit came in at EUR 1.9 million. In the past six months, Neways made considerable investments in its organisation. In addition to the usual investments in machines and test equipment, the first half of 2008 also saw investments in new production facilities. For instance, after extensive preparations at Neways Leeuwarden, the move to a new production facility in Leeuwarden was completed. This resulted in an optimized design of the production and logistics processes, which allows Neways to safeguard constantly rising quality demands and also adapt more effectively to the increasing technological complexity of the components and systems produced. Neways also realised a production location at Neways Electronics Production in Kassel. The move and the launch of this new facility has made the production and logistics processes more transparent and efficient and the processes now meet the clients’ requirements and wishes in every possible way. In order to further strengthen Neways’ position as a one-stop provider, the final operating company adopted the Neways name early this year. Evic Electronics was renamed Neways Electronics Echt from 1 January 2008.