Net sales grew by 6% for Salcomp in 1H/2011

Markku Hangasjärvi, President and CEO: Due to the competitive changes in the smart phone and mobile phone market and the strengthened position of low-end phone manufacturers, especially from China, Salcomp's number of chargers delivered during the second quarter of the year decreased compared with the previous quarter. This also decreased our net sales in April-June, although higher average sales prices of chargers mitigated the drop. Despite the decrease in the net sales, our operating profit got back in the black in the second quarter after the negative first quarter. The operating profit was improved by lower material prices compared with the first quarter, as well as a product mix consisting of more expensive products and rise in sales prices. Our goal is to continue improving the profitability during the second half of 2011. Due to this, we have enhanced our actions in order to broaden our customer and product portfolio, decrease material costs, improve productivity and reduce fixed costs. Financial development in April-June 2011 In April-June, Salcomp's net sales decreased by 7% to EUR 67.4 million (EUR 72.2 million in April-June 2010) due to the decrease in the number of chargers delivered by 12% to 60.4 million (68.6 million) chargers. The number of chargers delivered was decreased by the competitive changes in the smart phone and mobile phone market and the strengthened position of low-end phone manufacturers, especially from China. The impact of a smaller number of sold chargers was mitigated by a rise in average sales prices of chargers, which was mainly due to a product mix consisting of more expensive products, especially smart phone chargers. Salcomp's operating profit weakened by 90% to EUR 0.2 million (EUR 2.3 million). This was, on top of a drop in the number of chargers delivered, due to a rise in material and component prices and labor costs, among others, compared with the corresponding period last year. In addition, operating profit was decreased by a cost of EUR 0.1 million related to the termination of long-term incentive schemes, due to the ongoing redemption and delisting process. Operating profit was improved by realized and unrealized exchange rate gains of EUR 0.1 million (EUR 0.6 million of gains). The operating margin in the second quarter of the year was 0.3% (3.2%). The profit for the period amounted to EUR -0.7 million (EUR 1.5 million). Earnings per share were EUR -0.02 (EUR 0.04), and diluted earnings per share were EUR -0.02 (EUR 0.04). Cash flow from operating activities in April-June amounted to EUR 2.2 million negative (EUR 4.7 million positive). The cash flow from operating activities decreased mainly due to an increase in net working capital. Financial development in January-June 2011 The net sales grew by 6% in January-June to EUR 139.3 million (EUR 131.8 million in January-June 2010). The number of chargers delivered decreased by 3% to 131.2 million (134.5 million) chargers. The operating profit weakened to EUR -1.2 million (EUR 3.8 million) in January-June. This was due to an increase in material and component prices and higher labor costs, compared with the corresponding period last year. In addition, accelerated efforts in broadening the product range and customer base increased fixed costs. Operating profit was weakened by a cost of EUR 0.6 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 0.3 million (EUR 1.0 million of gains). The operating margin was -0.9% (2.9%) in the first half of the year. Taxes for the period totaled EUR 0.8 million (EUR 0.5 million). The amount of the Group's deferred tax has not increased during the period. The profit for the period was EUR -2.5 million (EUR 3.2 million). Earnings per share were EUR -0.07 (EUR 0.08) and diluted earnings per share EUR -0.07 (EUR 0.08). Personnel The number of Group personnel at the end of June totaled 9,047 (9,830): 3,974 were employed in China, 2,119 in Brazil, 2,881 in India, and 73 in Finland and other countries. Outlook for 2011 According to the estimates published by some of Salcomp's key customers and by various market research companies, the mobile phone market, also including the so-called grey market phones, is expected to grow, measured by the number of units, by some 9% during 2011, compared with 2010. This would mean approximately 1.6 billion mobile phones and, therefore, mobile phone chargers, to be sold in 2011. The volume growth in chargers used in other consumer electronic applications is also estimated to continue in 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, Salcomp's outlook for 2011 continues to be more uncertain than usual.