Electronics Production | August 24, 2011

Neways reports higher turnover and profit in 1H/2011

Neways Electronics International N.V. (Neways) increased turnover by 23% to EUR 143.5 million in the first six months of 2011. The increase was almost entirely organic.
There was growth across virtually the entire range of activities in the Electronic Manufacturing Services (EMS) market. Net profit in the first six months more than doubled to EUR 3.2 million. Market demand weakened in May and June under the impact of macro-economic developments but with orders worth EUR 68.8 million at the end of June the order book remained at a good level. Against the high level of 31 March 2011, the order book stood around 9% lower, whereas it was up by approximately 2% compare to 30 June 2010.

Turnover and order book

Gross turnover increased by 24.3% in the first six months of 2011 to EUR 156.4 million (first half of 2010: EUR 125.8 million). Internal turnover increased by 45% vis-à-vis the same period last year. Net turnover increased 22.7% to EUR 143.5 million. Turnover figures in the semiconductor, industrial and automotive sectors made a considerable contribution to growth. The acquired DHV activities were included in the consolidation as of 1 May 2011 and contributed EUR 0.6 million in turnover.

The order book at the end of June 2011 contained orders worth a total of EUR 68.8 million and was therefore at a good level. In comparison with 30 June 2010 (EUR 67.4 million), the order book increased by around 2%, whereas versus the end of March 2011 (EUR 75.3 million) there was a decrease of around 9%. The decrease was mainly the result of hesitancy in various market segments owing to the present uncertainty in global financial markets. This led to downward adjustments in the plans of various customers.

Gross margin

As a percentage of turnover, the gross margin remained almost stable in the first half of 2011 at 40.9% in comparison with 41.1% in the first half of 2010.

Operating result and operating margin

The operating result came to EUR 5.3 million, as against EUR 2.6 million in the first six months of 2010. This meant that the operating margin stood at 3.7%.

Important strategic and operational developments

Neways took important strategic steps in the past six months. In its endeavour to further expand development and engineering activities, Neways took over the electronic development activities in Eindhoven of the consultancy and engineering firm DHV in May this year. With this, 54 engineers were transferred to Neways. Neways also increased its 90% stake in subsidiary Neways Micro Electronics China to 100%. This increase means that all the operating companies are now wholly owned by Neways.

To improve returns, attention inside the organisation during the past six months was focused sharply on the realisation of further steps in efficiency. In addition to anticipating temporarily longer delivery periods for materials, various initiatives have been started to increase the low capacity utilisation in the operating company in Kassel (Germany). To this end, a project group as initiated by the holding company started implementing efficiency improvements and actions concerned with closer cooperation with other operating companies and generating new projects and orders.

The total number of employees (FTEs) at year-end June 2011 had decreased by 1% from 2,194 to 2,172. Mainly because of the acquisition of DHV's activities, the number of employees in western Europe increased from 1,328 at year-end 2010 to 1,374 at the end of June 2011. The number of employees in eastern Europe and China decreased from 866 at year-end 2010 to 798 at the end of 30 June 2011. Approximately 40% of Neways total workforce is active in Eastern Europe and China.


The general global economic outlook, which is currently strongly influenced by the debt crisis, led to hesitancy among customers, including various globally operating OEMs, especially in May and June. The order book as at 30 June 2011 stood at a higher level than in June last year but fell by 9% compared with the level at the end of March 2011. This will put downward pressure on turnover in the third quarter. A positive development is that the issue of materials shortages in the entire chain is now as good as solved and its impact on the results in the second half of the year will clearly be less.

To be able to respond effectively to developments in the various market segments the focus in the second half of 2011 will be on utilization and capacity. This will include a strong focus on maintaining flexibility with strict working capital management. To improve the competitive position, emphasis will continue to be on outsourcing to production sites in eastern Europe and Asia and on expanding procurement activities in China.

The order book has increased again since the end of June. On the other hand, one-off reorganisation costs yet to be specified are expected in the second half of 2011 in connection with adjusting the organisation of the operating company in Kassel (around 10% of group turnover) to changed market demand.

The recent sharp increase in uncertainty in the global economic outlook makes it very difficult to predict developments, especially in the fourth quarter. Therefore, it is not sure whether the expectation regarding turnover and profit stated after the first quarter indeed can be realized.
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