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Electronics Production | March 07, 2006

Neways net profit up in 2005

Holland's largest EMS-provider Neways Electronics International N.V. realised a net profit of EUR 5.1 million in 2005 (2004: EUR 4.7 million), partly because of a strong 4th quarter.
Herewith the forecast in November 2005 (at least EUR 4 million) was amply exceeded. Turnover rose by 9.6% to EUR 207.9 million. Growth in turnover was almost fully attributable to the consolidation of Neways Advanced Applications (Stork Electronics), which was acquired in 2004. Turnover on an organic base was slightly lower in 2005 compared to 2004, in particular due to strong decline of demand in the semiconductor industry. Neways' financial position greatly improved last year, improvements in efficiency were implemented throughout the whole organisation and advantages of synergy were made better use of. With this the company's foundation for growth was further strengthened in 2005 and dividend payments will be resumed.

The market for Electronic Manufacturing Services (EMS) improved slowly but steadily over the line as a whole. After the recovery of demand from the semiconductor industry in the second half of 2004, it declined again in 2005 as expected. Turnover from other sectors, such as the medical and industrial sectors, increased further last year. However, on balance this still resulted in a slight drop in organic turnover of 4%.

Because of the full consolidation of Neways Advanced Applications (acquired mid-2004), turnover rose by 9.6% to EUR 207.9 million. Due to the consolidation, turnover per segment gives a somewhat distorted view. Consolidation exerted a positive influence on the turnover from the semiconductor industry and the medical sector in particular.

The increase in turnover is accompanied by a slight drop in gross margin (as % of net turnover) to 40.5% (2004: 41.6%). Partly as a result, the operating profit came in slightly lower at EUR 9.0 million (2004: EUR 9.8 million), which corresponds to 4.3% of turnover (2004: 5.2%). This drop is distorted by non-recurring items (extraordinary income and expenses), including a provision in 2005 of EUR 0.5 million for the reorganisation in the operating company Ripa. Corrected for non-recurring items, there was a slight rise in the operating profit of EUR 9.3 million to EUR 9.5 million, which corresponds to 4.6% of turnover (2004: 4.9%). Apart from Ripa, all operating companies achieved a positive operating result.

Result before tax came in at EUR 7.5 million (2004: EUR 8.4 million). The tax rate was 32.7% compared with 43.6% in 2004. The lower tax rate was due to a one-off write down of the latent tax claim in 2004. The write down was related to the structural lowering of the tax rate in The Netherlands.

Net profit amounted to EUR 5.1 million, compared to a net profit of EUR 4.7 million in 2004. A positive result was achieved in both the first half (EUR 2.6 million) and the second half (EUR 2.5 million) of the financial year.

Further improvement of collaboration between the Neways operating companies will be top of the agenda in 2006. In addition to better use of the benefits of synergy, there are still sufficient possibilities within the organisation to implement improvements in efficiency and sharpen up operational management. In addition, Neways will not only be aiming to provide higher added value to customers as a 'one-stop-provider' in the EMS market, but also to further improve quality, reliability of delivery and innovative capabilities.

Outlook 2006
At the start of 2006, Neways is in a much better position than it was several years ago. Good progress has been made operationally and, together with the greatly-improved financial position, this is a healthy basis for further growth in the coming years. The order portfolio was well filled at the beginning of 2006. There is increasing demand from both the semiconductor industry and from other market segments. However, the outlook on developments in the EMS market still remains limited to no more than a few months. It is therefore too early to make an announcement on expected profit for 2006.

Click here to read Neways' complete report.

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