Electronics Production | April 30, 2009

PKC: net sales decreased by 36.8%

PKC Group's net sales in the January-March period decreased by 36.8% from the previous year to EUR 53.8 million (85.1 million in Jan.-Mar. 2008). Operating profit was EUR 0.1 million (9.3 million) and profit before taxes was EUR 1.9 million negative (7.3 million positive).
Harri Suutari, President and CEO: “The rapid decline in production volumes in our customer sectors, particularly in the heavy commercial vehicle industry, led to a sharp drop in our operational result. The PKC Group's production volume fell by about 42% on the same period a year earlier. Thanks to cost-cutting measures carried out in the past 12 months, consolidated comparable operating expenses in the first quarter declined by about 30%. Reorganisation and cost-cutting measures will be continued. The result in the first quarter was burdened by EUR 0.3 million in non-recurring rationalisation expenses.”

Demand for heavy trucks saw a very sharp decline during the first quarter in all of our market areas. In Europe, our main market, the volume of deliveries dropped to half and the value of new orders received by our customers reached only a third of what it had been a year earlier. In South America, deliveries and new orders fell by half. Deliveries to the mechanical engineering industry were only about a third of last year's level. The production and deliveries of recreational products were halved in North America.

With the exception of the Asian markets, investments made by the industrial sector fell significantly early in the year, reducing the Group's industrial electronics deliveries by about a quarter.

Net sales and financial performance (January-March 2009)
Consolidated net sales in January-March amounted to EUR 53.8 million (85.1 million), down 36.8% on the same period a year earlier. Consolidated operating profit totalled EUR 0.1 million (9.3 million), accounting for 0.2% of net sales (11.0%). Depreciations amounted to EUR 2.7 million (2.0 million). Financial income and expenses were EUR 2.0 million negative (2.0 million negative). Profit before taxes was EUR 1.9 million negative (7.3 million positive). Profit for the report period totalled EUR 3.3 million negative (4.6 million positive). Diluted earnings per share were EUR 0.20 negative (0.26 positive).

Net sales generated by the Wiring Harnesses business in the report period amounted to EUR 41.7 million (69.3 million), or 40.0% less than in the comparative period. The segment's share of consolidated net sales was 77.6% (81.5%). It generated an operating profit of EUR 0.6 million negative (7.0 million positive), equivalent to 1.4% negative of the segment's net sales (10.1% positive). Without the acquisition of MAN Nutzfahrzeuge AG's wiring harness business in Poland in 2008, the segment's net sales would have shrunk to less than half of the previous year's figure.

Net sales generated by the Electronics business decreased by 24.6% to EUR 12.1 million positive (15.8 million positive). The segment's share of consolidated net sales was 22.4% (18.5%). It generated an operating profit of EUR 0.7 million positive (2.3 million positive), equivalent to 5.7% of the segment's net sales (14.7%).

During the report period, the Group had an average payroll of 5,216 employees (5,538). At the end of the report period, the Group's personnel numbered 4,879 employees (5,597), of whom 4,260 (4,857) worked abroad and 619 (740) in Finland. Personnel cuts have been made at various units within the Group. A total of EUR 0.3 million in non-recurring expenses arising from the termination of employee contracts was recorded in the first quarter.

As a result of the co-determination negotiations concluded in January 2009, it was decided to temporarily lay off almost the entire personnel of PKC Group Oyj's Kempele unit, a total of 250 people, with the duration of the layoffs varying between a week and longer periods, as well as 60 employees at PKC Electronics Oy's Raahe factory for a maximum of three months.

Co-determination negotiations for closing the wiring harness production in Kempele and its effects to the personnel were initiated in Kempele unit on 19 March 2009 due to production and financial reasons. These negotiations concern the personnel of PKC Group Oyj's Kempele plant organisation's personnel, and may lead to the termination of the employment contracts of a maximum of 226 employees. With a view to serving other units and customers, the possibility of rearranging work and/or reorganising operations is also being considered, which may decrease the number of staff cuts.

At present, it is difficult to estimate how long the current economic downturn will continue. However, we foresee the weak predictability of commercial vehicle demand and uncertainty concerning financing in general, coupled with the emptying of the stocks of vehicle manufacturers, keeping demand for wiring harnesses exceptionally low.

We also estimate that demand for electronics design and manufacturing services in the market will weaken compared with last year. In Asia, investments made in the infrastructure of mobile phone networks may have a positive effect on demand for PKC's products.


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