Electronics Production | November 14, 2006

Incap presents strong revenue

Finland based EMS-provider Incap presents growing revenue in January - September 2006. However production transfer weakens the profability.
Incap's revenue in the January-September period totalled EUR 65.3 million, an increase of 15.2% over the same period's continuing operations in 2005 (Jan.-Sep. 2005: EUR 56.7 million). Revenue from the discontinued operations totalled EUR 1.3 million in January-September 2005.

Operating profit in January-September totalled EUR 3.2 million, or 4.8% of revenue. Operating profit during the same period in 2005 totalled EUR 3.1 million, or 5.4% of revenue.

Net profit for the report period amounted to EUR 3.6 million (4.3 million), or 5.5% of revenue (7.5%). Earnings per share were EUR 0.30 (0.35). Equity per share was EUR 1.69 (1.29).

Juhani Hanninen, President and CEO of Incap Corporation:
"The year 2006 has been positive for our company. Our revenue has grown mainly due to the increased needs of our present customers and we have also added new customer relationships."

"In order to grow vigorously and become international in line with our objectives, we must make outlays on developing our operations and examining new business opportunities. These investments will lead to non-recurring expenses, due to which our full-year relative profitability is expected to fall short of its 2005 level."

Revenue in the third quarter amounted to EUR 21.8 million, or 31.4% more than in the same period last year (July-Sep. 2005: EUR 16.6 million).

Operating profit in July-September amounted to a total of EUR 0.6 million (0.8 million). Third-quarter operating profit represented a 2.7% share of revenue (4.6% of revenue).

Profitability in the third quarter was influenced by the fact that revenue was concentrated in products requiring a large quantity of materials as well as by a temporary rise in expenses. The company incurred non-recurring expenses from the start-up of the factory in Kuressaare and the commissioning of additional capacity at the Helsinki factory. A EUR 1.4 million share of revenue came from the selling of materials to customers at cost price.

The electronics contract manufacturing market's situation remained good. There were great periodic and quantitative fluctuations and forecast periods were further shortened. Incap's revenue fell as expected in July but picked up again towards the end of the report period, with record high revenue posted in September.

Additional capacity created by investments in machinery at the Kuressaare and Helsinki units could not yet be fully utilised at the end of the report period, because installation work and the introduction of the equipment into service took place in July-August.

Due to strong demand, the transfer of the volume manufacture of electronics products from the Vuokatti factory to the Kuressaare factory started up slower than estimated and will continue into next year. The costs involved in the transfer will burden the full-year profitability more than expected. The company has decided to continue the co-determination negotiations which were started at the Vuokatti factory in May until January 2007.

The company continued charting the possibility of business operations in India.

Based on estimates by customers and the general outlook for the markets, Incap believes that demand for its services for the remainder of 2006 will remain at the same level as earlier this year and that the company's revenue in 2006 will clearly top that of 2005.

Due to the delay in production transfer and the unexpected growth of the costs involved, the relative profitability for the entire year 2006 is estimated to fall short of its 2005 level.
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