Scanfil lower profit

Production and delivery volumes have increased from the corresponding period last year, and demand has improved toward the end of the period. The growth of turnover is still held back by a decline in the average prices of wireless telecommunications products that was faster than the growth of production volumes, by the product and supply structures with lower production costs of new, technically more advanced products and by market growth and production concentrating in lower-cost countries. As predicted, the delivery volumes of ADSL products were considerably lower compared with the corresponding period last year. The demand for industrial electronics products remained stable and on a good level throughout the review period. As reported in the published preliminary information, the Group's turnover for the period fell compared with the previous year, amounting to EUR 122.5 (161.4) million. Operating profit for the period was 1.4%, owing to the non-recurring expense item of EUR 7.6 million recorded in the first quarter and resulting from the discontinuation of the Belgian subsidiary's production activities and the personnel adjustment measures. Operating profit excluding non-recurring items was EUR 9.3 (13.3) million, representing 7.6 (8.2)% of turnover. Telecommunications customers accounted for about 73% and industrial electronics customers for about 27% of the turnover. The process of shutting down the production activities at the Belgian plant began in the first quarter and has proceeded according to the agreed plan. Most of the production of the plant has already been transferred to the Group's other units. The remaining production in Belgium will end within the next few months. During the period, the Group continued to concentrate its production in lower-cost plants. Building projects in Estonia and Hungary have proceeded according to the defined schedule. The new 5,100 square metre production facilities at the Estonian subsidiary will be in use by the end of the third quarter, and the Hungarian subsidiary's 5,800 square metre expansion will be completed by the end of the year. After these expansions, both the Estonian and the Hungarian plant will have about 16,000 square metres of space. In China, the Hangzhou subsidiary is planning to make equipment investments. Together with the building and machinery investments at the end of last year and the beginning of 2006, this will raise the plant's capacity considerably. The investments have been scheduled for the second semester of this year. The Chinese plants' sales, including the deliveries to the Group's other plants, represented 28% of the Group's total sales in the review period (20% in 2005 and 25% in the first quarter of 2006). Of the Group's personnel, 41% work in China, and a total of 65% worked in the international subsidiaries on 30 June 2006. Click here to read the full report (www.scanfil.fi).