© Elcoteq Electronics Production | March 29, 2011
Elcoteq reports profit before taxes with EUR 43.7 million
Elcoteq's 2010 net sales declined on the previous year and amounted to 1,069.9 million euros (1,503.2). Operating loss was -18.1 million euros (-76.5), representing -1.7% (-5.1%) of net sales.
Profit before taxes was 43.7 million euros (-117.1) and net profit was 15.8 million euros (-109.0). Earnings per share (EPS) amounted to 0.45 euros (-3.22). Earnings include 11.1 million euros (37.0) restructuring expenses. Net sales grew in the AMS Business Segment and declined in the EMS Business Segment compared to the previous year. The decline in EMS net sales was mainly due to the volume decrease of one major customer and the sale of Elcoteq's Tallinn factory of which net sales still affected the year 2009 but not 2010. Various new customers were won during the year but a lack of financing capacity prevented the Company from absorbing all the business opportunities available in the market. On the other hand the AMS business does not require the same level of financing and grew according to expectations. Operating loss decreased significantly in 2010 from the previous year and the second half of the year was profitable. 2010 results were affected by non-recurring costs of 11.1 million euros (37.0) arising from restructuring actions implemented to mitigate the effects of lower net sales. The cost structure of the Company is now materially leaner than in previous years. The Group's net financial income amounted to 61.8 million euros (-40.5). Financial income was mainly attributable to one-time gains of approximately 79 million euros related to debenture repayment and hybrid securities transaction executed in January 2010. Fourth-quarter Net Sales and Earnings Fourth-quarter net sales in 2010 increased compared to the third quarter and amounted to 266.3 million euros (265.5 million euros in the fourth quarter of 2009 and 250.7 million euros in the third quarter of 2010). The level of net sales has stabilized towards the end of 2010, also indicating the positive change in the market environment. Operating income in the fourth quarter was 4.2 million euros (-23.4 million euros in the fourth quarter of 2009 and -2.5 in the third quarter of 2010). Operating income exclusive of restructuring expenses in the fourth quarter was 5.4 million euros (-2.1). Restructuring expenses in the fourth quarter of 2010 were related mainly to unused asset write-offs and personnel lay-offs in Brazil and to Group functions. Loss before taxes was -0.8 million euros (-36.4 million euros in 2009). Personnel At the end of 2010, Elcoteq employed 7,899 (10,101) people: 106 (139) in Finland and 7,793 (9,963) elsewhere. The geographical distribution of the workforce was as follows: Europe 3,793 (3,940), Asia-Pacific 1,662 (2,664) and the Americas 2,444 (3,497). The average number of Elcoteq employees on the Company's direct payroll in 2010 was 7,850 (11,271). Wages, salaries and other personnel expenses in 2010 amounted to 106.4 million euros (126.3). EMS Business Segment Net sales of the EMS segment started to pick-up and stabilize at the current level during 2010. Although total annual net sales of the EMS segment declined, the EMS segment showed more stable sales and improved profitability. Net sales of the Electronics Manufacturing Services (EMS) Business Segment in 2010 were 962.9 million euros (1,413.1), contributing 90% of the Group's net sales. The segment's operating result was at -5.5 million euros (-60.2), and at 5.2 million euros, excluding restructuring costs (-24.0). Fourth quarter net sales in 2010 amounted to 240.8 million euros (240.0). The segment's operating profit in the fourth quarter amounted to 5.5 million euros (-18.5 in the fourth quarter of 2009). Excluding restructuring costs the operating profit was 6.5 million euros (2.8). EMS profitability improved quarter by quarter during 2010 reaching positive results in Q4 2010. This positive development was driven by successful implementation of cost-reduction projects during the year and achievements in the customer-portfolio improvement. Various new customers were won during 2010, thanks to the segments competitive service offering and proven track record in the industry. AMS Business Segment Net sales of the After Market Services (AMS) Business Segment in 2010 were 107.0 million euros (90.1), contributing 10% of the Group's net sales. The segment's operating profit was 12.5 million euros (11.4), and the segment did not have any restructuring costs in 2010 or 2009. Fourth quarter net sales in 2010 amounted to 25.5 million euros (25.5 in the fourth quarter of 2009). The segment's operating profit amounted to 2.9 million euros (4.5). Forming the new AMS Business Segment effective as of October 2010 has resulted in a more focused management and development of Elcoteq's after market services business. Proactive development of Elcoteq's AMS offering is enabling us to serve our customers' evolving needs with competitive global AMS solutions. Geographical Areas Elcoteq has three geographical areas: Europe, Asia-Pacific and the Americas. Elcoteq's net sales in 2010 were derived from these areas as follows: Europe 66% (47%), Asia-Pacific 10% (14%) and the Americas 24% (38%). Restructuring Plan Elcoteq has continued the Restructuring Plan originally launched in January 2009 to adapt to the radical changes in the market situation and in order to execute further cost-saving potential. In 2010 Elcoteq sold its' subsidiary in St. Petersburg, Russia and closed an office in Kista, Sweden. The Elcoteq group organization was also streamlined and simplified to improve cost efficiency. As a result of this organizational change, the Company conducted personnel reductions in Group supporting functions. Cost-saving measures have continued at most of the factories as well. Outlook 2011 Elcoteq's net sales are estimated to stay at the same level as in 2010. The operating income is expected to be positive for the whole year although the first quarter result will be clearly negative due to lower volumes.
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