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Electronics Production | October 25, 2006

Elcoteq Q3 profit in line, repeats Q4 outlook

Elcoteq's third-quarter net sales totaled 1,169.1 million euros (1,194.7 in July - Sep 2005). Third-quarter operating income was 16.6 million euros (25.6), cash flow was -4.7 million euros (13.5).
Third-quarter net sales totaled 1,169.1 million euros (1,194.7). This marked an increase of roughly 14% on the second quarter of 2006 although a slight decrease compared to the same period last year. Underlying the low growth in net sales is weaker than forecast development of production volumes especially for terminal products in Europe where the product mix was geared towards products for which demand did not match the company's forecasts. Also in Asia-Pacific net sales were down slightly from the same period last year, whereas net sales in the Americas rose by roughly 8%. The Group's operating income between July and September was 16.6 million euros (25.6), or 1.4% (2.1%) of net sales. Profitability development was weaker than expected owing to unsatisfactory performance in the Americas and to low production volumes in Europe. Despite clear growth in net sales, the result in the Americas was weaker than in the second quarter due to some ramp-up challenges with certain new products, material problems associated with inventory management in projects either completed or close to completion, and redundancy costs. The one-time costs in the Americas burdened the third-quarter result by around 3 million euros. Income before taxes was 10.1 million euros (21.0) and net profit amounted to 5.9 million euros (13.7). Earnings per share were 0.19 (0.44). The Group's gross capital expenditures on fixed assets between July and September totaled 38.5 million euros (48.8), or 3.3% of net sales. Most of the investments were made in Europe and Asia-Pacific. Depreciation was 21.8 million euros (21.4). Capacity was also increased by 15.2 million euros through operating leases. Cash flow after investing activities in the third quarter was -4.7 million euros (13.5) as turnover of net working capital remained at the same level as in the previous quarter. The business acquisition from Andrew Corporation reduced the Group's cash flow by roughly 8 million euros. Net sales between January and September increased approximately 6% on the same period last year and totaled 3,179.7 million euros (2,987.0). Operating income was 37.0 million euros (51.0) and income before taxes 20.0 million euros (39.7). Earnings per share (EPS) were 0.40 euros (0.86). The Group's gross capital expenditures on fixed assets between January and September amounted to 84.6 million euros (88.2), or 2.7% of net sales. Depreciation was 60.7 million euros (56.4). Cash flow after investing activities was -62.0 million euros (18.9). The solvency ratio was 22.0% (22.5%) and gearing was 0.6 (0.3). Cash flow from sold accounts receivable amounted to 183.0 million euros at the end of September (165.9 million euros at the end of June 2006 and 148.8 million euros at the end of 2005). Unused credit facilities totaled 293.5 million euros (293.6 million euros at the end of June 2006). Commercial papers issued by the Group totaled 60.0 million euros. The Group had no outstanding issues of commercial papers at the end of June 2006 or the end of 2005. Net sales from the Europe and Asia-Pacific geographical areas decreased by some 4% compared to the same period last year. GA Europe's third-quarter net sales totaled 659.4 million euros (686.5) and GA Asia-Pacific's 307.2 million euros (321.0). Compared to the second quarter of 2006 GA Europe's net sales rose by approximately 10% and Asia-Pacific's by almost 13%.
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