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Electronics Production |

Scanfil interim report 1 January - 31 March 2007

The situation in the market for telecommunications network products remained unchanged from the last quarter of the previous year. Industry restructurings and very aggressive price competition from lower-cost countries also affected demand in the first quarter.

Demand for telecommunications network products was at a lower level than in the corresponding period last year. Demand from industrial electronics customers developed positively during the review period, and production volumes increased year-on-year. Due to market changes, Scanfil's Asian operations have continued to grow. During the period, the Chinese plants' sales, including deliveries to the Group's other plants, accounted for 34% of the Group's total sales (approx. 32% in 2006 and 25% in the corresponding period last year). Nearly half of the employees, 49%, are working in the Chinese subsidiaries. In Europe, the 5,800 square metre expansion of the Hungarian plant's production facilities was opened for production during the review period. With an agreement signed on 20 March 2007, Scanfil plc's Belgian subsidiary Scanfil N.V. sold its Belgian plant property at a price that was EUR 0.6 million higher than the balance sheet value. As predicted, the Group's turnover for January–March fell compared with the previous year, amounting to EUR 52.2 (60.1) million, down 13% year-on-year. Distribution of turnover based on the location of customers was as follows: Finland 41 (44) %, rest of Europe 28 (30) %, Asia 29 (24) %, USA 1 (2) % and the others 1 (0) %. In spite of a difficult and challenging market situation, the company was able to keep profitability at a satisfactory level through cost-efficient operations. Operating profit was EUR 3,6 (-3,4) million, representing 6,8 (-5,7)% of turnover. Earnings for the review period amounted to EUR 3,1 (-4,5) million. Earnings per share were EUR 0,05 (-0,08) and return on investment was 11,3 (-9,5)%. EUR 0.7 million of capital gains from the sale of fixed assets were recognised as income in the first quarter. Owing to the structure of the company's operations, the effects of change in exchange rates on the result were minimal. As growth shifts to the Asian operations, the impact of fluctuations in the dollar exchange rate on company's operations may increase. Cash flow from operating activities totalled EUR 1.6 (15.1) million, and the change in working capital was EUR -1.9 (10.0) million. The dividends approved by the Annual General Meeting on 12 April 2007, EUR 5.9 million, will be recognised in the second quarter. In the previous year, the dividends of EUR 6.0 million were recognised on 31 March 2006 under short-term liabilities. Gross investments in fixed assets totalled EUR 0,6 (1,2) million, which is 1,2 (2,0)% of turnover. Depreciations were EUR 2,0 (2,3) million.

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