Salcomp: Net sales increased by 21% in 1Q

Financial development in January-March 2011 In addition to the growth in the number of chargers delivered, net sales were increased due to the higher average sales prices of chargers, which resulted mainly from exchange rate changes, but also from a product mix consisting of more expensive products, especially smart phone chargers. Salcomp's operating profit weakened to EUR -1.5 million (EUR 1.5 million). This was due to an increase in material prices and higher labor costs. In addition, accelerated efforts in broadening the product range and customer base increased fixed costs. Operating profit was weakened by a cost of EUR 0.5 million related to the termination of long-term incentive schemes, due to the ongoing redemption and delisting process. Operating profit was also burdened by realized and unrealized exchange rate losses of EUR 0.4 million (EUR 0.4 million of gains). The operating margin in January-March 2011 was -2.1% (2.5%). The profit for the period amounted to EUR -1.9 million (EUR 1.6 million). Earnings per share were EUR -0.05 (EUR 0.04), and diluted earnings per share were EUR -0.05 (EUR 0.04). Personnel and management The number of Group personnel at the end of March totaled 9'269 (9,295): 5'140 were employed in China, 2'591 in India, 1'468 in Brazil and 70 in Finland and other countries. Outlook for 2011 Salcomp's net sales in 2011 are expected to be EUR 280-320 million. The operating margin in 2011 is expected to be 2-4% of the net sales. Due to the strategy revision of a major customer, as well as the earthquake and tsunami in Japan, Salcomp's outlook for 2011 continues to be more uncertain than usual. Markku Hangasjärvi, President and CEO: According to estimates made by market research companies and our biggest customers, some 374 million mobile phones were sold during the first quarter of the year, up by some 16% compared with the January-March period in 2010. In the market share review, we have changed over to use the same figures as our biggest customers. When determining the market volume, we also include the so-called grey market phones, i.e. mobile phones produced without a license. Salcomp does not deliver chargers to the grey market phones. Calculated with these figures, our market share was approximately 19% in the first quarter of the year and approximately 20% in the corresponding period in 2010. The decrease in our market share was mainly due to the faster-than-average growth in the grey market phones. Salcomp's net sales grew by over one-fifth, compared with the first quarter in 2010. Despite the increase in net sales, the operating profit ended up in the red. Operating profit was weakened by higher material prices and a rise in labor costs and fixed costs. The earthquake in Japan and the tsunami after that have so far only had minor influence on Salcomp's material purchases. However, the total picture has not yet completely cleared up, and material deliveries, both to us and at least to some of our customers, are expected to encounter disruptions during the year.