Electronics Production | April 25, 2007
NOTE reports improved profitability
Sweden based EMS-provider NOTE AB presents its report for the first quarter of 2007. Sales grew by 7% to SEK 425.0 (398.6) m in the period.
According to NOTE, in seasonal terms, sales and profits are normally lower in the first quarter than the rest of the year. Growth was largely organic and primarily attributable to the Telecom customer segment. In autumn 2006, NOTE signed agreements relating to new deliveries to a number of key accounts in the Industrial and Telecom segments. Preparations for production start are underway and volume deliveries are expected to take off in the second half-year. Gross margins grew by 2.0 percentage points to 12.5% (10.5%) in the first quarter. Margin growth resulted from increased volumes and rationalisations within production and sourcing. Higher volumes, improved coordination of group production units and the transfer of volume production to units outside Sweden contributed to progressively improved capacity utilisation. Operating profit increased by 31% to SEK 24.8 (18.9) m and operating margin improved by 1.1 percentage points to 5.8% (4.7%). Sales and administration costs for the quarter were 7% down on the fourth quarter 2006, but 19% higher year on year. Overheads for the period include all costs for the resigning CEO of approximately SEK 2.0 m. Profit after financial items increased by 40% to SEK 23.0 (16.4) m and profit margin improved to 5.4% (4.1%). Net financial income/expense improved slightly year on year. Profit after tax amounted to SEK 16.0 (12.1) m, corresponding to SEK 1.66 (1.25) per share. Investments in tangible fixed assets amounted to SEK 8.2 (2.8) m, corresponding to 1.9% (0.7%) of sales. The majority of investments were in equipment for increased production capacity and IT systems to increase the efficiency of sourcing. Depreciation for the period amounted to SEK 6.5 (6.7) m. The rate of investment in the current year is forecast to be slightly higher than in 2006. The parent company is primarily focused on the management, coordination and development of the group. Parent company revenue was SEK 9.4 (6.8) m for the period and related to intra-group services sales. Profit after financial items was SEK -2.2 (-0.1) m. Sector commentator iSuppli expects demand for EMS services in Europe to grow by an average of some 9% annually over the coming years. The majority of growth is expected to be derived from customers in the Industrial segment. Restructuring of NOTE Nyköping-Skänninge NOTE Nyköping-Skänninge's PCB assembly was focused to the company's Skänninge factory last year. In order to improve efficiency further, at the end of the period, a decision was taken to start negotiating on the relocation of the remaining production from Nyköping to Skänninge. Notice has been issued to approximately 25 employees. The relocation is expected to conclude in the summer.
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